Change and Continuity in Industrial Assistance (Early 1980s)

The economic events of the mid-1970s forced the government into counterinflation measures, including an incomes policy which traded tax cuts for reductions in wage inflation, and the introduction of a monetary target. Price inflation bottomed out at around 8 per cent in 1978, from 24 per cent three years earlier, but the incomes policy reduced the relative pay of publicsector employees and the attempt to catch up led to the ‘winter of discontent’, which was a precursor to the return of a Conservative government in May 1979 (Tomlinson, 1990; Allsopp, 1991). In this new climate the control of inflation through monetarism became the central tenet of policy, with the Medium Term Financial Strategy the mechanism for targeting the money supply and Public Sector Borrowing Requirement. Demand management was in effect discarded and the objective of full employment was effectively abandoned. Instead, the government sought to tackle the root cause of Britain’s relative economic decline, and this required attention to the supply side of the economy. The aim was to improve efficiency, return nationalized industries to the private sector and liberalize markets so as to encourage entrepreneurship and the formation of new firms.