BRITAIN 1.5 What impact did Thatcher's governments (1979-90) have on Britain 1979-97? - Cheltenham Bournside ...
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BRITAIN 1.5 What impact did Thatcher's governments (1979-90) have on Britain 1979-97?
AN OVERVIEW OF THATCHER'S CAREER Thatcher was born in Grantham, Lincolnshire, where her father owned two grocery shops He was very active in local politics and took Margaret along to many of the meetings he attended Margaret was brought up with a Christian faith that informed a strongly held set of Conservative moral values throughout her life Having studied Chemistry at Oxford University, she worked for a few years as a research chemist before training as a barrister She stood as a candidate in the 1950 election – she lost on this occasion but in the election o f 1959 she won the seat of Finchley and became an MP Thatcher gradually rose through the ranks until in 1970 she was made Education Secretary – in this role she gained the nickname 'milk snatcher' In 1975 she became leader of the Conservative party, which was then in opposition, becoming the first female Prime Minister in 1979 Her first priority was the economy – began cutting supply of money in circulation to reduce inflation (monetarism) She also aimed to reduce government interference with the economy and used the law to smash the power of Trade Unions Her initial economic policies were unsuccessful, with 3.6m out of work - however, her success in the 1982 Falklands War saw her re-elected in 1983 During her second term she had the confidence to expand privatisation of state owned assets and began to centralise more power She faced a number of problems such as the miner's strike, IRA and the Soviet Union - stand offs made her more popular with the people In 1987 she was re-elected for a third term and introduced the 'poll tax' 1989-1990 which was very unpopular - she resigned in November 1990
ECONOMICS - OVERVIEW
When Thatcher came to power, she sought to:
Reduce inflation - running at around 14% in 1979 (after periods of 20%+ in the late 70s)
Supply Side Economics:
Reduce budget deficit The belief that economic growth can be
most effectively created by lowering
Increase efficiency of the economy taxes and decreasing regulation
Reduce power of trade unions
Summary of Policies
Belief in desirability of free markets over government intervention (e.g. pursuing policies of privatisation and deregulation)
Pursuit of supply side policies to increase efficiency and productivity
Reducing power of trade unions and increased labour market flexibility
Financial deregulation (e.g. building societies becoming profit making banks)
Reducing higher rates of marginal income tax to increase incentives to work
Ending state subsidies for major manufacturing companies
Encouraging home ownership and share ownership
Targeting money supply and monetarist policies to reduce inflation of late 1979 – Monetarism was effectively abandoned by 1984
ECONOMICS - MONETARISM
Monetarism is the belief that inflation is caused by the amount of money in the economy
Thatcher aimed to reduce the money supply through cuts to government spending and higher interest rates
This theory was developed by Milton Friedman
This theory had only been tested in the military dictatorship in Chile
Introduced in Thatcher's first term
'To those waiting with baited breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The
lady's not for turning!'
Success Failure
Inflation reduced to single figures by 1982, never rose above 9% for the rest of the 80s 1980 and 1981 budgets slashed government spending – riots in several cities (e.g. Brixton in London)
1980-1981 manufacturing fell 14%
1980 – Inflation rose to 22% due to souring pay demands
1982 – Unemployment at 3 million
Unemployment benefits forced up government spending
By 1983 monetarism was phased out in favour of more successful supply-side policies (tax cuts and
deregulation)
1979 – Inflation 10.3%
1990 – Inflation 10.9% (no change)ECONOMICS - PRIVATISATION
Aimed to cut government expenditure, reinvigorate the economy and incentivise workers
Thatcher's Legacy
Thatcher believed in popular capitalism - everyone in society should own property and shares in
companies • British Rail privatised 1994-1997 – government continues
to subsidise trains
Before 1983, she privatised British Aerospace, British Sugar and British Petroleum (BP)
• 1992 Private Finance Initiative under John Major –
1984 – British Telecom (BT) sold public-private partnerships. Private funding used to
provide a government service, which is then funded by
1986 – British Gas sold - raised £5.6 billion, people were encouraged to buy shares with the campaign, the state in the long term
'If you see Sid, tell him.'
