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The UK Economy under Thatcher and Major

On Wednesday night, 15th of May, Lord Lamont came to address the Political Society to compare Margaret Thatcher’s economic policies with John Major’s, having served in both of their administrations. He had an illustrious political career, serving as Chancellor under Major and in the Departments of Energy, Industry, Defence and the Treasury under Thatcher.

Lord Lamont began his talk with an appraisal of Thatcher’s economic policy. When Thatcher came into government, the UK was in an absolute economic predicament and was commonly known as the ‘sick man of Europe’, due to their poor record in terms of industrialism involving many days lost to strikes, and Lord Lamont outlined the causes of this. This was worsened by the winter of discontent which happened in 1978, a year before Thatcher came to power. He told us that Thatcher’s main goal was to tackle inflation. Her government decided that the way to do this was to reject the Keynesian economics of the past and to encourage economic liberalism, along the lines of Milton Friedman’s thinking. Lamont did not give any specific opinion on this matter, but it was clear that he realised the massive problem facing Thatcher’s government.

Lamont then summed up Geoffrey Howe’s budgets of 1979 and 1981, which sought to enforce Thatcher’s fiscal policy, radically different from what had been seen with the Keynesian model of before. He closed his Thatcher analysis on a good note, commenting that her policy which prioritised privatisation and tax cuts had been good for the economy and had inspired other economic models globally.

Lamont then went on to consider John Major’s policies, under whom he served as Chancellor of the Exchequer. He first explained the exchange rate mechanism (ERM), which allowed the pound to be compared with every other currency within the EU. There was a large threat of recession when the UK first joined as a result of interest rates at 14%, so joining was a meaningful step to counter this. The ERM did lower interest rates almost immediately, so Lamont naturally saw it as a force for good. Once the ERM collapsed, he set interest rates to target inflation specifically, and these were published and made open to the public, a huge step in the independence of the Bank of England.

He closed his speech with a final remark on Thatcher’s policy: ‘she (Thatcher) used to say that her greatest achievement was New Labour, as they accepted her policies. Of course, that didn’t last’.

It was then time for questions, which ranged from Brexit to Iran’s relations with the West.

On behalf of all of those who went to the talk, I would like to thank the Political Society and Lord Lamont for what was a truly informative and fascinating evening, which won’t be forgotten in a hurry.

Max Graham

DATE POSTED: 02 June 2019

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Articles for: 2019

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