3.3 Heath and the Economy

Question 1

First economic policies 1970-71: What was growth like between 1970-71?

Answer 1

Encouraging growth and inflation

Question 2

First economic policies 1970-71: In March 1971, what did Barber propose?

Answer 2

To replace purchase tax with VAT

Question 3

First economic policies 1970-71: What did Barber relax from 1970-71?

Answer 3

Exchange controls

Question 4

First economic policies 1970-71: How did Barber liberalise the banking system?

Answer 4

Competition and Credit Control

Question 5

First economic policies 1970-71: What did Barber reduce?

Answer 5

Direct taxes

Question 6

When was decimilisation?

Answer 6

1971

Question 7

What was decimilisation?

Answer 7

British currency would have100 new pence instead of 144 old pennies in a pound

Question 8

Why was it hoped that de Gaulle noticed decimilisation?

Answer 8

To highlight how keen Wilson and Heath were on all things European and show Britain wanted to be modern

Question 9

What did Heath abolish to combat rapid inflation?

Answer 9

Prices and Incomes Board

Question 10

What did Heath have to do to combat rapid inflation?

Answer 10

Severe spending cuts
Sweetened by a reduction in standard rate income tax

Question 11

What subsidies did Barber cut to combat rapid inflation?

Answer 11

Council house rents and expenditure of milk to children

Question 12

What chant comes from the cuts to expenditure of milk to children?

Answer 12

Thatcher the milk snatcher

Question 13

Problems in 1971: What began to jump?

Answer 13

Wages and therefore prices

Question 14

Problems in 1971: What did inflation rise to from 1969 - 1971?

Answer 14

5% to 10%

Question 15

Problems in 1971: What was the problem of British employers at this time?

Answer 15

They were not generating entrepreneurial activity

Question 16

Problems in 1971: What was the growth rate between 1969 and 1971?

Answer 16

2.5% to 1.7%

Question 17

Problems in 1971: What did Britain’s industrial productivity need to be to keep pace with inflation?

Answer 17

5%

Question 18

Problems in 1971: What was the surplus in 1971?

Answer 18

£1bn

Question 19

Problems in 1971: What was the deficit in 1973?

Answer 19

£1bn

Question 20

How many people were unemployed in 1972?

Answer 20

1 million

Question 21

What is stagflation?

Answer 21

This is when inflation and unemployment rise sharply at the same time

Inflation spirals upwards but because of unemployment industrial capacity fails to grow, and often stagnates.

Question 22

When did Rolls Royce face bankruptcy?

Answer 22

1971

Question 23

What did the government do with Rolls Royce?

Answer 23

They nationalised the company

Question 24

What did the government do when the Upper Clyde Shipbuilders were on the verge of collapse?

Answer 24

They nationalised it

Question 25

Why was the nationalisation of Rolls Royce and the Upper Clyde Ship Builders a problem?

Answer 25

It was a u-turn on their earlier aims at Selsdon Park

Question 26

The Economy 1972-73: What did Barber do with the 1972 budget?

Answer 26

Cut taxes and increased public expenditure

Question 27

The Economy 1972-73: What did Barber's budget push the growth rate to?

Answer 27

7.4% by 1973

Question 28

What did Heath fail to secure?

Answer 28

Trade union cooperation on wage restraint

Question 29

What did Heath create to control inflation?

Answer 29

Prices Commission and a Pay Board

Question 30

What came into play on the 6th November 1972?

Answer 30

A 90 day freeze on pay and prices (including rent)

Question 31

What did the Price and Pay Code do?

Answer 31

Limited increases in pay, rent, and prices

Question 32

Why was the Price and Pay Code a u-turn on Selsdon Park?

Answer 32

They were introducing their own incomes policy

Question 33

In 1972, what did Barber say about the pound?

Answer 33

‘no reason to believe that the pound was overvalued’

Question 34

What does 'floating the pound' mean?

Answer 34

This means the forces of supply and demand will determine the price of the currency

Question 35

Why did Barber float the pound?

Answer 35

As a temporary measure He said that the trade balance had deteriorated and did not want to have to borrow money

Question 36

What happened to the pound after Barber floated it?

Answer 36

Plunged on the market

Question 37

How many people were unemployed by 1973?

Answer 37

500,000

Question 38

Why did the 1973 Oil Price Crisis begin?

Answer 38

The Yom Kippur War

Question 39

What was the Yom Kippur War?

Answer 39

A war between a coalition of Arab states v Israel

Question 40

What did the war prompt OPEC to do?

Answer 40

Declare an oil embargo

Question 41

What is OPEC?

Answer 41

Organisation of Arab Petroleum Exporting Countries

Question 42

What did the price of oil rocket to in 1973?

Answer 42

4x the usual levels

Question 43

By March 1974, how much had oil prices risen by?

Answer 43

From $3 a barrel to nearly $12 globally

Question 44

By 1980, how much did oil cost?

Answer 44

$35 a barrel

Question 45

What did the value of sterling fall by as a result of the oil crisis?

Answer 45

$1.50 to the £1

Question 46

How much did inflation grow to by 1974?

Answer 46

16%