Shares were sold cheaply to ensure a quick, wide take up
Success Failure
£19 billion raised - able to pay for tax cuts By 1990 only 20% of shares were owned by individuals (failure of popular capitalism)
Number of shareholders went from 3m to 11m between 1979-1990 Only 9% unskilled male workers held shares, compared to 50% of professional males
Since the privatisation of the 10 state-owned water authorities in 1989, the number of customers at risk Privatisation led prices to increase faster than inflation (gas)
of low water pressure has fallen by 99%
BT Privatisation led to better customer service – previously customers had to wait 6 months for install Harold Macmillan compared it to 'selling off the family silver'
200,000 jobs were lost as a result of coal privatisation
Privatisation of British Rail has not improved the service - government spending doubled since 1994ECONOMICS - DEREGULATION
The removal of rules and regulation – Thatcher hoped this would encourage innovation and competitiveness
1979 removal of exchange controls
Ended restriction on how many pounds could be converted and spent abroad
1986 'Big Bang'
Relaxed rules of the ownership and trading operations of banks
Success Failure
Removal of exchange controls fuelled overseas investment (with big profits returned Removal of exchange controls led to an increase in spending on consumer goods,
to Britain) which drained money from Britain, increasing the balance of payments defecit on the
current account
Big Bang – City of London grew rapidly - became one of the major financial centres in Big Bang led to riskier financial schemes - unscrupulous individuals made huge sums
the world of money, this culture contributed to the financial crisis of 2008
Lawson Boom - Economic growth reached 4-5% a year in late 80s British people became more accustomed to borrowing money - not what Thatcher
wanted, she supported 'careful savers'
Private household debt increased from £16b in 1980 to £47b in 1989
Mortgage debt rose from £43b to £235b
By 2003, personal debt was £1.3 trillion - the highest in europeECONOMICS - TAXATION
Thatcher did not believe that taxation should be used to take money from the rich to subsidise the poor
'The problem with socialism is that you eventually run out of other people's money'
She thought this led to a lack of incentive to work hard and bred dependence at the bottom of the scale
Aimed to promote investment, growth and therefore government income through tax cuts
1980 Budget – top rate of income tax cut from 83% to 60%
1988 Budget – basic rate of income tax from 29% to 25%, higher rate of income tax was cut to 40% - often referred to as the 'giveaway budget'
Taxation cuts were subsidised by the discovery of North Sea Oil
However – average tax bill rose by 6% between 1979-1990 due to an increase in indirect taxation (e.g. VAT)
1979 – VAT was increased from 8% to 15%
Success Failure
Tax cuts were a fiscal stimulus which helped to increase disposable income and Increase of regressive taxes like VAT and National Insurance Payments placed a higher
consumer confidence – this led to a rise in consumer spending and economic growth burden on the poor – increasing wealth inequality
Decline in tax avoidance schemes – wealthiest 5% paid as much tax in 1988 as the Poll tax brought down Thatcher
40% rate as they did in 1978 at the 83% rate
Tax cuts contributed to the Lawson Boom - 4/5% growth in late 80sECONOMICS – TRADE UNIONS
In the 1970s, days lost to Trade Union strikes were at all-time highs
It was feared that poor industrial relations and strikes were key factors in holding back industry
Thatcher was determined to reduce the power of trades unions and end industrial dispute from costing British industry
Their power was reduced through a series of Employment Acts
1980 Act - ended 'closed shop' and sympathy strikes
1982 Act - unions could be sued for illegal strike action
1984 Act – strikes had to be approved by a majority of union members in a secret ballot – Thatcher also begins building up coal reserves
After the strike, further employment acts in 1988, 1989 and 1990 further weakened Trade Unions
The Miner's Strike
Success Failure
NUM strike lasted 1984-85
Unions became far more willing to work with the Unemployment: Between 1974-1991 the number
government after NUM defeat of miners fell from 200,000 to 10,000
Thatcher branded the strikers 'the enemy within'
Total number of Trade Union members fell from Communities in industrial areas were devastated;
NUM leader Arthur Scargill made tactical errors that undermined the strike: 13.5m in 1979 to under 10m in 1990 they experienced mass unemployment, high crime
