Margaret Thatcher

• Monetarism


  Economic theory that argued the best way to control inflation was by limiting government spending and borrowing by strict curbs on the money supply e.g., the amount of money in circulation
• The economy was in bad recession, inflation above 15% and high rising unemployment above 2 million


  1980
• Stagflation was back in 1980, saved by North Sea oil and gas
• Instead of turning around on monetarist policies, they doubled down
• Government borrowing went down, grants to local councils were cut, and benefits were frozen
• Public spending was cut because they believed individuals spent their money better than governments did
• Shift from direct taxation to indirect taxation such as VAT


  Top rate of income tax fell from 83% to 40% by 1988, standard rate fell from 33% to 25%, VAT went up from 8% to 15% in 1979
• Cutting public spending caused conflict between Tories and labour-controlled local councils

  One of the worst fights was with GLC (Greater London Council) headed by Ken Livingston
• Rate capping introduced to limit the amount of money that the council was allowed to raise in local taxation

  In 1985, local authorities tried to rebel against this, threatened by bankruptcy
• Thatcher never managed to cut public spending because spending went up on social security due to high levels of unemployment
• Privatised entities

  • BP in 1979, Aerospace in 1980, British Telecom in 1984, British Gas in 1986
• Between 1979 and 1990, the number of individuals owning stocks went up from 3 million to 9 million
• Privatisation


  • Anti-socialist ideology, brought revenue for the government, made life insecure for employees, increased inequality, many companies undervalued when sold
• Deregulation


  Making it easier for businesses to trade and grow, encouraging entrepreneurship and wealth creation
• Measures introduced for start-up companies

  • Loan Guarantee scheme, Enterprise Allowance scheme
• Deregulation benefits include a boost to entrepreneurship
• Deregulation drawbacks include people taking advantage
• Encouraging entrepreneurship and wealth creation

  Making it easier for businesses to trade and grow
• Government measures to help start-up companies

  1. Loan Guarantee scheme

  2. Enterprise allowance scheme
• Benefits of government measures
• Fallbacks of government measures
• Financial deregulation freed up London and financial markets from the tight controls of the Bank of England
• The Big Bang deregulated the London Stock Exchange

  27th October 1986
• Effects of the Big Bang deregulation
• Increased competitiveness with other countries led to gradual lowering of interest rates on credit
• British customers can now invest in foreign businesses
• Impact of increased competitiveness of mortgages offered on the British market
• People took advantage of the Right to Buy scheme
• Ability to pay off mortgages was dependent on the employment of both adult members of the family
• Investment in dubious businesses leads to more financial scandals
• New investors in the stock market are unqualified and people lose money
• Government overestimated the benefits of the policies
• Closures of massive businesses occurred
• Medium businesses not producing as much GDP or employment for the economy
• Britain and Argentina were the only countries to implement monetarist policy to such an extent
• Britain had to deal with the impact of a democratic society while implementing the policy
• Geoffrey and Nigel didn't consider the massive downturn of the world economy following the Iranian war
• USA implemented similar policies 2 years earlier than Britain
• Huge boost in consumerism occurred
• Developing gap between the poorest and the wealthiest within society