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Loss, Cost, and Effort Involved in These Episodes

We noted at the outset that the 1980s Thatcher Government episodes are cases in which the metrics used in Chapter Two to pick up 'squeeze' are arguably more problematic than in the previous five chapters. When we look at them through the prism of imposed losses, political cost to incumbents, and effort required of the state machine, as shown in Table 8.1, it is the early 1980s episode that appears to rate high on all three of these dimensions, for reasons given earlier.

In that episode, the Thatcher Government indeed had to expend political capital by breaking election promises, had to work the state machine well beyond its established routines in conditions of high conflict (for instance, in developing its privatization programme, unpicking the 'lock' on pension and benefit uprating, and developing measures such as the bank windfall tax), as well as imposing losses on median or core voters (notably by freezing tax thresholds in 1981) to raise revenue in what it saw as 'desperate circumstances'.

By contrast, the mid-to-late 1980s episode of 'double soft' squeeze looks more like medium or even low political effort on the scale we introduced in

Table 8.1. A qualitative classification of imposed loss, political cost, and state effort associated with 1980s fiscal squeezes

Low

Moderate

High

Overall classification

1980-81 Squeeze Type: Hard Revenue

Conservative 5/1979 onwards Loss

[2]

[1], [2]

[1], [2]

High

Cost

[1], [2]

[1], [4]

High

Effort

[3]

[1], [2]

High

1983-88 Squeeze Type: Soft Revenue/Soft Spending

Conservative (until 6/1983) Loss

[3]

[1]

[1]

Moderate

Cost

[1], [2], [3]

Moderate

Effort

[1]

[1], [2]

Moderate/High

Conservative 6/1983 onwards Loss

[3]

[3]

Moderate

Cost

[1]

[2]

Low

Effort

[1], [2]

Moderate

Note: Numbers in square brackets refer to categories in Table1.2, ChapterOne.

Chapter Two. As we have seen, imposed losses in this episode were variable (hitting some voters hard while benefiting others), but many of those losses seem to fall into the 'moderate' category of Table 1.2, as 'stealth taxes' outside the headline rates of income tax, or 'stealth' benefit cuts such as the cumulative effects of the changes in pension uprating as inflation fell and economic growth resumed. Incumbents were not forced into breaking explicit election promises and could shape the timing of fiscal squeeze to the electoral cycle. More was required of the state machine in fiscal policy over this period than minor adaptations of existing routines, but the effort required arguably fell well short of that involved in cases such as the development of a new system of mass income taxation in World War II.

 
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