A Political and Economic Dictionary of Western Europe, First Edition
The United Kingdom is a state in the north of Western Europe which comprises England, Scotland, Wales and Northern Ireland. These nations and regions were brought together in stages by Acts of Union: England and Wales were united in 1536; Scotland was added in 1707 to form Great Britain; and Ireland in 1800 to form the United Kingdom of Great Britain and Ireland. The most recent amendment to the Act occurred in 1927 when the United Kingdom of Great Britain and Ireland was altered to the United Kingdom of Great Britain and Northern Ireland following the foundation of the Republic of Ireland in 1922.
Area: 243,000sq km; capital: London; population: 59m. (2001).
Until the mid-20th century the United Kingdom had a large empire, but its involvement in the two World Wars (1914–18 and 1939–45) weakened its resources and many states within the empire gained independence (e.g. India in 1947). Some small states in Western Europe remain British dependencies (Gibraltar, the Channel Isles and the Isle of Man). The United Kingdom struggled with its loss of status following the end of empire and tried to maintain its role in the world through bilateral links with the USA and as a member of international organizations, such as the United Nations, the North Atlantic Treaty Organization and the Commonwealth, and regional associations, such as the European Union (EU).
The United Kingdom does not have a codified written constitution, but is governed by a series of laws and conventions. The head of state is Queen Elizabeth II who acceded to the throne in 1952 and was crowned in 1953. She is also head of state of 15 other sovereign states in the Commonwealth Realm. Legislative power formally lies with the House of Commons and the House of Lords. The first-past-the-post electoral system for elections to the House of Commons—held at least every five years—usually ensures that there are clear parliamentary majorities for one of two main political parties: the Conservative Party and the Labour Party. The Conservative Party was considered the natural party of government for most of the 20th century. It governed for 57 years of the last century, most recently in 1979–1997 under Margaret Thatcher and John Major. The Labour Party won a landslide victory on 1 May 1997, however, and was re-elected at the most recent elections, held on 7 June 2001, with a slightly reduced majority, with Tony Blair as Prime Minister.
Despite the distinct national and regional configuration of the United Kingdom, the state is traditionally a unitary state in which power is centralized in the seat of government in Westminster, London. Conservative governments have resisted attempts to loosen the structure of the United Kingdom. Thatcher’s governments in 1979–90 reduced the power of local authorities and further centralized the state. Labour governments, however, have supported demands for regional devolution. Referendums were held on the issue in Scotland and Wales in 1979, but a no vote was returned in Wales, and the turn-out in Scotland was too low for the result to be valid. The Labour government elected in 1997 proposed further referendums on devolution and these were held in Scotland and Wales in that year. Following yes votes in both cases, a Scottish Parliament and a Welsh Assembly were first elected in 1999. The successful negotiation and endorsement through referendums of the Good Friday Agreement in Northern Ireland led to the establishment of the Northern Ireland Assembly, first elected in 1998. However, direct control from Westminster was re-imposed in Northern Ireland in 2000 as a consequence of a lack of progress in decommissioning weapons. The Labour government also proposed holding referendums on the issue of establishing regional assemblies within England. However, in the first referendum held in the north-east region in November 2004 the electorate overwhelmingly rejected the proposal (no 78%; turn-out 47.7%), and the issue of English devolution has been shelved.
UK politics are divided on the issue of European integration, though this division is not along party lines. The United Kingdom applied for membership of the European Economic Community (EEC) in 1961 and 1967, but its applications were vetoed by French President Charles de Gaulle. It eventually became a member in 1973 under a Conservative Party government. Two years later, in 1975, a Labour Party government held a referendum on the issue in which 67% voted in favour of remaining in the EEC. Conservative governments in 1979–97 were broadly in favour of the process of economic liberalization up to the completion of the Single European Market, but opposed further social or political integration which appeared to threaten British sovereignty. The Conservative Party is internally divided on the issue of the United Kingdom’s membership of the single currency. On election in 1997 the Labour government announced a policy of constructive engagement with the EU. It signed the Social Chapter of the Treaty on European Union and has promised to hold referendums on membership of the single currency and on the European Convention. However, opposition to the EU remains strong and a new political party, the UK Independence Party (UKIP), founded in 1993, has campaigned in national and European elections to withdraw Britain from the EU. The UKIP won 12 seats in the European Parliament in elections held in June 2004.
Economy: The UK economy is today the fourth largest in the world (in terms of gross domestic product (GDP) by exchange rate but not by PPP) after the USA, Japan and Germany. Since the 1980s its wealth has no longer been based on manufacturing, but, rather, on the service economy. The City of London is classed as a global financial centre, and e-commerce is growing in significance. As part of the legacy of empire, the United Kingdom’s economy is open to trade and is characterized by a high rate of foreign direct investment that accounts for some 20% of UK manufacturing. The economy is traditionally a liberal market economy and has a liberal welfare state. Following the Second World War, Labour Party governments increased the role of the state in managing the economy by nationalizing key industries and expanding the scope of the welfare state. A universal health provision, the National Health Service (NHS), was established in 1947.
GNP: US $1,476,800m. (2001); GNP per caput: $25,120 (2001); GNP at PPP: $1,431,000m. (2001); GNP per caput at PPP: $24,340 (2001); GDP: $1,424,094m. (2001); exports: $385,830 (2001); imports: $418,989m. (2001); currency: pound sterling; unemployment: 5.1% (2002).
