Monetarism - early economy

• Define monetarism

  • cut government spending in order to curb inflation
• Inflation due to monetarism hit over 15%
• Inflation hit 2 million
• North Sea Oil stopped a balance of payments crisis
• 1981 - further monetarism
• 1981 budget

  • local council budgets are cut
  • Income tax fell from 83 to 44 percent whilst lowest band went to 25 from 33
  • VAT went from 8 to 15 percent
  • Indirect tax on poorest and not progressive
• Public spending cuts led to clashes with looney left - labour councils - blamed them in ideology and wasting resources

  • Ken Livingston and GLC - demonised for education and public transport
• Rate Capping 1990

  • Sheffield and Liverpool rebelled but threat of bankruptcy backed down
  • 1986 local government act - central government powers increased at expense of local
• Social security spending went up so much due to unemployment meaning that public spending was never cut