Thatcher's economic policies and their impact

Question 1

What change was made with Income tax?

Answer 1

Income tax was significantly lowered down right from the beginning of her premiership.

Question 2

What replaced income tax?

Answer 2

Income tax loss was replaced by indirect taxation implemented at the sale of products, e.g. VAT.

Question 3

How did VAT impact society?

Answer 3

VAT hit poor and working class people harder this is because they didn’t have as much disposable income than the rich. As a result they lost more money when paying for products than their rich counterparts.

Question 4

What did Thatcher think De-Nationalising bred?

Answer 4

1. Competition
2. Innovation

Question 5

Why is competition a big factor in a monetarist system?

Answer 5

Competition causes innovation.

Specific industries and companies would constantly need to be the best and have the best product / machine / inventions to stay on top in their specific industry.

Question 6

What is GDP

Answer 6

Total value of what a country produces in a year.

Question 7

How do you calculate GDP?

Answer 7

GDP =
+ Private consumption of goods and services
+ Private investment
+ Good and services bought directly by the government
+ [Exports – Imports]

Question 8

Key economic policies of Thatcher include:

Answer 8

1. Deregulation
2. Privatisation/Denationalisation
3. Low direct taxation
4. Increase on indirect txation
5. Emphasis on supply side economics

Question 9

What do Governments do in supply side economics?

Answer 9

In the supply side of economics governments will take a step back and will try to get involved directly in the economy less so it gives companies more incentives to make money and innovate.

Question 11

Privatisation/Denationalisation =

Answer 11

The selling off of publicly owned industries to the private sector. Between 1979 and 1990 16 Government owned industries were sold off these ranged from Jaguar to Britoil.

Question 12

Deregulation =

Answer 12

The loosening of controls on banks, businesses and other financial markets. The government would interfere as little as possible, meaning they would remove the ‘red tape’ making it easier for businesses to trade and grow. In turn this would allow for entrepreneurship and wealth creation.

Question 13

Supply side economics =

Answer 13

Deregulation allows for enterprise and entrepreneurship, which allows employees to spend on goods and services [encouraged by low taxation on individuals], this makes businesses make profits and these profits encourage expansion/further investment into business.

Question 14

What is needed for monetarism to succeed?

Answer 14

Monetarism needs a stable economy, this means there does sometimes need to be some government involvement.

However this goes against the principles of Thatcher.

Question 16

Financial deregulation =

Answer 16

Increased competitiveness, which led to lower interest rates over time.

Question 17

How is financial deregulation bad?

Answer 17

Negative effects of over-borrowing money and people caring much more on foreign companies then British ones as they had a vested interest on them.

Additionally the amount of financial scandals that emerged during this time period grew exponentially due to the lack of regulation amongst businesses and people who worked in the city and in financial services.

Question 18

How is financial deregulation good?

Answer 18

Another side effect was that British people and companies were able to invest in foreign companies.

Question 19

What did Financial deregulation cause?

Answer 19

Whilst the decrease of financial regulation led to an increase of growth in medium sized businesses, the growth wasn’t as much as the government had hoped for.

Alongside this Britain’s average annual % growth rate between 1980-88 was only 2.2% far less then Japan [4.1], Canada [2.8], USA [2.8] and Italy [2.4].