Heath's Economic Policies (1970-1974)

Question 1

Heath’s Economic Aims

Answer 1

• Adopt a ‘new style of government’
• intended to break away from the Post-War Consensus
• Wanted to move towards a free market economy

Question 2

The Selsdon Man

Answer 2

• Heath’s new approach to economy was agreed between Conservatives at a conference in Selsdon Park
• Referred to as a new type of ‘Conservatism’, sometimes called the ‘New Right’
• Wanted to promote laissez-faire beliefs
• Wilson mocked Heath, coined the term ‘Selsdon Man’, insulting term due to his rejection of the Post-War Consensus

Question 3

Conservatives 1970 Manifesto

Answer 3

• Tax reform
• Better law and order
• Reform to trade unions
• Immigration controls (gained Powellite voters)
• Cuts to public spending
• End public subsidy of ‘lame-duck’ industries

Question 4

The Barber Boom (Stagflation)

Answer 4

• Example of the ‘New Right’ approach
• Policy followed by Anthony Barber, Chancellor of Exchequer
• Included income tax cuts, reducing government spending and scrapping Wilson’s Prices & Incomes Board
• Pleased workers as wage restrictions were lifted
• Frustrated wealthy due to tax concessions and cuts in government spending
• Rise in council house rents from reduction subsidies

Question 5

Labour’s Criticisms of Abandoning the Post-War Consensus

Answer 5

• Heath’s government condemned by Labour
• Criticised for abandoning the mixed economy
• Weakening the welfare state
• Undermined principle of full employment

Question 6

Heath’s Economic U-Turn

Answer 6

• Heath returned back to the P-W Consensus within 18 months
• 1971: Inflation at 15%
• Declining industrial output destroyed government’s confidence
• 1972: Heath returned to the Prices and Incomes Policy
• Began supporting ‘lame-duck’ industries again
• E.g. Rolls-Royce, historically a beacon of Britain’s industrial genius, managerial expertise, was losing money at an alarming rate
• Gov nationalised Rolls-Royce in 1971, sustained by gov grants
• Subsidies granted to other private companies in financial difficulties
• E.g. Upper Clyde Shipbuilders, threat of closure led to determined resistance from workers

Question 7

The 1973 OPEC Energy Crisis

Answer 7

• Arab OPEC members reduced their oil supplies to Western countries who supported Israel during the Arab-Israeli War, 1973
• Western economies who were oil dependent economies suffered
• Resulted in severe, rapid inflation throughout the industrial world
• Britain’s Balance of Payments Deficit rose to £1 billion
• Annual rate of inflation rose to 16% then 25% by 1975
• 1974-1976, unemployment more than doubled
• Trade union strikes in response to stagflation