The five biggest economic legacies of Margaret Thatcher

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Margaret Thatcher

The death of Baroness Thatcher marks the end of an era. She divided opinion dramatically, but like her or loathe her, the longest serving British prime minister left an indelible mark on the country.

So what were her five biggest economic legacies?


The breaking of the unions

At the beginning of her time in office, union leaders like Jack Jones and Joe Gormley wielded incredible power - bringing British industry to almost a stand-still in the Winter of Discontent in 1979. Thatcher's rise came at a time when public sentiment had begun to turn against union power and 'strike fever'.

After her election, she and Employment Secretary Norman Tebbit set about stripping the unions of their legal protection - banning flying pickets, making strike ballots compulsory, and outlawing the closed shop. She took the miners on in 1984, and when they returned to work in 1985 her battle was won. The unions went into steep decline, and although they remain strong in a handful of industries (and the public sector), the power has largely swung towards business owners.

Privatisation

The process began in the late 1970's as a money-making scheme, but in the 1980's it became a matter of ideology. Thatcher was driven by two beliefs. The first was that private companies would be more effective than public entities, and that competitive productivity would boom after privatisation.

The second was that of popular capitalism - that we all ought to be shareholders - embodied in the "tell Sid" campaign encouraging us all to buy shares. As a result four and a half million people bought British Gas shares.

The result has been somewhat mixed. On the plus side, a number of small investors have made small nest eggs, the businesses themselves have changed beyond recognition - in many cases moving from becoming loss-making to profit-making. There have also been some clear efficiency gains - and those who remember waiting weeks to have a phone installed will see some change for the better.

However, there are those who argue that the consumer has also lost out. The privatisation of energy companies and rail companies have not necessarily resulted in lower prices and a fairer system, and the state has less and less control on the prices faced by a struggling population. Consumers are putting money in the pockets of the capitalists. Your view on whether this is a bad or a good thing will depend on your politics - and your electricity bill.

Home ownership

The right-to-buy scheme introduced in 1980 encouraged council tenants to buy their homes at a much-reduced price. Simultaneously this had two striking effects: the expenses associated with state housing fell dramatically, and it created a huge swathe of new home owners - in 1979 around 55% of people were owner-occupiers, by 2003 some 70% of people owned their own home.

However, there are those who argued that the policy precipitated a housing crisis - removing affordable housing stock, without replacing it. Those who were not eligible for the scheme were priced out of the property market entirely.

There are others who say that the creation of millions of new homeowners in an uncontrolled way contributed to the wide swings in property prices, and exacerbated the boom and bust of the market.

The death of the workplace pension

Margaret Thatcher's government was responsible for the launch of Personal Pensions in July 1988 and for the scrapping of compulsory occupational pension scheme membership, in April 1988. For her, this was part of her political ideology emphasising individual rights and responsibilities, rather than collectivism - which led to her declaring "there's no such thing as society".

However, this was the beginning of the end for workplace schemes, as companies began to scale back their commitments, and gradually more and more of the burden of retirement was heaped onto the individual. As Tom McPhail, Head of Pensions Research at Hargreaves Lansdown, points out: "Pension provision may be focused through the workplace but with the end of final salary pensions and the move to money purchase arrangements, the question of what people get to live on in retirement is increasingly dependent on the decisions which they take for themselves."


Targeting of inflation

When Thatcher came to power, inflation had been allowed to run rampant, and was widely considered to be the small price to pay for high employment. She took the opposite view: that unemployment was a small price to pay for controlling inflation, and she hiked the base interest rate from 17% to an astonishing 30% in 1979.

This had little effect in the short term, but she refused to u-turn saying: "This lady's not for turning" and after spending was cut and taxes raised in 1981 Budget, inflation came back under control.

This wasn't the only time she took such measures: doubling interest rates in 1988 to curb inflation - proving that she wasn't afraid of the mass unemployment that had accompanied her decision to do the same thing less than a decade earlier.

As George Osborne announced in his latest Budget, the primary aim of the Bank of England will remain the controlling of inflation, leaving this goal as a lasting legacy of Thatcherism.

But what do you think? Are these the five most important economic changes Thatcher made, or did other things affect Britain more? Was her government's introduction of the PEP the beginning of a tax-free savings revolution that put her union-breaking in the shade? Was her combative approach to European politics a game changer of far more significance than controlling inflation? Let us know in the comments.

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