How successful was monetarism Learning objectives Know key

How successful was monetarism? Learning objectives • Know key details of Thatcher’s early economic policy. • Understand the impact of monetarism. The lady’s not for turning.

“Thatcher’s economic policy is best understood as an attempt to reverse the harmful trends which, she believed, successive governments since 1945 had allowed to develop. She expressed this as ‘taking government off the backs of the people. ’” Lynch, Britain 1951– 2007 First priority: tackle INFLATION, which was running above 15% by 1980 (not highest).

Who was Thatcher’s first Chancellor? • Geoffrey Howe • Very important that he was a ‘dry’. When his first budgets attracted criticism (even from Conservatives), he followed Thatcher’s instructions to maintain monetarist principles.

Government action Positive consequences Negative consequences

Government action • Government spending cut to ensure the public sector borrowing requirement (PSBR) was always in deficit = no need to borrow to fund public services. • Interest rates kept high to deter borrowing and keep £ strong internationally. • 1981 expanded on these actions, cutting local council grants and freezing benefits. • Top rate of income tax fell from 83% to 40% (by 1988). Thatcherites believed people • VAT increased from 8% to 15%. spent money better than governments did.

Positive consequences Use Hugh first (p 118 and p 122). Include what supporters of monetarism thought. • Successful at controlling inflation (down to 5% by 1985).

Negative consequences Use Hugh first (p 118 and p 122). Include what critics of monetarism thought. • Orders for manufactured goods fell (demand AND output dropped, contributing to 1980– 81 recession. • Unemployment increased (see p 123 for figures). • Government was discouraging spending (to control inflation) at the same time as trying to boost economic growth.

Crossovers • Covering ‘loony left’ when we look at opposition to Thatcher. • Covering social consequences later too.

Just imagine … • Labour HAD been an effective opposition to Thatcher in the 1980 s. • Create a detailed poster or party political broadcast transcript attacking Thatcher’s economic policies for one of the election campaigns (1983 or 1987).

Homework – FNL • Answer the source question using the skills you recapped in the Northern Ireland lesson.