Postwar Development
After the war，the British economy experienced a period of great difficulty.Many essential goods were in short supply，and in 1946 the Labor government had to introduce bread rationing，which had not been done even during the war.There was a public consensus that the most important task after the war was to improve people’s lives and rebuild the economy in order to make Britain“a land fit for heroes to live in”.The postwar government adopted policies to pursue the implementation of a welfare state，full employment，and government control of the economy.
The Labor Party，which won a landslide electoral victory in 1945，carried out drastic reforms that laid the foundation for postwar British social and economic development.Parliament passed two very important acts in 1946：the National Insurance Act and the National Health Service Act，which led the country onto the road of welfare state.
The National Insurance Act covered all working people from the time they left school until they retired.It provided workers with a weekly payment in case of illness or unemployment.It also provided benefits for pregnant women，funeral grants，and old age pensions.The funds to cover the costs came from three sources：the government，employers，and employees.
The National Health Service Act provided universal free healthcare.It made doctors and dentists civil servants paid by the state，while hospitals were organized into regions associated with universities that had medical schools.
To ensure full employment and provide housing for workers，the Labor government also built large numbers of homes.These were managed by local councils，because of which they became known as council houses，and were let out at very low rents.
These measures were the most popular legacy of the Labor government，and were not challenged by the Conservative Party when it came to power in 1951.
The other important reform the Labor government implemented was the nationalization of industries.The Labor Party believed that industry should serve the interests of all the people，and that it was the role of the government to intervene if private businesses failed to develop an industry satisfactorily.By 1951，20％ of all British industries were nationalized，including important sectors such as coal mining，overseas radio and telegraph services，electricity and gas，iron and steel manufacturing，parts of the transportation and communications sectors，and the Bank of England.In addition to nationalization，the Labor government also exercised a considerable degree of control over private industries with the goal of reviving the basic sectors of the economy and helping to balance trade.In 1949，the government devalued the pound by 30％，from￡1∶＄4.08 to￡1∶＄2.87，in order to boost exports.
The United States introduced the European Recovery Program，commonly known as the Marshall Plan，in 1948.Its goal was to contain the spread of Communism by promoting economic development and stimulating international trade among U.S.allies in Europe.The U.S.Congress appropriated＄13 billion of aid to Europe under the program，and with this assistance as well as the currency devaluation，the British economy started to slowly recover in the 1950s.In order to retain public support，the Conservative Party encouraged economic consumption and boosted living standards.It also began to privatize some of the nationalized industries.
However，persistent inflation and trade deficits hindered economic growth.Trade union strikes for higher wages further crippled the economy.In 1972，a coal miners’strike caused a national energy crisis.Although leadership of the government changed from one party to another，the economy remained stagnant，and Britain’s economic growth fell behind other western European countries.
Meanwhile，the United Kingdom had problems in Northern Ireland.The Catholic minority and the Protestant majority there did not have good relationship since the Ireland was partitioned in 1921 with the majority part of it got independence and became the Republic of Ireland while the northern part chose to remain within the United Kingdom largely because of the Protestant colonists who migrated there from Great Britain during the years when Ireland was under British control.In the late 1960s，conflicts between the Catholics and Protestants erupted into three decades of violence known as the Troubles.The Catholics tried to end the British control of Northern Ireland and organized the Irish Republican Army（IRA）to conduct military action against the British troops and terrorist actions against civilians.The Troubles lasted until 1998 when the IRA agree to end its military action.
Margaret Thatcher，the new leader of the Conservative Party，became Britain’s first female Prime Minister in 1979.She was determined to halt the country’s decline and to reduce the government’s role in the economy.Thatcher was so decisive and strong⁃willed that many people called her the Iron Lady.Her government introduced the biggest changes in British economic policy since the 1940s，in what many people call it the Thatcher Revolution.She believed that Britain should stop seeking to achieve socialism，and that the country should instead privatize its economy as much as possible.To achieve this goal，she introduced many reforms，the most important of which were related to welfare，ownership of industry，and the trade unions.
