Electoral and Other Consequences

As we have seen, the electoral outcomes in this case run counter to the 'asymmetrical punishment' hypothesis discussed in Chapter One, in that a right-of-centre party escaped severe electoral punishment for a hard revenue squeeze, in quite special circumstances that included a major breakaway party splitting the left-of-centre vote (and for some the presumed 'heresthetic' effect of the Falklands War).

The electoral outcome of the second squeeze episode in 1987, when the Conservatives also escaped serious electoral punishment (losing some twenty- one seats on a miniscule 0.2 per cent swing), is arguably rather less of an anomaly. As we saw, the fiscal squeeze in that case was soft on both the revenue and spending side (even then, reflecting items like increased oil revenue and massive asset sales that arguably cushioned its effect on voters at large), and was moderated to fit the electoral cycle.

However, one notable electoral effect that occurred at that time that arguably had major long-term consequences, albeit hard to attribute as between fiscal squeeze and other factors in play at that time, is the decline of the Conservatives as a major political party in Scotland over this period (from twenty-two to ten of the then seventy-two Scottish parliamentary seats between 1979 and 1987, and from 31.4 to 24 per cent of the Scottish vote over the same period). How far the accompanying political pressures for constitutional change in the form of Scottish self-government and independence can be put down to the effects of Thatcherite fiscal squeeze is a major imponderable.

Beyond electoral effects, the 'Thatcherite' fiscal squeeze episodes discussed in this chapter seem to have had several other longer-term consequences. Its use of asset sales to reduce government borrowing requirements, itself borrowed from Labour's sale of BP shares in 1977, set a pattern for all subsequent governments to date (albeit under changing accounting rules) and led to a remarkable long-term decline in the net worth of the public sector relative to GDP. Its dramatic run-down of civil service employment in favour of more outsourced public service delivery also constituted a policy broadly continued under all subsequent governments (Hood and Dixon 2015). Its tactic, particularly in the soft revenue squeeze of 1983-89, of raising revenue in real terms but not relative to GDP by cutting or at least not increasing basic income tax rates while increasing revenue from indirect taxes and other less visible 'stealth' tax measures, also entered the political playbook of all its successors up to 2015. And the tactic underlying the soft spending squeeze of the Lawson Chancellorship—of raising spending, particularly on welfare, in line with inflation but below the rate of earnings growth over a relatively long period—set the pattern for the long-drawn-out 'boiling frogs' approach to spending cuts adopted in the 1990s and 2010s episodes, discussed in Chapters Nine and Ten.

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