How Effectively was the Economy Managed, 1970-79? Flashcards
Heath (Cons), 1970-74- Economic Aims (Manifesto)
Manifesto drawn up in Selsdon Park Hotel- wanted ‘quiet revolution’ to remove state from people’s lives- believed people would be more enterprising + self sufficient
Heath (Cons), 1970-74- Economic Aims (Keynesianism)
Intended to radically break from ‘Keynesian’ consensus
Wanted to end commitment to large, interventionist state + maintaining full employment
Heath (Cons), 1970-74- Economic Aims (Industrial Relations)
Rejected ‘corporatism’ + wanted to deal firmly with unions
Believed gov shouldn’t ‘prop-up’ businesses, they should be left alone to modernise + develop in competitive atmosphere
Heath (Cons), 1970-74- Actions (First Budget)
Chancellor, Barber, introduced sweeping tax cuts to stimulate spending + consumerism
Also cut gov spending, including subsidies to council houses, free school milk, subsidies for prescription charges
First budget made cuts of over £330m
Heath (Cons), 1970-74- Actions (IRC+NBPI)
Axed Wilson’s Industrial Reorganisation Corporation- belived it was the role of private businesses to provide necessary modernisation, abolished National Board on Prices and Incomes, ended gov ability to control prices + incomes
Heath (Cons), 1970-74- U-Turn (Boom)
Brief boom- ‘Barber Boom’, but failed to cure trade problems + fuelled inflation
By 1972, inflation at 15%, industrial output continuing to fall + unemployment rose to 6%, compared to 2% in 1950s
Heath (Cons), 1970-74- U-Turn (Rolls Royce)
Rolls Royce hit hard times- orders falling + losing money
Heath refused to let company collapse- beacon of British industry + worldwide brand, so nationalised Rolls Royce in 1971
Heath (Cons), 1970-74- Problems Facing Britain in 1974 (Unemployment)
Heath’s attempt to break consensus had failed- unemployment highest since depression, 628,000
Heath (Cons), 1970-74- Problems Facing Britain in 1974 (Industrial Relations)
14 million working days lost to strikes in 1974
Miners’ Strike of 1974- 21% pay increase, showed government were powerless to control unions
Heath (Cons), 1970-74- Problems Facing Britain in 1974 (Oil)
1973- International increase in price of oil- $2 to $35 per barrel
Budget deficit rose to £1 billion, inflation risen to 16%, unemployment increasing rapidly, value of pound fallen from $2.00 to $1.57
Heath (Cons), 1970-74- Analysis
Total failure- didn’t address previous economic issues
Failure to negotiate with unions impeded economic policies
Had to return to consensus, admitting failure
Worst unemployment since 1930s, quality of life decreasing, unstable economy
Wilson (Labour), 1974-76, Callaghan (Labour), 1976-79- Internal Economic Problems
Crippled by economic crises they inherited- most significant inflation
By mid 1970s, prices rising faster than wages, inflation reached 30% in 1975
Unable to persuade unions to restrain wage demands
Wilson (Labour), 1974-76, Callaghan (Labour), 1976-79- International Problems
By 1976, international traders had little confidence in British economy + put off by strikes, so took business elsewhere
Trade declining- value of pound fell by 20%, from $2 to $1.63
Wilson (Labour), 1974-76, Callaghan (Labour), 1976-79- IMF
Wilson asked International Monetary Fund (IMF) for a $3 billion loan in 1976
In order to receive loan, Britain must make major cuts to expenditure
Cuts increased unemployment, more than doubled to 1.4 million by 1979
Wilson (Labour), 1974-76, Callaghan (Labour), 1976-79- