Economic policy

Abstract

The Conservatives were in government between 1979 and 1997 and then in opposition until 2010, their longest spell in opposition in their modern history. The period of the 1980s was associated with the aftermath of the stagflation of the 1970s and the implementation of the new ideas of Thatcherism aimed at reversing British decline and restoring a pathway of growth. The 1980s was a period of considerable economic turmoil and political strife. The government presided over a very deep recession in 1980-1981, which saw unemployment rise sharply as what remained of the traditional heavy manufacturing base largely disappeared. It peaked at three million, and remained there for most of the decade. At the same time inflation rose sharply because of another spike in the price of oil fuelled by the breakdown of pay restraint. The Thatcher government abolished foreign exchange controls and announced a major deflationary budget when the economy was still in recession, which signalled the government’s determination to make major cuts in public expenditure. The government was keen to continue the monetarist experiment begun by the Labour government but to make it much more rigorous (Maynard, 1988).