It isn’t uncommon for parties to change ideologies and develop new strategies to achieve power or fit into public opinion. New Labour was an example of this where they departed from the left and became a catch-all party. As a result, New Labour adopted various Thatcherite economic policies; which were polices used by Thatcher where their effects are visible to this day on the UK economy. New Labour understood that they were adopting neo-liberal economic policies, this was new for the party which helped in causing the forming of New Labour from the Labour party at the time. Thatcherite economics is closely linked with the idea of free-market economics; due to the use of monetarism, privatisation and creating trade union reform. This essay will look at how after the transformation that was from Labour to New Labour also caused an adoption of various Thatcherite economic policies by Tony Blair and other party officials; the extent into which they did this will also be explored by this essay.
Margret Thatcher was infamous for privatisation of many parts of the UK economy; from gas to electricity to water. This leads to a key economic policy which New labour had adopted, privatisation, New Labour begun dissociating themselves with them wanting to keep industries nationalised or nationalising industries. The original Clause IV was what constituted Labours pledge to nationalisation of these industries. ‘The common ownership of the means of production distribution and exchange’ (Labour constitution, 1918). Clause IV’s wording had been changed in 1995, setting the stage for New Labour to be free to adopt Thatcherite policies like privatisation. The result of this change signified how New Labour planned to be depart from nationalisation and take up privatisation, much like Thatcher. New Labour started their use of privatisation on the NHS. New Labour had a large part to play in the privatisation process of the NHS, and other various public infrastructure for these industries. The Private Finance Initiatives (PFI) is what allowed this Thatcherite economic policy to be carried out. Even though it was implemented by the previous Conservative government. This initiative allowed the private sector to take control of parts of the public sector, meaning that they began to take over important infrastructure such as hospitals and schools and lease them back to the government. Much like how Thatcher privatised industries like the airways, New Labour escalated privatisation of the NHS etc. Although Labour did adopt privatisation, the way in which they implemented it was different from how Thatcherite economics would suggest to. New Labour sold important infrastructure to private companies, such as hospitals, but the infrastructure is leased back to the taxpayer as mentioned before. This means that the running of the NHS is still controlled by the government, New Labour at the time, but owned by private companies. While Thatcher sold the industries outright to private companies where the government doesn’t have direct control of the industries.
One policy which New Labour adopted from Margret Thatcher was the weakening of trade union power and support. This was one of Thatcher’s key policies, throughout her time as prime minster she constantly made efforts to weaken their power on the British economy. The Labour party was birthed from Trade Unions, and so after having their hold over the economy greatly diminished by the conservative party Labours return to office was thought to mean a return of Trade Unions also. ‘A revival of trade unions was widely expected when Blair’s New Labour government took over (…) in 1997. This did not occur. Collective bargaining continued to retreat.’ (Brown, 2011). New Labour adopted this policy of weakening Trade Union power but within Labour itself; as it wished to reduce their control of their party institutions, such as the NEC. Such as when Blair decided to support plans to place a cap on donations from unions to the party; which would essentially reduce their influence on the party. Even though traditionally the majority of Labours funding came from trade unions. This showed the intent in which top officials of New Labour wished to dissociate themselves from trade unions, this may have been so that they could further integrate thatcherite economic policies that they had already adopted but couldn’t due to being linked with trade unions, like privatisation.
Both Thatcherite and New Labour economic policy had an increase in public spending, although what the money was spent on and its purpose were different and may suggest that New Labour didn’t adopt this policy but instead changed the use of it. Even though New Labour increased public spending significantly more than Thatcher, at least before the financial crisis in 2008, there was still an increase from both. Thatcherite policies were to reduce spending on public services especially; this is evident in the Health and Education departments. Yet, due to high levels of unemployment in the UK spending on benefits increased spending significantly to the point where real spending ‘increased by 1.1 per cent a year’ (Eaton, 2013). ‘The unemployment created by the crude application of tight monetary policy after 1979 mean that public spending could not be brought down benefits had to be paid for’ (Burton, 2016). This shows us how Thatcherite economic policy was to control public spending, and high unemployment rates caused it to rise not because public services had increased funding. However, New Labour economic policy differed in a sense where they used public spending differently to how thatcherite economic policy would suggest. Unlike Thatcher, they targeted public services and increased their funding; especially in the Health Education and Transport departments.
New Labour did have differences in economic policy with Thatcherite economics, a notable difference is their economic policy towards the poorer versus the effects on the richer in society and how they dealt with inequality. Thatcherite tax policies affected the working class much more than the middle class, some polices even benefitted the middle class. Whereas New Labour actively implemented policies to benefit the working class, which is to be expected of the Labour party. As soon as the conservatives regained power under Thatcher, they upped VAT from 8% to 15%; this type of tax is known as regressive tax, which takes a larger proportion of income from working class citizens than from the middle class. As well as this they reduced the top rate of tax to less than half of what it was; whereas the basic rate only fell by a quarter of what it was. On the other hand, New Labour implemented policies such as the National Minimum Wage act, where the benefits of it being illegal to be paid an exploitative wage were mostly specific to the working class. Sure Start is another policy which helped provide a better start to children’s lives; yet sure start was designed to benefit citizens from poorer backgrounds. ‘It (Sure Start) is targeted at the poorest areas of the country’ (Webster, 2004). Also unlike thatcherite economic policy new labour undone the reduced top rate of tax and increased it to ‘50% for those with taxable income over £150,000’ (Manning, 2015); again, displaying the difference in policies between New Labours economic policies and Thatcherite ones. The thatcherite ideology believed very much in individual responsibility; this was translated into Thatcher’s economic policy, where the welfare state had been shrunk massively. Thatcherite policy also ignored creating equality within the economy causing inequality to spiral during this time. However New Labour decided not to adopt this aspect of thatcherite economic policy; they instead actively tried to implement policies to promote equality.
New Labour again didn’t adopt Thatcherite economic policy as Thatcherite policy didn’t directly act upon unemployment unlike New Labour where unemployment was explicitly targeted by them. Thatcher’s policy towards unemployment was dictated again by this ideology of individual responsibility and their various free market policies. The policies Thatcher used to reduce unemployment were for it to be reduced indirectly via other their other policies. Thatcher’s free market policies like privatisation and breakdown of union powers caused a limit on institutional powers to intervene in industry, and a reduced power for unions to negotiate with business on behalf of workers. Making it harder for governments to implement successful policy to reduce the resulting unemployment. Although even after these free market policies were implemented new labour made sure they created policies which would target unemployment. As a result, New Labour produced one of their flagship policy after first entering government in 1998 called the new deal, which essentially targeted unemployment or ‘worklessness’. The new deal aimed at reducing long term unemployment specifically in youth, but also in adults and the elderly, as a part of New Labours ‘welfare-to-work’ plan.
To conclude, New labour certainly adopted many thatcherite economic policies, from trade unions to privatisation, yet they didn’t fully adopt the policies. The differences between their economic policies are evident as shown above, such as use of public spending. these differences might be because difference in ideology; where Thatcherites believe in individual responsibility, and New Labour believed much more in community and supporting the worse off. It may also be because of state of the economy and as a result had to act differently to create stability and growth. For example, Thatcher entered government when inflation was spiralling and this might be a reason why her cabinet didn’t have as many policies as new labour did to tackle unemployment. Therefore, New Labour did adopt many of Thatcher’s key economic policies but with their own spin on it, as well as this they rejected of her other policies.