economy

Question 1

who was Heath’s chancellor?

Answer 1

Barber

Question 2

what did Barber introduce?

Answer 2

-initially introduced cuts in public spending
-also introduced tax cuts to try and encourage investment
-this caused the ‘Barber boom’, with a rapid rise in inflation
-led to stagflation

Question 3

what was Heath’s economic u-turn?

Answer 3

-he was initially committed to less intervention and stopping the public subsidy of ‘lame duck’ industries but he ended up intervening to help key industries in trouble:
-1971= rolls-royce nationalised
-upper clyde shipbuilders given a subsidy of £35mil

Question 4

positives/strengths of economic policy:

Answer 4

-£2.5billion invested into the economy in increased pensions, benefits and tax reductions
-temporary economic improvement in 1973 e.g. unemployment fell under 500,000
-rate of unemployment was no higher by 1974
-global financial crisis caused in part by the oil crisis - out of Heath’s control

Question 5

negatives/weaknesses of economic policy:

Answer 5

-inflation was 5% when he came to power but by 1974 it was 10%
-cuts to taxes only led to inflation and did not lead to growth
-jan 1972 = unemployment hits 1million - highest since end of war
-nov. 1972 = government withdrew its policy of not backing any pay freezes by announcing a 90-day freeze on pay and prices
-number of working days lost to strikes was double that of wilson’s government
-inherited a balance of payments surplus but left with a deficit