Economic policy + unions

Monetarism

Sole important job of government in economic management is control of the money supply, and this can be scientifically measured and calibrated (as inflation is related to the quantity of money in the economy)

What did Howe, Chancellor, do almost immediately

Cut the basic and top rates of income tax → top rate from 83 to 60%, which was a more drastic change than for the basic rates

Monetarism at first - policy

Government began to cut spending, 1980 Budget planned this → and to control inflation further, interest rates were kept at a high level in order to deter excessive borrowing and keep the pound strong in the international financial markets

Monetarism - success with inflation

Inflation fell from about 18% in 1980 to 10% in 1990

Thatcher and government spending - was it always successfully kept down?

No - even though there were dips in public spending in the period, it always remained relatively high. In fact, it increased overall: it rose by an average of 1.1% a year

Thatcher did however get government borrowing down (PSBR reduced considerably) → reduces their debt overall

Deregulation

• Focusing on free-market policies – substantial reduction in government regulation of financial services

•  Privatisation – British Gas 1986, British Airways, Rolls Royce (which Heath had bailed out)

• Taking government regulations/rules away, giving the companies free reign over policies

• Did not denationalise the railways (Major)

What was unemployment in 1983?

3 million