‘Since 1997 the major political parties have agreed on economic policy’ Discuss
Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting interest rates and government budget as well as the labor market, national ownership, and many other areas of government interventions into the economy. There were two approaches to take on the economy. Either one takes a neo liberal or interventionist Keynesianism economy policy. The neo liberal approach would be to have a small government, which doesn’t interfere and leaves the markets to themselves. The Keynesianism approach would be to borrow money and spend on either public spending or projects such as schools. New Labour and the current Conservative and Liberal Democrat coalition continued in neo-liberal policies, making there a consensus, however during the international crisis the Gordon Brown government bought in Keynesianism policies to allow the country to come out of the recession.
When Tony Blair became Prime minister in 1997 he introduced himself as New Labour. By this he meant that he was a new strand of the Labour party, which merged strands of neo-liberal policy and socialist policy, to which he called it ‘the third way’. The aims of the third way were to end the cycles of boom and bust, to restore a sense of responsibility to both monetary ad fiscal policy, to be able to afford increased expenditure on public services, to reduce the levels of poverty, to improve the competitiveness of British industry and finally to create conditions for the UK to join the single currency.
Tony Blair wished to achieve this with a number of policies, one including the monetary policy committee of The Bank of England. This transferred control of interest rates from the government to the new monetary policy committee at The Bank of England. The purpose was to control inflation between 1.5 and 2.5%. It was also established to show that Labour could manage the...