80s - Thatcher's Economics Flashcards
(42 cards)
What is monetarism?
An economic theory arguing that the best way to control inflation was by restraint of government spending/borrowing and strict curbs on money supply
Where was unemployment and inflation at in 1980?
Inflation over 15%, and over 2 million unemployed.
What saved Britain from a severe BOP crisis in 1980?
North Sea oil and gas.
Contrary to popular expectation, what did the 1981 budget include?
Further monetarist policies - a decrease in government borrowing, local council grants cut and benefits frozen. Known as the most unpopular budget in history.
What was the tax shift in 1981?
From direct to indirect tax - the top rate of direct tax fell from 83%-40% but VAT increased from 8%-15%.
Which 3 goods did tax increase annually on, 1979-1987?
Petrol, cigarettes and alcohol.
What were the two sides of the debate over the tax shift in 1981?
Supporters argued this incentivised wealth creation by allowing people to keep what they earnt, and critics argued it hit poor people too hard.
What were the political bodies that Thatcher clashed with throughout her tenure, particularly in the early 80s?
The Labour-run councils - Thatcher blamed them for wasting money.
Who did Thatcher clash with particularly during this period?
Ken Livingstone - the head of the Greater London Council. Thatcher treated every education or public transport policy as a provocation. In response to this, Thatcher demonised him as the face of the loony left.
What was introduced to control Labour council overspending?
Rate capping:
- Limited the amount of money the council were allowed to raise in local tax.
Which councils rebelled against rate capping?
Sheffield and Liverpool - in 1985 they tried to rebel but backed down due to the threat of bankruptcy.
What did the 1986 Local Government Act do?
Abolished metropolitan authority councils set up by Heath in favour of peripheries of Thatcher’s government.
What was the 1986 Local Government Act seen as?
A clear victory over the Loony Left, but later served to minimise local accountability.
Did Thatcher ever actually manage to cut public spending?
No, because spending on social security increased massively in response to mass unemployment.
What was Thatcher’s U-turn in 1986/7?
Getting rid of monetarism in 1987 after Lawson abandoned spending targets in 1986.
What was the main emphasis in the 1987 budget?
There was greater emphasis on the supply-side over the demand-side.
What were the 4 significant privatised companies?
BP in 1979, BA in 1980, BT in 1984 and BG in 1986.
What accompanied the sale of British Gas in 1986?
A campaign intended to maximise purchase of shares by ordinary people.
What was the increase in individuals owning stocks or shared 1979-1990?
3m-9m, 3x.
Why did Thatcher believe that the private sector was more efficient at running goods and services?
Business competition and profit-driven management encourage innovation.
Outsourcing by the State became more common, so Competition grew.
What was the benefit of privatisation to the government?
They no longer had to commit money to the companies and profited off of the sale.
What was the main issue with privatisation?
The companies, interested solely in profits, either cut workers or mechanised factories, leading to higher unemployment rates.
How many industries/companies were privatised by 1990?
16.
What was deregulation?
The removing of red tape around banking, trying to create a free market by making it easier for businesses to trade and grow, and encouraging entrepreneurship and wealth creation.