In the first three decades following the Second World War, the United Kingdom experienced a period of relative economic decline—the so-called ‘British disease’. The economy grew at an average annual rate of 2.3% in 1960–80, compared with 7.7% in Japan, 4.6% in France, 3.7% in Germany and 3.5% in the USA. The causes of this decline are commonly attributed to key interrelated weaknesses of the UK economy. Productivity in the United Kingdom grew more slowly in the 30 years to 1979 than in other competitor economies, at just two-thirds of the average of 12 other advanced industrial states. The United Kingdom traditionally has a poor level of skills and training of the workforce (13% of school leavers had no qualifications in 1979) and a low rate of capital investment. In 1960–95 the United Kingdom spent 18% of GDP on investment, compared with 22% in France and Germany. UK managers are, on the whole, poorly trained and the UK economy is traditionally characterized by adversarial industrial relations. There has been a tradition of bad macroeconomic management in the United Kingdom: boom and bust cycles and high inflation rates bred a culture of short-termism. Successive governments tended to set interest rates to meet political aims before elections rather than to secure economic stability. The UK economy was severely affected by the oil crises of the 1970s. Inflation reached a peak of 27% in 1975 and the government was obliged to seek a loan from the International Monetary Fund in 1976.
Successive Conservative Party governments in 1979–97 sought to revolutionize the United Kingdom’s economy. The key aims of Margaret Thatcher’s policies in 1979–90 were to reduce state intervention in the economy, to encourage the free market, strengthen entrepreneurship, and increase share ownership. These objectives, later labelled Thatcherism, were met with policies to keep inflation low, cut taxation and welfare spending, privatize state-owned industries, deregulate the economy, and reduce the power of trade unions, which Thatcher held responsible for the ‘British disease’. Thatcher’s trade union reforms introduced a ban on industrial action in firms unrelated to a dispute (secondary picketing) and on closed shops; made parent unions liable for their branches; and required that full ballots of members be conducted before strike action. The Thatcher years were characterized by major battles between employers and trade unions, such as the year-long miners’ strike in 1984 and the dispute between News International and print workers’ unions in Wapping, London, in 1986.
The economic reforms under Margaret Thatcher and her successor John Major succeeded in some of their aims of reviving the economy and halting relative British decline. The economy grew at an average annual rate of 1.9% in 1979–96, compared with an average rate of 1.5% in 1973–79. Similarly, productivity grew during the 1980s at an average annual rate of 4.7%, compared with an average annual rate of 0.9% in the 1970s. Manufacturing output per worker grew faster than in all comparable countries except Japan in 1979–94. However, during the 1980s there was a significant decline in manufacturing, affecting mostly the industrial regions of the north. Manufacturing’s share of GDP declined from 27% in 1979 to 22% in 1989 and to 20% in 1993. One-quarter of manufacturing capacity was lost in two recessions, in 1979–81 and 1990–92. The collapse of manufacturing led to soaring unemployment: in the 1980s some 2m. manufacturing jobs were shed (30% of the workforce). The rate of unemployment, which had been 4% in 1979, rose to 8% in 1996. Conservative Party governments’ macroeconomic policy continued the boom and bust cycles and there were two massive recessions, in 1979–81 and 1990–92. While inflation rates were kept low, interest rates were high—15% in 1986. As unemployment rose, welfare spending increased from 22% of GDP in 1979 to 26% in 1996, in spite of attempts to restrain it.
The Labour Party government elected in 1997 broadly continued the economic policies of the Conservative Party governments, but placed less emphasis on the orthodoxy of markets and more stress on social fairness. The Labour government introduced a national minimum wage, returned some powers to trade unions and increased spending on the welfare state, targeted in particular on families and children, the National Health Service and education. Labour also sought to improve macroeconomic stability and to end the tradition of boom and bust. As a first move, Chancellor Gordon Brown granted operational independence to the Bank of England. The government still sets the inflation target, but the Monetary Policy Committee of the Bank of England has responsibility for setting interest rates to meet this target. The average rate of inflation has been 2.4% since 1997. Brown’s economic policy also seeks to increase investment; he follows the ‘golden rule’ that the government will only borrow for investment, and not to fund current spending commitments over the period of an economic cycle.
The structural changes to the economy in the last two decades have halted the process of relative decline. During the 1990s the United Kingdom’s annual rate of economic growth averaged 2.3%: this was higher than in Germany (1.3%) and France (1.5%). Unemployment and inflation rates are lower than their respective averages in the European Union (EU). The United Kingdom’s economy proved resilient to world economic slowdown following the terrorist attacks on the USA on 11 September 2001, and economic growth of 3% was recorded in 2002. Since 1992 the United Kingdom has experienced its longest period of sustained economic growth for more than 200 years.
The United Kingdom joined the European Community in 1973. During the 1980s it was at the forefront of the process of economic liberalization associated with the completion of the Single European Market in 1992, but resisted any attempts at social harmonization: it opted out of the social chapter that was annexed to the Treaty on European Union in 1992. The United Kingdom joined the Exchange Rate Mechanism (ERM) in 1990 in order to improve macroeconomic stability, but it was forced to leave it on 16 September 1992 (‘Black Wednesday’) when it proved impossible to raise interest rates high enough to defend the pound. This ejection from the ERM was followed by a 15% devaluation of the pound sterling. The Labour government elected in 1997 and re-elected in 2001 has promised a referendum on membership of the single currency ‘when the time is right’. In addition to the EU formal convergence criteria, Gordon Brown has set further economic tests which the UK economy must pass before a referendum may be called. These are: that the UK economy is compatible with its European partners; that there is sufficient flexibility; and that membership of the euro area brings benefits for investment, financial services, and employment, growth and trade. A referendum was promised for Labour’s second term of government (2001–05), but has not been held.
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