Premiership of Margaret Thatcher

The Premiership of Margaret Thatcher began on 4 May 1979, with a mandate to reverse the UK's economic decline and to reduce the role of the state in the economy. Margaret Thatcher was incensed by one contemporary view within the Civil Service, that its job was to manage the UK's decline from the days of Empire, and she wanted the country to assert a higher level of influence and leadership in international affairs. She was a philosophic soul-mate of Ronald Reagan, elected in 1980 in the United States, and to a lesser extent Brian Mulroney, who was elected in 1984 in Canada. Thatcher would go on to radically transform Britain more so than any leader of Britain since Clement Attlee, rejuvenating a stagnant world power but socially dividing much of the population.

First government 1979–1983

Deflationary strategy

Under the Thatcher government the taming of inflation displaced high employment as the primary policy objective.Roger Middleton, Government versus the Market: The Growth of the Public Sector, Economic Management and British economic performance, c. 1890-1979 (Cheltenham: Edward Elgar, 1996), p. 630.

As a monetarist, Thatcher started out in her economic policy by increasing interest rates to slow the growth of the money supply and thus lower inflation. She had a preference for indirect taxation over taxes on income, and value added tax (VAT) was raised sharply to 15%, with a resultant actual short-term rise in inflation. The fiscal and...
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