Thatcher's Economic Policies and their Impact, Trade Unions 1979-1987

Question 1

Who was Chancellor in first term?

Answer 1

Geoffrey Howe

Question 2

What was Moneterism?

Answer 2

• financial theory associated with Milton Freidman
• to bring inflation under control
• he believed gov spending root cause of inflation thus had to restrict money in circulation and reduce public expenditure

Question 3

Due to monetarism what were thatcher’s aims?

Answer 3

• cut public spending
• raise interest rates
• keep pound strong on international financial markets

Question 4

What did Thatcher say about U-turns?

Answer 4

• 1980 Tory Party conference she said “U-turn if you want to, the lady’s not for turning”

Question 5

What was the 1979 economic budget?

Answer 5

-1979 Budget intended to bring down public spending and inflation + switch taxation from direct to indirect
- Income tax cuts: top rate down from 83p to 60p and lower rate down 33p to 30p
- VAT up to 15% to finance tax cuts
- public spending reduced by £4 billion
- sharp increase in interest rates to 14%

Question 6

what was as a consequence of the 1979 budget?

Answer 6

• deflated economy had seriously added to unemployment
• 1980 was gripped by serious recession
• 15% inflation
• Unemployment tops 2 million - highest in western europe

Question 7

What was done economically in 1981?

Answer 7

• A triumph for the monetarist
• 1981 Budget was most resolutely anti-Keynesian of modern times
• even some resistance from Howe
• Britain’s largest ever tax increases including a rise of 20p in petrol tax. Heavy increases on tax of tobacco and alcohol
• £3500 million spending cuts
• 1982 Amersham International privatised - grossly undervalued

Question 8

What were the consequences of the economic policies in 1981?

Answer 8

• Increased unemployment
• public expenditure con to rise partly because of colossal bill of social security payments to relieve the rising n. of unemployed
• 1979-1981 other nations saw GDP rise over 5% Britain fell by 2.5%
• productive capacity was falling more rapidly than ever recorded before
• stagflation back

Question 9

What was the 1982 economic budget?

Answer 9

£1.3 billion in taxes were “given away”

Question 10

What were the consequences of the 1982 economic budget?

Answer 10

• after a year in office the Thatcher gov found itself presiding over:
• mass de-industrialisation
• inflation of more than 20%
• a rise in public spending
• unemployment over 3 million (highest since 1933)
• prospects of a slump
• only revenue from North Sea oil kept balance of payments reasonable

Question 11

What were the negatives of Thatcher’s economic policy? - first term

Answer 11

• 364 economists denounced gov’s economic approach as ruinous
• combination of high interest rates, high exchange rate (prices rose 18% in 1980, 12% in 1981) + high inflation destroyed many viable firms
• about 25% of manufacturing capacity was lost during period
• 1979-81 britains GDP fell by 2.5% whilst other countries rose
• productive capacity falling
• 3 million unemployed

Question 12

What were the positives of Thatcher’s economic policies?

Answer 12

• much more capacity would have been lost had not the gov con to support “lame ducks” taken under public wing
• 1970s British Leyland and Rolls Royce
• inflation fallen from peak of 22% in early 1980 to mere 5%
• partly due to huge unemployment depressing consumer pressure
• monetarism abandoned quietly: had they continued british economy would have collapsed

Question 13

Who was chancellor in second term?

Answer 13

• Nigel Lawson
• gulf between rich and poor became wider

Question 14

What did Lawson do with public spending in 1983-?

Answer 14

• urged cuts in public spending (high unemployment meant gov spending increased)

Question 15

What did lawson do with taxation in 1987?

Answer 15

• 1987 budget reduced standard rate income tax to 27p (yet huge budget surplus of over £16 billion recorded)
• cuts to personal taxation levels to benefit the super rich
• other taxes rising
• increased returns from VAT and increased Corporation Tax on company profits

Question 16

What were lawsons supply side policies?
1983-

Answer 16

• policy of law taxation + other incentives
• cuts in benefits to produce goods and investment
• tax cuts will increase economic growth, by allowing entrepreneurs to invest their tax savings, creating higher productivity, jobs and profits
• thus more tax revenue for gov

Question 17

What were lawson’s privatisations policies?

Answer 17

• 1984 - British telecom soled for £3 billion (under priced the share and had lavish advertising campaign)
• 1986 British Aerospace and Britoil
• 1986 British Gas for £5434 million
• Rolls Royce, British Shipbuilders, British Leyland and British Airports followed
• Macmillan likened it to “selling off the family silver”

Question 18

What were lawson’s policies regarding deregulation?

Answer 18

• Thatcher’s second term saw a determined attempt to deregulate capital markets
• stock market fundamentally reformed by “big bang” in 1986, ended old restrictive practices and opened up trading to wider range of financial institutions, inc foreign banks

Question 19

What was the positive impact of Lawson’s policies?

Answer 19

• Household consumption rose rapidly, driven up by wave of easy credit
• consumption boom in south
• house prices rocketed
• average earnings had risen consistently above inflation throughout 1980s
• 1986, prices rose 3.4% and earnings by 7.9%
• must be considered in context of worldwide expansion in trade until 1987
• annual growth rate of 4%, inflation con to fall

Question 20

What was the negative impact of Lawson’s policies?

