Economic Boom under Blair
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- Created on: 03-05-18 17:05
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- Economic boom under Blair
- Brown would have complete control over economic policy as chancellor
- part of agreement he wouldn't challenge Blair in leadership election
- Lab. inherited very favourable economic climate
- Brown's priorities
- prove ton Middle England Lab. could be trusted with the economy & was pro-business
- escape image of 'tax and spend' economy
- keep inflation low
- keep govt. spending under control
- prove ton Middle England Lab. could be trusted with the economy & was pro-business
- Brown's priorities
- 'prudence with a purpose'
- growing stable economy to improve public services
- after 2001, injection of money into public services
- big increases in new school & hospitals
- wages increased for nurses, doctors & teachers
- exam results up & waiting times down
- Lab. argued spending essential to make up for years of under-funding & neglect under Cons.1979-97
- in order to avoid raising taxes, Lab. (like Cons.) continued to use private sources of funding for improvements in public services
- some criticism of funding new projects through Private Finance Initiative (PFI)
- buildings usually finished quickly by debt stored up for the future
- by 2007 inflation kept under control, record numbers of people in work, living standards remained high & consumer economy boomed
- some economists warmed boom based on rising house prices & high levels of credit card spending & personal debt not increased productivity
- Will Hutton
- danger this 'bubble' might not last
- when Cons. left office 1997 inflation = 2.6% by 2007 it was 4.8%
- pension reform = £8bn of pensions lost
- v. popular savings ratio was 9.7% 1997; fell to 3.7% 2007
- UK total share values was £120bn lower
- raid on pensions was a 'stealth tax'
- other examples of stealth tax
- rising national insurance contributions
- removing marriage tax allowance for couples under 65
- removing tax relief on mortgage payments
- reducing level of tax-free savings under TESSAs, PEPs & ISAs
- in 1999 untaxed amount could be saved was £12,000. 2007 it was £7,000
- other examples of stealth tax
- by 2007, 29.1m people in work - 2.5m more than 1997
- in 2007, 5.4m (many 16-30 y/os) had never had a job & lived on benefits
- 37% increase in jobs were in the unproductive public sector which made B increasingly a client state
- policy to borrow in order to fund expansion of public services
- costs of services outran revenue returns leading to increased borrowing
- govt. borrowing encouraged consumer credit boom
- B. not well prepared for international recession that set in by end of 2007
- 'Golden Brown' policy to sell off half of B's gold reserve as gold prices falling
- subsequent recovery of gold market meant B had sold at a heavy loss of £3bn
- Brown would have complete control over economic policy as chancellor
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