The Economic Revolution during Thatcher's time in power

The Economic Revolution

• Thatcher’s revolution began with the early budgets
• His first budget was introduced in June 1979 and included the following changes;

• Interest rates were raised to 14%.
• The standard rate of income tax was cut from 33% to 30%, and the highest rate from 83% to 60%. The idea was to incentivise the population by rewarding hard work and success.
• To balance the lost income tax revenue, the government raised the rate of of VAT and other indirect taxes that all consumers had to pay. VAT went from 8% to 15%. The impact of these tax changes meant that it was now consumption that was being taxed, not effort. (This would penalise the less well off.)

• These changes had a profound effect on the already weak economy
• The increased prices of goods due to higher levels of VAT pushed up inflation to 21.9% by the end of 1980.
• Cuts to government spending and support for nationalised companies was also cut, but not as far as Thatcher had hoped was possible.

• Other free market changes introduced included the abolition of the Price and Income Commission and ending controls on the movement and value of currency.
• The value of the pound increased, which harmed exports, adding to unemployment.
•  Ironically, the government had to borrow more money to pay for the increasing unemployment benefits due to with a shrinking tax revenues.

, Howe’s second budget in the summer of 1980

• promised more of the same, cutting a further…