THE EDUCATION OF THE TREASURY: THE MEDIUMTERM FINANCIAL STRATEGY 1980–84

Abstract

The first Thatcher government introduced an innovatory macro‐economic plan – the medium‐term financial strategy (MTFs) – in March 1980. It was the most notable example of how the Government sought to change the direction of post‐war policy. This article traces the origins and formulation of the strategy, noting that it was Treasury‐imposed, and monetarist in orientation. During its implementation however it was substantially modified. The phrase ‘pragmatism and continuity’ best describes this process. Aspects of macro‐economic policy are introduced to develop this theme. There is clear evidence that the Treasury was ‘educated’ by the problems encountered: the objectives of the MTFS were not uniquely achievable simply because they were deliberately limited in scope. Nevertheless, the strategy has survived as a policy framework and freed from its monetarist dogma remains a useful means of co‐ordinating objectives.