rates and emotional suffering
Strikes began after winter - UK needed less energy
Scargill did not ballot members about strike action Total number of working days lost to strike action Crime rate doubled during the 1980s
fell from 10.5m in 1980-84 to 0.8m in 1990-1994
His provocative methods angered the public – he held 79% dissaproval rating during the strike
Government subsidies for failing industries
removedROLLING BACK THE STATE - OVERVIEW Thatcher's Views Strong moral values rooted in methodist upbringing Felt state intervention was to blame for Britain's decline; high taxes discouraged entrepreneurship, state ownership crushed innovation and competition, welfare state bred dependancy Welfare state = nanny state Wanted to break from consensus Inspirations Keith Joseph - new right conservative Friedrich von Hayek - economist, published a book advocating against a large welfare state Neo-liberalism – free market economic thinking, against state intervention and regulation, became popular among conservatives in the 70s Aims Reduce the size of the state - small government Reduce government interference in people's lives Promote efficiency through privatisation and 'contracting out'
ROLLING BACK THE STATE
Civil Service Local Government NHS Education
Originally 732,000 civil servants in Britain – 3x more Thatcher wanted to slim down local government and Thatcher wanted to slash the NHS like the Civil Thatcher wanted to raise education standards and
than comparable nations reduce its independence Service – would have loved to enforce private health give more value for money
Thatcher brought in business-minded people and 1985 Local Government Act - enabled her to abolish However, the NHS was the crown jewel of the welfare Education Minister created a National
advisors from outside the government to help slim councils – Greater London Council (GLC) and 6 other state – too beloved by the public to change radically Curriculum and merged the O-Level with the
down the civil service city councils were abolished Secondary Leaving Certificate into the GCSE
Thatcher abolished the Civil Service Department in Wanted to cripple Labour councils who tried to fight Between 1980-87 spending on the NHS rose 60% New syllabus rolled out in 1986
1981 - she saw it as a Trade Union her policies
MINIS - Introduced by the Environmental Minister, Cut central government payments from 60% to Third election victory in 1987 gave Thatcher more 1988 Education Act - made the National Curriculum
allowed him to closely monitor the cost and 49% of funding and introduced rate caps to stop local confidence compulsory and introduced key stages with
responsibility of civil servants (inefficiencies would be councils plugging the funding gaps examinations
uncovered and cut out)
¼ environmental ministry workers were fired in 3 'Community charge' was rolled out in 1989 in 1989 Working for Patients white paper called for the Exam results used in league tables - to encourage
years Scotland and 1990 in England and Wales creation of 'internal markets' with healthcare competition, drive up standards
MINIS was rolled out to other ministries It became known as the Poll Tax and was hugely Free market elements were introduced after Thatcher 'Better' schools were quickly oversubscribed, demand
unpopular as the poor paid just as much as the rich fell from power – unpopular with doctors for schools drove up house prices in the area
By 1988, 22.5% of civil servants had been sacked - Encouraged councils to use 'contracting out' to Spending on NHS managers increased from £25.7m Poorer familes were forced out of good schools due
saving £1 billion promote efficiency and reduce costs to £383.8m to the area's price
'Next Steps' report of 1988 recommended a less Nationally the total number of government 1996 – 34 NHS trusts were in debt Schools also allowed to get funding directly from
centralised service + more flexible 'agencies' employees fell from 2.5m to 2.1m between 1979-95 central government - reducing power of LEAs
By 1991 there were 57 of these agencies – by 1997 Right to Buy in 1980 intended to reduce dependence Quality of care decreased - 2% of hospital beds lost Head teachers and governors gained more control of
76% of the civil service worked in 100 different on local government and promote pride/responsiblity between 1990-94 budgets and spending
agencies 200,000 council houses sold between 1982-83
Brian Harrison - 'the most substantial revolution However, the lack of available council houses made it Requirement to meet targets disliked by doctors and 1,200 schools became independent this way
