economic policies and problems Flashcards
who was the chancellor 1964-67?
Callaghan
who was the chancellor 1967-70?
Jenkins
what economic challenges did labour inherit/face?
- balance of payments crisis - deficit of £800million in 1964
- reduction in sterling markets as more colonies gained independence
- lack of international competitiveness
- high labour costs made products more expensive
- labour = allied to trade unions - couldn’t reduce wages as it would upset the unions
labour economic policy aims:
I
E
B
D
C
V
(idiotic elephants breathe daily currently visciously)
- reduce inflation
- increase exports to address balance of payments deficit
- pay off overseas debts
- improve the economy + make britain more competitive
- maintain the value of the pound (£1 = $2.80 in 1964)
what was the issue regarding overseas military bases?
it was very expensive to maintain them, but britain couldn’t reduce them without damaging its status as a global power
what’s a run on the pound?
a time of nervousness surrounding the value of the sterling which causes its value to fall, leading to bankers changing their £ to other currencies
ways to solve economic problems + problems with it - deflation:
-to engineer deflation a government can increase taxes and tariffs, limit wages and cut government spending -deflation would support the value of the pound and prevent further inflation
-but it was a stop-go economic policy, which the tories had been criticised for
-there were fears that it would stop labour from meetings its manifesto commitments of extra spending on technology etc
ways to solve economic problems + problems with it - devaluation:
-devaluation = lowering the value of a currency in comparison to others in a fixed exchange system
-it would make imports more expensive and help exporters by making british goods cheaper abroad, hence helping balance of payments
-but it would make britain look weaker and mean it has to scale back on global involvement
-but wilson fear labour would become known as the devaluation party, as they had previously devalued in 1931 and 1949
what was the actual proposed solution for the economic problems?
-department of economic affairs set up with George Brown as the head
-it set growth targets and devised a national system of economic planning councils
-also tried to establish a voluntary agreement about wages and prices with industrialists, union leaders and civil servants
when was deflation imposed?
-from day 1
what did deflation involve?
15% charge on imports initially, then 10% then abolished.
taxes on alcohol, tobacco and petrol
what were the successes of deflation?
-raised £475mil in revenue
-british exports rose - balance of payments showed a surplus by 1969
what were the failures of deflation?
-fierce international opposition and threats of retaliation in response to 15% charge on imports
-created cycle of crises related to value of pound
-all revenue was used on commitments made in manifesto
-had to take out loans
describe the national plan:
-set up in september 1965
-aim was to increase national output by 25% in 5 years, an annual growth rate of almost 4% over 6 years, and increase exports by 5.25% per year
- national board for prices and wages
-government would provide investment funds for the modernisation of british industry
successes of the national plan:
-minor successes e.g. motorways built in north, manufacturing sites set up in south wales
- labour increased their majority to 96 in the 1966 GE
-rent rebates to help the poor
failures of the national plan:
-many didn’t think dynamic growth could actually happen
-many measures were contradictory to deflationary policies
-lack of cooperation between callaghan (treasury) and brown (DEA)
-too ambitious
-the board lacked power and relied too much on trade unions
when was devaluation from + what did the pound now equal?
-november 1967
-£1 = $2.40 in 1967, whereas previously it was $2.80
successes of devaluation:
-wilson and jenkins made the queen announce a bank holiday which avoided another devaluation
-overall the value of the pound had been just about maintained
failures of devaluation:
-in 1968 there was a crisis in the dollar because of the vietnam war which caused a run on the pound
-the harsh budget increased taxation by £923mil - unpopular
-prescription charges were reintroduced, after being abolished in 1964
summary of labour’s economic failures:
-manifesto pledges had to be abandoned
-gov. forced to introduce unpopular spending cuts and raise taxes
-unemployment was still a problem - 2.7mil unemployed by 1967, highest since 1945
-due to dockers strike and oil crisis due to middle east war, pound had to be devalued
-national plan abandoned in 1967
-britain still wasn’t an EEC member, so didn’t benefit from europe’s rapidly growing trade
-labour voters accused the party of using tory policies to try and fix inflation
-britain forced to ask for a loan from the IMF
-inflation actually increased under labour - prices were 18% higher in 1970 than the were in 1964
-living standards began to fall because of wage freezes
what was the Trade Unions Congress?
-a federation of unions across britain
-established in 1868 to provide a coordinated voice for the labour movement
-unions had lots of power in labour due to block voting
what was the biggest union?
-transport and general workers’ union
-led by jack jones
-had 2 million members by the 1970s
who was Barbara Castle?
-Wilson’s employment minister
-a bevanite
-believed in the powers of trade unions, but needing them to act responsibly
when was in place of strife proposed and what was it?
-1969
-aimed to strengthen the unions dealing with employees but also limit their powers
-aimed to stop wildcat strikes
-barbara castle’s white paper
-would potentially benefit industrial output and factory owners
-opposed by unions and bevanites
-most of the british public, the right of the labour party and wilson all supported it
