1b: Response to economic challenges, 1951-1979

Question 1

Did Britain suffer the entire time?

Answer 1

No. There was an economic boom until the 1970s, due to a global boom, but Britain did experience a relative economic decline due to spending more than it earnt.

Question 2

What were some of the key issues of this period?

Answer 2

Balance of Payments Problems.
Devaluation.
Union unrest and unemployment.
Inflation.

Question 3

Tories and post-war economy, 1951-1964:

What were the Tories opposed to?

Answer 3

They were opposed to further nationalisation (but wouldn’t reverse the current legislation) and rationing, thus all rationing was over by 1954.

Question 4

Tories and post-war economy, 1951-1964:

Did the Tories follow their own economic view?

Answer 4

Not really; they subscribed to an economic consensus that prioritised full employment and a mixed economy.

Question 5

Tories and post-war economy, 1951-1964:

How was unemployment under the Tories?

Answer 5

It stayed between 300,000 and 500,000 - no return to 1930s levels.
They used Keynesian PWS when it began to increase.

Question 6

What did Empire withdrawal and the Commonwealth mean?

Answer 6

Allowed the govt to conserve money and spend it elsewhere.
Mass migration mean more migrant workers - Indian/Pak population:
1949 = 64,000 vs 1959 = 462,000 ] result of the British Nationality Act, 1948.

Question 7

Tories and post-war economy, 1951-1964:

What was stop-go economics?

Answer 7

An attempt at controlling inflation AND unemployment.

When the economy grew too quickly, taxes and interest rates were raised to prevent excessive borrowing and spending.

Question 8

Tories and post-war economy, 1951-1964:

Why did the Tories have to implement stop-go?

Answer 8

They encouraged consumer spending (consumer credit laws relaxed in 1954) but they struggled to face the consequences of high imports and inflation - this led to increased balance of payments problems.

Question 9

Tories and post-war economy, 1951-1964:

What was the impact of exports by stop go?

Answer 9

They became less competitive, so compounded the balance of payments issues further.

Question 10

Tories and post-war economy, 1951-1964:

What were living standards like in 1957-1964?

Answer 10

Living standards were rising - “never had it so good.”

Question 11

Tories and post-war economy, 1951-1964:

What was economic output like compared to rivals?

Answer 11

Poor.

Britain’s economic growth in 1960 was 4%; this was 12% in Japan.

Question 12

Tories and post-war economy, 1951-1964:

What did MacMillan experiment with, and why?

Answer 12

Corporatism.
He was a one-nation conservative so tried to unite the country through getting cooperation labour, government and business managers.

Question 13

Tories and post-war economy, 1951-1964:

How did Macmillan try to implement corporatism?

Answer 13

NICKY (National Incomes Commission).

NEDDY (National Development Council and Office).

Question 14

Tories and post-war economy, 1951-1964:

What was NEDDY?

Answer 14

An institution that encouraged union and management co-operation and discussion of economic developments.
However, it had no legal control and was only suggestive - wrongly assumed that the goals of business and unions would be aligned.

Question 15

Tories and post-war economy, 1951-1964:

What was NICKY?

Answer 15

Provided guidance over reasonable price increases - workers wanted higher wages to buy into materialism.
It was purely advisory so unions (shop stewards) ignored it.

Question 16

Tories and post-war economy, 1951-1964:

What was unemployment like by 1964?

Answer 16

It stood at 873,000 - the highest since the war but still lower than the 1930s.

Question 17

Tories and post-war economy, 1951-1964:

What had balance of payment problems led to?

Answer 17

The pound’s value was threatened.

It should have been devalued but, instead, the govt took out a £714mn IMF loan to support its value.

Question 18

Wilson’s Labour, 1964-1970:

What was his aim, but why was it hampered?

Answer 18

He aimed to modernise the economy through meritocracy and technology, however it was hampered by the £800mn budget deficit.

Question 19

Wilson’s Labour, 1964-1970:

What did he introduce in 1966/67 and why?

Answer 19

The Prices and Incomes Act.