within the civil service since the 1850s' harder for councils to house the poorest in society nursesPOLITICAL DIVISION
Divisions between Right and Left
Post War Consensus - centre ground shifted left, socialist policies prevail
1945-1970
Centre ground still to the left, but failure of post-war consensus and rise of neoliberalism pushing things to the right, political titans Wilson and Heath both centrist and pro-
1970-1979 European
Centre ground shifts to the right under Thatcher, conservatives support her free market policies and reject the post-war consensus
1979-1990
Centre ground to the right, Labour adopt Thatcherite policies, particularly regarding the economy
1990-1997
Special Advisers and Career Politicians
Thatcher accelerates trend to use outside advisers rather than career civil servants for policy advice
Voter turnout fell – linked to the rise of the elite, career politicians
Number of politicians with a university degree rose from 40% in 1918 to 75% in 2010
Fraction of Labour MPs from a manual worker background was 1/3 in 1945 but 1/10 in 2010
Number of MPs from a legal background declined since 1979 from 70% in 1974 to 30% in 1997
Number of MPs who previously worked for political organisation increased from 3% in 1979 to 14% in 2010
Thatcher changed the rules of political organisations and caused other parties to change their approach in order to succeedSOCIAL DIVISION
Gap between Rich and Poor Regional Divisions Wales
Gap between Rich and Poor widened under Thatcher London and the South East got richer and became more productive, South Wales suffered badly from the decline of the mining areas
while productivity declined in the North East and North West
Regressive taxes took a larger percentage of the poor's income than the North-South divide created 73,000 people were unemployed in Wales in 1979, rising to 166,000 in
rich 1986
Policies aimed at cutting inflation cut spending on the poor and led to Thatcher tried to address these problems through enterprise zones: Just 3000 people worked in mining in Wales by 1990
unemployment among manufacturing work • Areas where firms received government funds to move in
and generate growth
• Led to some impressive urban renewal projects (Albert
Docks)
• Wider success was limited
Cuts in income tax benefited rich more than poor - by 1989, the bottom Number of economically inactive people in former industrial areas 90% of the workforce in Wales was lost
10% paid £400m less in income tax, top 10% paid £9.3b less continued to increase between 1990-97
Proportion of pensioners living below the poverty line increased from By 2001, 1/5 men in former coalfields were unemployed, up from 1/10 in Unemployment led to social problems like drug abuse,
13% to 43% 1981 homelessness and crime
Income of the richest rose 61% between 1979-92, while the income of Yorkshire, South Derbyshire and North Warwickshire bounced back 1,308 drug offences were recorded in Wales in 1990 compared with 605
the poorest decreased by 18% but South Wales struggled in 1979
Middle class divided by Thatcher - many against her attack on the public However, economic growth was experienced in other areas of Wales:
sector – only 55% of middle class voted Conservative in 1987, fewer • Spending on the NHS increased from £500m in 1979
than any time since 1918 to £1.5b in 1990
• GDP per person increased from £7000 to £20,300
However, the middle class grew and one can argue that increasing • Number of school-leaver seeking further education or
income gap between the rich and the poor is a sign of a growing training increased from 20% to 47% between 1974-91
economyEFFECTS ON POLITICS AND PARTY
DEVELOPMENT - CONSERVATIVES
United Party: Gained support from a divided conservative party New Conservative Elite: Changed the social makeup of the Conservative Party
• 'less posh' - MPs educated at public schools dropped from 75% to 66% between 74-87
Thatcher was careful not to criticise Heath's U-Turn before 1974
• 'Old Conservative Elite' - Wealthy privileged, upper class, linked to aristocracy made up
Enlisted a 'wet' (one-nation tory) Willie Whitelaw, to her side - 'everyone needs a 75% of MPs in 1974
Willie'
• 'New Conservative Elite' - Like Margaret Thatcher, middle class grammar school, self-
Rallied the Conservatives around her free-market, patriotic views before the
1979 election made success, made up 44% of MPs in 1987
She was careful not to ignore the back-benchers • However, mainly men - number of female MPs only increased from 19-41 during her
time as Prime Minister
Ending Consensus Politics: Introduced new political ideas of individualism, low Modernised Party: New American innovation swiftly adopted by Conservatives
