Britain 22- economic developments

Question 1

what govt policy did the conservative govt of 1951 employ which generated much controversy?

Answer 1

‘stop-go policy’

Question 2

what economic issues did the 1951 conservative govt inherit?

Answer 2

-balance of payments crisis- with deficits of nearly 700 million and export markets being damaged by countries starting to buy outside the sterling area
-korean war pushing up military costs

Question 3

why was te he economic pattern of the 1950s one of growing prosperity?

Answer 3

• rationing ended 1954
  -austerity of war time ended
  -swift acceleration in birth rates

Question 4

what was the impact of the boom in global ecnonomy?

Answer 4

-led to a sustained increase in overseas trade bringing high levels of earnings from exports and investments
-britain could now could export around 29% more goods in late 1950s than it could in 1951

Question 5

by what year had full employment been acheived and how many unemployed?

Answer 5

1955, 200,000

Question 6

give some examples of Butler’s reccomendations in his October 1951 memorandum which he went on to implement

Answer 6

-imposition of credit restrictions
-reduction of imports
-cutting food subsidies
-reducing travel allowances
-raising interest rates from 2 to 4% to discourage borrowing
-cutting ministers’ salaries and reducing civil service
-abolishing identity cards ending rationing
-denationalisation of steel and iron industries

Question 7

how did the conservatives use interest rates and taxes to maintain the economy?

Answer 7

interest rates would be increaased to discourage borrowing and import controls increased to limit purchases from abroad to reduce the trade gap. taxes vcould be increased to check overspending or too rapid a rise in wages. but if fall in demand for good then taxes and interest rates might be lowered to stimulate soending

Question 8

when was the first STOP period of the conservatives stop-go policy?

Answer 8

1951-52- with economy in weak state and poor balance of payments position, deflation considered necessary

Question 9

when was the first GO period of the conservatives stop-go policy?

Answer 9

1953-55- balance of payments situation recovering + weak recovery seemed likely so policy of expansion and controls were removed

Question 10

when was the second STOP period of the conservatives stop-go policy?

Answer 10

1955-59- economy once again overheating due to wage demands and too many imports fuelling inflation -> higher interest rates and spending cuts

Question 11

which taxes did Butler have to cut in 1955 and why?

Answer 11

income tax and purchase tax, felt (despite economy overheating),putting up taxes was not a good option for the c party which helped to contribute to their victory

Question 12

why did Butler have to impose another budget in Oct 1955 after their victory in May election and what was the impact?

Answer 12

had to raise taxes on various household objects which became known as the ‘pots and pans’ budget abnd dented his reputation as it was clear that the success of the party in the election had come before doing what was best for the economy

Question 13

what were the limitations of the stop-go policy?

Answer 13

this approach seemed to suggest the govt was always reacting to events rather than trying to direct them.
also became clear that Britian was not keeping up with economic growth in Europe. division within party between Thornycroft and cabinet ministers

Question 14

who was Macmillans chancellor?

Answer 14

Peter Thorneycroft

Question 15

what did incomes increase by compared to output and what did Thorneycroft suggest to solve this issue?

Answer 15

1948-56, incomes rose by 75% and output only 28% so to stop the inevitable inflation this situation would cause, wanted to limit wage increases + cut money supply

Question 16

how did other cabinet ministers feel about Thorneycroft’s suggestions?

Answer 16

others, who were on-nation conservatives strongly opposed to such policies as it would lead to increased unemployment and cutbacks in housing