Answer 20

• critics say encouraged thatcherite culture of greed to detriment of collective responsibility
• 1983, balance of trade in manufactured goods moved into deficit for first time
• unemployment high, peaked at 3.2 mill in 1985
• unemployment low in successful districts (basically the rising house prices prevented the unemployed in the north any chance of entry in the regional boom)

Question 21

Thatcher and Trade Unions: 1979-1983
What acts were passed in her first term?

Answer 21

• employment act 1980
• employment act 1982

Question 22

Describe first employment act

Answer 22

• employment act 1980
• “flying pickets” made illegal
• restriction on closed shops
• restricted legal immunity for sympathy strikes
• introduced ballot requirement prior to strikes
• removed those provisions of the Employment Protection Act which it was claimed damaged small businesses

Question 23

Describe the second employment act

Answer 23

• act went further by challenging immunity that the unions had enjoyed from any financial damaged during strikes
• unions could now be fined very heavily for strikes deemed unlawful
• several fined this way

Question 24

What happened as a result of the employment acts?

Answer 24

• n. of strikes fell: 1981 only 4.2 million days lost in industrial disputes compared to average of 13 million a year throughout the 70s
• union membership had fallen from over 13 million in 1980 to below 10 million three years later
  (however morgan argues what really neutralised the power of trade unions was the growing economic crisis and resultant unemployment)

Question 25

Thatcher and the unions 1983-1987
What were industrial relations like in 1983?

Answer 25

• After 1983 the Employment act was much used
• strikes rapidly disappeared as union after union found members unwilling to ballot
• aware of running up fines

Question 26

What act did thatcher pass in her second term? And what did it do? -unions

Answer 26

The 1984 Trade Union Act
- required unions to ballot their members on the retention of their political funds
- damaged Labour support to some extent
- Tories continued to cash in from record donations from industrial and commercial companies
- to the govs dismay, the majority of unions con to support labour

Question 27

in 1984 what was restricting trade unions?

Answer 27

• unemployment, decline of manufacturing, geographical change, and technical innovation as well as poor self image all reduced the influence of unions throughout the 1980s

Question 28

When and what was the Miners Strike under Thatcher?

Answer 28

• 1984, the National Coal Board (NCB)
  faced a national strike by the National Union of Mineworkers (NUM) led by Arthur Scargill
• Ian MacGregor drafted as chairman of the NCB by Mrs. Thatcher to oversee the closure of uneconomic pits.

Question 29

How long did the Miner’s strike under Thatcher last?

Answer 29

• Lasted almost a year, demonstrating the deep disillusionment of the mining communities at the erosion of their pits, their villages and their way of life.
• had support of wider community

Question 30

How did Thatcher prepare for the miner’s strike?

Answer 30

• coal supplies were stockpiled to avoid shortages
• planned for protection of the power network with the aid of other European countries
• Coal stocks were therefore very high, demand was low and cheap coal imports were available.
• Economically, coal supplies no longer dominated industry with the pits supplying only one fifth of the country’s energy supplies

Question 31

How did the police handle the strikes?

Answer 31

• powers increased to deal with mass picketing and flying pickets who had been used to great strategic advantage in the past. - highly organised, considerable freedom in use of violence against flying pickets
• Travel of striking miners was restricted as police set up roadblocks, raising questions on civil liberties.

Question 32

How were Scargill’s mistakes a key reason for failure of the Miner’s strike?

Answer 32

• split the NUM by failing to ballot members
• many from prosperous Nottinghamshire coalfields con to work
• split from NUM to form the Union of Democratic Miners.
• actions of UDM mainly responsible for the success of the gov in surviving the strike –> ended March 1985.
• UDM accused Scargill of caring more about hard-left politics than the interests of miners he was leading to defeat.
• Scargill turned down compromise from the government
• but was unable to sustain support with no sign of victory after a mild winter.

Question 33

How violent were the miner’s strike?

Answer 33

• violent clashes between police and pickets
• notably at Orgreave coking depot in Rotherham
• Britain seemed at times to be close to class war.
• Violence occurred against “scabs and blacklegs” in various parts of the country,
• lost the NUM some support
• little or no support from the wider trade union movement or TUC

Question 34

What was labour’s stance during miner’s strike?

Answer 34

The Labour party under the new leadership of Neil Kinnock distanced itself from the NUM, which suffered many slurs implying support from terrorist organisations.

Question 35

What was the impact of the strike?

Answer 35

• pit closures + decimation of Britain’s mining communities
• By 1989 less than 5,000 miners were employed in Wales
• Scotland and Lancashire having barely 3,000
• Even UDM: their collieries were closed –> many felt bitter resentment
• The militant Kent coalfield was closed entirely + no better in north east
• Mrs. Thatcher’s could again pose as the protector of suburban southerners against industrial disruption
• The “winter of discontent” had been finally exorcised and it was Mrs. Thatcher’s victory.
• The last months of the strike were particularly demoralizing.
• The failure of the strike certainly made the closure of pits happen quicker than it would have done otherwise.