taxation, choice and free market liberalism
• Use of PR companies (e.g. Saatchi & Saatchi for marketing in elections)
Ended Conservative support for full employment and nationalised industries
• Use of Press Secretary Sir Bernard Ingham to leak information to the press to
Fought to save Britain from 'creeping socialism' damage opponents
These ideas continued to post Thatcher conservative governments
• Use of Computers to target potential voters in marginal constituencies – 1983 election
e.g. Privatisation of British Rail 1994-97
a direct mail campaign targeted 500,000 voters
Extension of Trade Union legislation – Trade Union and Labour Relations Consolidation
Act 1992
Commitment to lower direct taxation - basic income tax reduced from 25% to 23% in 1997EFFECTS ON POLITICS AND PARTY
DEVELOPMENT - LABOUR
Why Did Labour Need to Change? Kinnock's Reforms (1983-1992) Tony Blair (1994-2007)
Disillusionment with Labour Neil Kinnock became leader 1983-1992 – the split between Labour Blair became leader in 1994
• Labour unable to deal with strikes in the 70s and SDP made it harder for Labour to tackle the left wing of the party
• Attacked by the right wing as the 'loony left' due to labour Described by Thatcher as her 'greatest legacy' - she had persuaded
activism and Militant Tendency (a group of extreme left wingers Labour to embrace her ideas in order to gain votes
who gained control over the Liverpool branch of the party)
Policies Were Out of Touch Kinnock had to take action against Militant Tendancy and had to get Blair recognised that the party needed to continue moving away
• 1983 manifesto described as the 'longest suicide note in history' rid of left-wing ideas in order to gain support: from traditional working class and trade union support to reach out
• Policy propopsals included scrapping nukes, withdrawal from the to the growing number of middle class supporters
EEC and more direct control over bank loans • Nuclear disarmament was rejected as Labour policy
• Ending and rejected nationalisation in favour of privatisation -
• These policies did nothing to deal with the problems facing Britain
Clause IV of the constitution abandoned public ownership
(high unemployment, riots etc.) • Labour moved to a more pro-European stance
• Clause IV had always been in favour of public ownership
Leadership before this
• 1989 – Labour dropped its support for Unions
• Leader Michael Foot was scruffy, held strong socialist opinions
and was never able to appeal to the voter • Continue low direct taxation
Electorate
• Big businesses would be embraced and free markets allowed to
• Thatcher's tackling of the unions and deindustrialisation
Kinnock resigned after the 1992 election flourish – free market liberalism
diminished Labour's traditional voter base
• Right to buy increased Conservative support among the growing
• Limit trade union powers + abandon class politics
middle class (60% of Labour voters who bought their council
house then voted conservative)
• However, also aimed to promote inclusiveness + reduce gap
Split between the rich and poor
• 1981 the 'Gang of Four' broke away from Labour and formed the • Aimed to promote equal distribution of opportunities
SDP • Denounced 'forces of conservatism'
• They were concerned by Trade Union power, Euroscepticism and • Committed to a minimum wage (introduced in 1998)
Michael Foot • Investment in education to create equal opportunities
• Labour then also had to compete with the SDP for votesEFFECTS ON POLITICS AND PARTY
DEVELOPMENT – OTHER PARTIES
SDP and Liberal Regional National Parties
Saw that Thatcher was representing the right and Foot the Left, there was a need for a The realignment of the economy under Thatcher's control hit Wales and Scotland hard
centre-party
Claimed members from Labour and Conservatives unhappy with Thatcher Coal mining was practiced in both regions – Shipbuilding was the backbone of the Scottish
economy
SDP and Liberal Party allied for the 1983 election - gained ¼ of the vote SNP (Scottish National Party) - called for greater powers and later full independence for
Scotland: seen as anti-Thatcher, especially after the introduction of the poll tax
SDP unable to capitalise and merged with Liberals to form the Liberal Democrats in 1988 Welsh Nationalist Party (Plaid Cymru) - Increasing dissatisfaction with Thatcher's policies
left the Conservative Party in decline in the late 1980s
Lib Dems seen as socially liberal and pro-European Plaid Cymru were able to secure a referendum under New Labour that created the Welsh
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