He needed to pass this as NEDDY and NICKY were not working - the unions weren’t agreeing to voluntary wage restraints.

Question 20

Wilson’s Labour, 1964-1970:

What did the Prices and Incomes Act do?

Answer 20

Gave the govt power govt to limit pay claims - the NBPI regulated pay settlements.

1966: Wage freeze for 6 months to curb inflation.
1967: Wage rise only if the company was increasing productivity and output.

Question 21

Wilson’s Labour, 1964-1970:

What was the purpose of the Ministry of Technology?

Answer 21

Bring advanced technology, techniques and processes to industry.
Concorde was a major success.

Question 22

Wilson’s Labour, 1964-1970:

What was the IRC?

Answer 22

The Industrial Reorganisation Company:
More state intervention to boost efficiency.
1 - Promoted efficient practices and gave loans to companies that adopted them.
2 - Promoted mergers, but many failed.

Question 23

Wilson’s Labour, 1964-1970:

What famous merger failed, and what did it mean for the economy and the govt?

Answer 23

Leyland motors and British motors formed British Leyland.
Its cars were not good and could not compete globally, continually needing subsidies.
This drained money and did not bring much money in.

Question 24

Wilson’s Labour, 1964-1970:

What did Wilson famously do in 1967?

Answer 24

Devalued the pound by 14% ($2.80 —-> $2.40)

This was to pay debts more easily - the pound in the pocket was not effected (supposedly).

Question 25

Heath’s Tories, 1970-1974:

How did he diverge from the PWC?

Answer 25

He embraced the free market and rejected corporatism.

Question 26

Heath’s Tories, 1970-1974:

What did he immediately axe?

Answer 26

The IRC:

It was the role of private business, not the state, to bring about modernisation.

Question 27

Heath’s Tories, 1970-1974:

What other key Labour policy did he scrap?

Answer 27

The NBPI:

Markets should set wages, not the govt.

Question 28

Heath’s Tories, 1970-1974:

What spending cuts did he make?

Answer 28

His first budget made £330mn worth of cuts.

Scrapped school milk and raise NHS prescription charges.

Question 29

Heath’s Tories, 1970-1974:

What did he believe about cuts?

Answer 29

He believed it would stimulate the economy as an entrepreneurial spirit would manifest.

Question 30

Heath’s Tories, 1970-1974:

What was the Barber Budget of 1972?

Answer 30

A “dash for growth” - tax cuts.

This resulted in an inflation spike.

Question 31

Heath’s Tories, 1970-1974:

How did the 1973 oil crisis tank the economy?

Answer 31

Fuel shortages meant prices rose (extreme inflation).
The UK was dependent on imports that were becoming unaffordable.
The pound’s value dropped.

Question 32

Heath’s Tories, 1970-1974:

What did the oil crisis lead to?

Answer 32

Stagflation: Low productivity but high prices.

Union unrest and strike action as Barber cut public sector workers’ wages.

Question 33

Heath’s Tories, 1970-1974:

What problems was Heath facing by 1974?

Answer 33

Inflation had risen to 18%.

Unemployment had risen to 7% (was 2% in the 1950s).

Question 34

New Economic Thinking:

What plagued Britain throughout the 1970s?

Answer 34

Inflation.

Prices were rising faster than wages - 30% by 1975.

Question 35

New Economic Thinking:

Were the union co-operative?

Answer 35

Nope.
As the living standards of their members eroded, unions ignored calls for wage restraints.
Striking got more fierce when militant shop stewards and flying pickets got involved.

Question 36

New Economic Thinking:

What radical thing did Healey do?

Answer 36

He, a Labour Chancellor, abandoned full employment as state spending only worsened inflation.

Question 37

New Economic Thinking:

Why did Britain apply for an IMF loan and how much was it?

Answer 37

The pound had dropped 20% in values ($2 —-> $1.63)

The loan was worth £4bn but required £3bn worth of tax cuts.

Question 38

New Economic Thinking:

What did Labour do under Callaghan?

Answer 38

They abandoned the Post-war consensus and began to embrace monetarism.
Tony Benn, however, proposed a siege economy.