1990-1997: The Major years

In 1990 Margaret Thatcher stood down from the office of Prime Minister after not getting the political support she felt she needed to continue. John Major was elected her successor.

The British pound was tied to EU exchange rates, using the Deutsche Mark as a basis, as part of the Exchange Rate Mechanism (ERM); however, this resulted in disaster for Britain. The restrictions imposed by the ERM put pressure on the pound, leading to a run on the currency. Black Wednesday in 1992 ended British membership of the ERM.

1997 To present: New Labour

In 1997, the Labour Party swept to power with a huge majority in the House of Commons. On entering power Tony Blair's Labour Party stuck with the former Conservative government's spending plans. The Chancellor, Gordon Brown, gained a reputation by some as the "prudent Chancellor" and helped to inspire renewed confidence in Labour's ability to manage the economy. One of the first acts that the new Labour government embarked on was to give the power to set interest rates to the Bank of England, effectively ending the use of interest rates as a political tool. Labour also introduced the minimum wage to the United Kingdom, which has been raised from time to time since its introduction. The Blair government also introduced a number of strategies to cut unemployment. Unemployment has fallen back to the level it was in the late 1970s, although it still remains significantly higher than it was during the post-war era and the 1960s.

Chapter 4. 21st century

In the Labour Party's second term in office, beginning in 2001, the party increased taxes and borrowing. The government wanted the money to increase spending on public services, notably the National Health Service, which they claimed was suffering from chronic under-funding.

Growth rates were consistently been between 2% and 3% from 2000 to early 2008 and inflation levelled off at around 2%. The Bank of England's control of interest rates was a major factor in the stability of the British economy over that period. The pound continued to fluctuate, but rising again to a rate of approximately $2 per Ј1 in 2007. Since then, the effects of the Credit crunch have led to a slowdown of the economy.

Conclusion

On 5 March 2009, the Bank of England announced that they would pump 75 billion of new capital into the British economy, through a process known as quantitative easing. This is the first time in the United Kingdom's history that this measure has been used.

The process will see the BoE (Bank of England) creating new money for itself, which it will then use to purchase assets such as government bonds, bank loans, or mortgages. Despite the misconception that quantitative easing involves printing money. The initial amount to be created through this method will be 75 billion, although Chancellor of the Exchequer Alistair Darling had given permission for up to 150 billion to be created if necessary.