Coutts, K. and Gudgin, G.
The Macroeconomic Impact of Liberal Economic Policies in the UK
Centre for Business Research Special Reports
(2015)
Abstract: A sea-change occurred in the early 1980s in the way the UK economy was organised. From then on, until the present day, openness to trade, light-touch regulation of commerce and free competition have been the watchwords, alongside low income tax rates and constraints on trade union action. Most importantly, the removal of a raft of restrictions on banks and building societies, combined with the abolition of controls on the international movement of capital, allowed a huge expansion in household borrowing. These liberalisation measures extended an earlier trend including the bonfire of war-time restrictions, international trade agreements to reduce tariffs, the move to floating exchange rates between 1971 and 1973, and the switch from direct to indirect controls on bank lending in 1971. However, even by the late 1970s the UK economy was still strongly managed by government. Controls were still in place on capital movements, investment, prices and incomes. Trade unions remained powerful and the basic rate of income tax was at 30% with the top rate at 83%. Most lending to households was still undertaken by heavily controlled building societies. Government economic policies prior to the late 1970s still aimed to maintain full employment although the practice had become more difficult to achieve. After 1979 policy switched decisively towards controlling inflation, firstly through monetarism and later by using interest rates to meet inflation targets.
Author links: Ken Coutts