Margaret Thatcher（Prime Minister from 1979—1990）
With regard to welfare，Thatcher’s government lowered old age pensions，shortened the period for unemployment benefits，and reduced child benefits，among other measures.It stopped the construction of new council houses and encouraged the sale of existing ones at a subsidized low prices.As a result，over one million council house tenants became homeowners.
Perhaps the biggest change the Thatcher government accomplished was the privatization of state⁃owned industries.Her government sold publicly⁃held industries to private investors at much lower prices than their real values，which benefited the buyers tremendously.By the end of her term in office，more than two⁃thirds of the industries owned by the state in 1979 had been sold.The number of private share holders in the country rose from 3 million in 1979 to 9 million in 1990.
Another important reform achieved by the Thatcher government was the deregulation of the labor market.Before Thatcher，the labor market was tightly controlled by trade unions，and employers could not hire or fire workers without unions’agreement.Trade union strikes caused large losses for the economy every year.Thatcher believed that a free labor market was essential for a healthy economy，so she abolished wage councils which set minimum wage standards for the service and manufacturing sectors and reduced the unions’negotiating power.Laws were passed to make the unions legally responsible for economic losses caused by strikes unless a strike was approved by the majority of the striking workers through a secret ballot.
Through these measures，Thatcher’s government did get inflation under limited control，but the unemployment rate rose.The economy recovered a little in the middle of the 1980s.But after 1988，another recession started.Inflation became serious and unemployment rate was high.Many workers went on strike again.By the end of 1990，Thatcher was forced to resign because of the stagnating economy，the unpopular poll tax her government had levied and her reluctance to integrate the British economy with the European Union.
Tony Blair（British Prime Minister 1997—2007）
She was succeeded by John Major who worked hard to keep the Conservative Party united over the question of European integration and to revive the economy.Major did succeed in getting inflation under control by 1993 and the economy grew at a healthy rate，although unemployment was still as high as 10％.But the voters lost confidence in the Conservative Party because of its internal division on policies toward the European Union and a series of sandals.
In 1997，the Conservative Party was defeated by the Labor Party headed by Tony Blair，who became Prime Minister.At 43，Blair was the youngest British Prime Minister in 200 years.He recognized that the changes which had happened in Britain during the 18 years of Conservative government required the Labor Party to adjust its policies.As a result，he advocated for the“Third Way”which was different both from the old Labor Party’s commitment to the nationalization of the economy and its close ties with trade unions，and from the Conservative Party’s emphasis on economic individualism and its rejection of public investment.He was committed to long term economic stability and fiscal transparency.In order to separate politics and economic policy，he gave the Bank of England authority to set interest rates independently of the government.In social policy，the Blair government changed the old Labor Party’s practice of using the tax system，public expenditure and price controls to reduce inequality，and instead focused on establishing a minimum wage，as well as tax credits to supplement low wages.It also emphasized individual responsibility by making welfare recipients to participate in various programs.The Blair government was successful in limiting government spending，keeping inflation under control and reducing unemployment.By the end of the century，British economic growth surpassed that of other major European countries.The economy entered a new period of recession during the financial crisis of 2007—2008.The government has implemented an austerity program in order to cut the budget deficit and the economy has shown some signs of recovery since 2013 under a new Conservative government as the Conservative Party took power in 2010.
In terms of political reforms，Blair supported the establishment of the Northern Irish Assembly and the revival of the old Scottish Parliament and Welsh Assembly and gave them more authority in regional affairs.He also carried out Parliamentary reforms which significantly reduced the number of hereditary members of the House of Lords.In Northern Ireland，his government successfully concluded a peace plan with the opposing Catholic and Protestant parties in 1998 which ended the long military confrontation there.His government also passed the Constitutional Reform Act in 2005 which provided for the establishment of a Supreme Court which took the judicial power out of the House of Lords.As a result，it achieved the separation of the judicial and legislative powers.Blair was very popular with the British people and won a second landslide victory in the 2001 elections.However，his popularity dropped in 2003 when his government accompanied the United States into the war against Iraq without the sanction of the United Nations and against the protest of many European nations.