ABSTRACT
Increases in real earnings under Mrs Thatcher’s government have actually been progressively larger, the higher up the income distribution a worker finds himself. In the 1980 budget Howe introduced a four-year Medium Term Financial Strategy (MTFS) to generate favourable expectations and to provide a consistent framework for macroeconomic policy through the linking of monetary and fiscal policy target paths. As far as the ‘supply side’ of the economy is concerned, the government has inter alia acted on several points to make the labour market more conducive to market forces and to adjust real wages more rapidly to their market clearing level. Ironically, what was also symptomatic of the Thatcher government’s MTFS was that, rather than holding the money supply within a preannounced target range, it actually tended to swell the money supply figures because of so-called ‘distress borrowing’. Companies were increasing their demands for loans to keep afloat.
