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Thatcher's Economy - Coggle Diagram
Thatcher's Economy
Monetarism
From the first budget in 1979, Thatcher's government planned to reduce government spending by using monetarist policies
In 1981. government doubled down on monetarist policies, and applied even further monetarist measures
Government borrowing was cut, council grants were cut and benefits were frozen
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Government introduced rate capping (limiting the taxation of local councils), and this led to a rebellion by local councils in 1985. The councils backed down when facing bankruptcy.
Public spending never went down in real terms, because of high social security spending due to unemployment
Taxation
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Some argued that reduced direct taxation was good because it encouraged wealth creation, however some argued that it hit the poorer people hardest
Privatisation
Full drive for privatisation began in 1984, after sale of British Telecom. High profile British Gas sold in 1986.
1979-1990, number of people owning shared increased from 3 million to 9 million
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Critics argued that companies were sold too cheaply, to ensure it was all bought
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Deregulation
Another aspect of supply-side economics is the idea that the government must interfere as little as possible
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Enterprise Allowance Scheme encouraged the unemployed to set up a business, and provided them with £40 a week for a year to begin their business
Financial deregulation freed up the City of London, huge new wealth was created and the yuppie emerged
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Inflation
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High interest rates of 1980s led to a reduction in output and demand, because it made it hard to export (as value of £ increased) and expensive to borrow
Inflation grew steadily after 1985, reaching 10% by 1990
Unemployment
Maintaining low unemployment was not the key aim of the Thatcher governments, controlling inflation was
Impact of monetarist policies led to many industrial plants closing permanently, manufacturing fell by 15% in 2 years
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Industrial areas, e.g. Liverpool, had unemployment as high as 25%
Economic Realignment
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Foundations of working class communities began to crumble, north-south divide sharpened
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Riots in northern towns were investigated in the Scarman Report and key causes were poverty and race.
Redevelopment was initiated by Michael Heseltine in areas like London and Liverpool, developing and helping the shift to service industries.