CONSERVATIVES 1951-64 CHAPTER 2

Question 1

POST-WAR BOOM

• The conservative government was lucky in its timing - came to power just as the beginnings of the

Answer 1

post-war economic recovery started to show through

Question 2

POST-WAR BOOM

• July 1954 – what happened and its impact

Answer 2

food rationing came to an end - the austerity of wartime was over, and the British people were set to enjoy a higher standard of living than ever before.

Question 3

POST-WAR BOOM

• Countries rebuilt after the war - global economy booming + rising demand at home - full employment achieved by

how many unemployed??

Answer 3

1955 with only 200,000 unemployed – less than 1% of the workforce.

Question 4

POST-WAR BOOM

In the run-up to the 1955 election, chancellor RAB Butler was able to boost the Conservative election prospects with a ‘give away’ budget
of how many pounds and what did it show

Answer 4

£134 million in tax cut

showed britain's affluence + consumerism.

Question 5

POST-WAR BOOM

• Britain enjoyed a higher income per head than any other major country except

Answer 5

the US.

Question 6

INDUSTRIAL PRODUCTION

In 1959, West Germany had increased its production by

compare this to france and britain using 1950 as a 100 baseline

Answer 6

125% compared to 1950, France by 102% and Britain by only 29%.

Question 7

Worker productivity by 1960 increased by

% in britain compared to germany and france

Answer 7

25% in Britain, whereas it increased by 59% in Germany and 77% in France.

Question 8

By 1962, Britain had lost 10% of the share in world trade compared to 1950, owning

how much and compare to west germany

Answer 8

15%, whereas West Germany increased by 13%, owning 20% of the world trade.

Question 9

Late 1950s were the years of optimism – why?

Answer 9

the British enjoyed more jobs, more money, more goods, better housing, and the provisions of the new welfare state.

Question 10

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

• The growth in wages was outstripping the rate of increase in production
  this led to?

Answer 10

inflation.

Question 11

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

• Government controls had to be used to curb excessive inflation and taxation remained high to control excessive spending that would lead to an

Answer 11

increase in imports and pay foot the rising costs of public services.

Question 12

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

• This pattern where the government attempted to control growth when the economy was in danger of overheating is known as

Answer 12

stop-go economics.

Question 13

DEFINE

• STOP-GO ECONOMICS:

Answer 13

expanding economy (go) (low interest rates and rising consumer spending) results in economy overheating as wages and imports exceeds productivity and exports - deliberately slowing down or deflating the economy through huger interest rates and spending cuts (stop).

Question 14

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

• Although high salaries created a large internal consumer demand, they did not encourage manufacturers to increase their export trade which would have helped bolster the export industries -

this led to a

Answer 14

trade deficit which created problems with the balance of payments:

Question 15

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

overall balance of trade in the years:
1950
1955
1960

Answer 15

-56
-19
132

Question 16

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

• The pressure from the US over the Suez Crisis exposed Britain’s financial weakness and started a

Answer 16

run on the pound (rapid fall in the value of the pound in international currency markets).

Question 17

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

• The crisis and the divisions in the cabinet carried on throughout the summer of 1957 - - Macmillan sided with those who wanted to keep up an expansionist economic policy:

what did he do to thorneycroft and what did this result in?

Answer 17

overruled Thorneycroft in 1958 when he proposed drastic spending cuts leading to his and his junior ministers (Enoch Powell) resignation.

Question 18

BALANCE OF PAYMENT ISSUES AND STOP-GO POLICIES

Macmillan’s chancellor, Thorneycroft believed in monetarism - to limit wage increases and cut the money supply.

• Other cabinet ministers who were one nation conservatives were strongly opposed to such a policy as it would lead to

Answer 18

increased unemployment and cutbacks in housing.

Question 19

• The financial crisis did not do lasting harm to the popularity of the conservative party, which improved dramatically by 1959 -

what happened to the economy and what did it lead to?

think tax cuts

Answer 19

sterling regained its value against the dollar and the economy expanded so much that the budget of 1959 provided tax cuts of £370 million – more than Butler’s give-away budget of 1955.

Question 20

• The British economy continued to grow and was at its peak between

Answer 20

1960 and 1964.

Question 21

• However, the government became further trapped in a cycle of stop-go policies in an attempt to maintain economic stability.
• In 1961, worries about the economy overheating forced the government to introduce

what did it lead to (think IMF crisis)

Answer 21

a ‘pay pause’ to hold down wage inflation and ask for a loan from the international money fund (IMF), again facing issues from balance of payments and stop-go economics.

Question 22

• It also became clear economic growth in Europe especially West Germany, was leaving Britain behind – the trade with the commonwealth was not sufficient to keep up - Macmillan reversed his policy and decided it was

Answer 22

essential to join EEC in 1961 – this application was a symbol of the sense of failure in bringing about economic modernisation.

Question 23

• To address this, Selwyn Lloyd, Macmillan’s third chancellor of the exchequer set up the

two bodies

Answer 23

• NEDC (known as Neddy) which was made responsible for long term planning and consisted of government representatives, academics, employers, and trade unionists.
• A national incomes commission (NIC) (known as Nicky) was set up in 1962 to keep an eye on wages and prices.

Question 24

• The rejection of Britain’s application to join the EEC was in

Answer 24

January 1963 due to DeGaulle’s veto

Question 25

• 1963: the Beeching Report was published as part of a review into cutting public expenditure.
  it recommended and led to

Answer 25

massive cuts in Britain’s rail network including the closure of more than 30% of the rail network, provoking public outrage.
* Hundreds of branch lines and thousands of stations were axed and showed the government was no longer surfing on a wave of prosperity and economic success.

Question 26

• Maudling, who replaced Lloyd as Chancellor of the Exchequer, pushed the economy into the go phase by lowering the bank rate to encourage consumer spending

what did this lead to

growth rate vs balance of payments

Answer 26

• growth rate rose to 6% in 1964, however imports remained 20% higher than exports.

Question 27

SUMMARY
* British economy still growing and living standards still going up.
BUT
The economic problems apparent in the 1950s had not yet been solved.
why?

2 reasons

Answer 27

• Cycle of stop-go economics not broken - economic growth led to the overheating of the economy through excessive imports and rising wage demands.
• Britain continued to slip behind foreign competitors such as West Germany, France, and USA.