Topic 1: Economics (1951-64) Flashcards
2
What economic problems did the conservatives face when taking office?
- £700m balance of payments deficit
- Korean War financing: 10% of GNP and 30% of total expenditure
5
Explain Affluence 1951-64
- Britain enjoyed a higher average income per person than any other country in the world bar the United States
- Home ownership increased to 44% by 1964 (25% pre-war)
- 91% of pop owned TV by 1964 (4% in 1950)
- Car ownership quadrupled from 2m to 8m between 1950 and 1964
- Historian Blake describes 50s as Golden Age
7
Describe the post-war boom
- Post-war baby boom led to 5% inc in pop (1951-61)
- Rising consumer afluence led to virtually full employment (less than 1% by 1955)
- Expansion in electrical and steel industries
- real wages rose from £7.50 to £18 from 1950 to 1964
- economy grew by 2-3% a year between 1951-64 (1.3% during WW2)
- But national min levels of subsistence rose above pre-war levels
- Industrial production rose 26% in Macmillan’s time
3
Describe balance of payments issues
- £700m balance of payments deficit in 1951
- further problems in 1955, 1959 and 1962
- Britain importing 29% more goods at end of 1950s than start of 1950s
3
Describe British trade 1951-64
- growing world economy facilitated trade expansion
- Between 51-64, Japanese industrial production 10x - EEC rejection
- share in world trade dropped form 25.5% to 13.9%
2
Define stop-go economics
Government economic management through a cycle of inflationary (Go) and deflationary (Stop) measures to curb inflation and maintain full unemployment.
Used to create feel-good factor before elections (1955 and 1959)
2
What were the positives of stop-go economics?
- short-term boost that won elections (1955 and 1959 budgets)
- ‘dash for growth’ - 4-6% econ growth
3
What were the negatives of stop-go economics?
- reactionary - not long-term (13 wasted years)
- rising unemployment (800k by 1962)
- difficult to initiate wage restraint e.g. failure of pay-pause
4
Describe the ‘stop’ economic policies of Butler (1951-55)
- responded to 1951 deficit with savage cuts to imports, credit, subsisides, etc
- in 1952, bank rate raised from 2% to 4%
- programmes led to £259m budget surplus that year
However - as RAB later admitted in his memoirs, defiict reduction was due to end of Korean war and market fall in import prices
2
Describe the ‘go’ economic policies of Butler (1951-55)
- wartime controls and rationing abolished in 1953-54
- due to £242m budget surplus, cut £134m taxes in April 1955 budget - (led to inflation and balance of payments crisis)
Stop (4), Go (1)
Describe the economic policies of Macmillan (1955-57)
‘stop’, then ‘go’
Stop:
- raised bank rate to 5.5%
- cut food subsidies
- added VAT to tobacco
- introduced premium bonds scheme (annoucned 1956 budget) - took money out of circulation
Go:
- cut income tax by 6d
5
Describe the economic policies of Thorneycroft (1957-58)
‘stop’
- Out of blue sterling crisis in summer 1957, sparked by fear of high govt spending and inflation - prompted talk of devaluation
- raised bank rate from 5% to 7% - to bring down wage inc
- Thorneycroft wanted £150m cuts to public spending - clashed with ON minister for Health, Ian Macleod (exposed cracks in cabinet)
- Macmillan settled at £100m to prevent unemployment
- Thorneycroft, Powell and Birch resigned
4
Describe the economic policies of Heathcoat-Amory (1958-60)
‘Go’
- by 1959, bank rate cut to 4% and pound regained value against dollar
- 1959 budget - £370m tax cuts
- cut standard rate of income tax from 42% to 38.75%
- imports grew twice as fast as exports - balance of payments crisis
helped win 1959 election
4
Describe the economic policies of Selwyn-Lloyd (1960-62)
‘Stop’
- raised bank rate to 7%
- 1961, requested IMF loan
- NICKY, NEDDY and pay-pause all failed
- unemployment at 800k as a result of his deflationary policies
6
Describe the economic policies of Maulding (1962-64)
- unemployment averaged 2.6% in 1963 - highest since introduction of welfare state
- 1963 budget £300m tax cuts
- ‘dash for growth’ - hoped balance of payments crisis would be counteracted with more dynamic exports - essentially failed
- 4-6% econ growth (1963-64)
- By 1964, exports were 10% higher than in 1961, but imports were 20% higher
- Govt left £750m deficit after elec - amounted to criminal negligence
