What were the key features of New Right economic policy? To what extent was this thinking challenged in the 1980s and 1990s?

A-Level: Politics

New Right economic policy was the greatest shift in economic thinking since the start of the post 1945 post war consensus. Thatcher not only tore up decades old Keynesianism, but introduced radical reforms to the trade unions, denationalising certain sectors of the economy. Therefore Thatcherism can be considered a modern British economic revolution.

It is impossible to understand Thatcher’s economic policies without first looking at briefly the key policy that she benefited from; privatisation. Though privatisation was not new, Callaghan and even Heath had sold off minority stakes in order to gain capital, Thatcher sold wholesale. She had always expressed her ideological views of ‘rolling back the frontiers of the state’, and not only had these industries been highly unionised, yet had also stacked up huge debts, operating in an inefficient monopolistic economic climate, for instance the top 18 companies employed 1.6 million workers*1. It was in these policy issues Thatcher showed herself to be a true conviction politician. Referring to these industries in 1981 prior to the infamous miners strikes of 1984-5, she referred to them as ‘horrific, poisonous, debilitating, voracious and a haemorrhage’.* 2 It was in the 1979 manifesto Thatcher promised to sell half of BP, yet it was not until 1981that the Chancellor signalled the postal services, BT, gas and electricity were all under consideration. Thatcher by the use of privatisation, seeking to create her ‘shareowning democracy’ trebled share ownership to 8 million holders by 1989, yet even this was behind many of the Western democracies. It was privatisation that gave her billions in extra revenue that previous and future governments would not have. It allowed her to cut taxes even further, yet more significantly one could argue remove those damaging liabilities many of the public sector industries had become, British Steel for example was a 1.7 billion liability in 1979.

So huge was the shift in public ownership, that only 1/3 of the level from 1979 of GDP was created by the public sector in 1990. Thatcher earned a huge £20 billion from these policies and a further £5.5 billion from the sale of council houses, and thus many of her critics suggest that her tax cutting agenda was a jackpot only the Thatcher period would gain from, and her tax cutting ‘success’ as well as large reductions in public debt were only a result of the extra revenue from privatisation. It was only after 1983 that Thatcher became popular enough to remove the ‘wets’ from her cabinet that feared too radical policy agendas and carry out her privatisation movement. Men like Lord Carrington and Peter Walker, by 1983 had left the cabinet scene and in 1984 the first of the major privatisations began with BT. This was followed by the sale of British Gas, 1986, followed by BA, BAA and BP in 1987. Thatcher claimed that these sell-offs would create a ‘shareowning democracy’.
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