New Labour, New Century 2001-7: 3 New Labour and the economy Flashcards
how did the economy change under Blair?
1997-2001 appeared to flourish
Brown gained an impressive reputation for restricting inflation and building up Britain’s financial reserves
Brown was particularly prudent initially but relaxed his approach to engage with large-scale government expenditure
large amounts of money were spent on the NHS
inflation rose from 2.6% in 1997 to 4.8% in 2007
how did Brown build up reserves of money for later expenditure?
taxing pension savings - taxed the dividends companies paid to their investors
created lots of anger
the value of pensions fell - by 2007 the amount lost was over £8 billion
the savings ratio declined from 9.7% in 1997 to 3.7% in 2007
UK share values were some £120 billion lower than they would have been
what is the savings ratio?
annual percentage of an individual’s disposable income that is saved rather than spent
what did Labour do in order to not break the commitment of low taxation?
- raised national insurance contributions
- removed the marriage tax for couples aged under 65
- removed tax relief on mortgage payments
- reduced the level of tax-free savings that could be made each year under the schemes as TESSAs, PEPs and ISAs e.g. in 1999 the untaxed amount an individual could save was £12,000; by 2007 it was reduced to £7000
how did employment change?
number of people employed rose to 29.1 million in 2007 (2.5 million more than 1997)
however, the growth of jobs was not where it was most needed: for unskilled workers and youth
in 2007 there were 5.4 million people of working age, many between the ages of 16 and 30, who had never had a job, living on unemployment benefit
what is a client state?
a society in which a significant number of the population work directly for the government or its agencies
Britain had become one - 1/4 of workers were employed by gov, 37% of the increased jobs were in the public sector, in 2007 employing 7 million people
Labour borrowed lots of money during their time in office, why? and how did they justify it?
believed expanding the public sector was a way of improving public services
however…
costs incurred tended to outrun the revenue received
increased spending in the NHS, education, etc could not be met entirely from taxation revenue
Brown borrowed heavily from foreign banks though under New Labour there was a period of stability until the end of 2007 when there were signs of an economic recession
also consumer boom as borrowing from banks was encouraged but allowed to run for too long in order to mask the difficulties created by the gov’s own borrowing
what did brown do to gain the nickname ‘Golden Brown’?
between 1999 and 2002, the price of gold fell on the international markets so Britain sold off 13 million ounces, nearly half of its reserves, China bought 7 million ounces
by 2005 gold prices recovered and it appeared Britain had lost some £3 billion
China, in contrast, had doubled its money
what issue arose with regards to trading with China?
China used the World Trade Organisation to its advantage
in 2006 China was selling much more to Britain than it was buying
in 2005 Britain’s exports to China were only £5 billion compared to Germany’s £31 billion
Britain embarked on a campaign to increase its influence and trade with China
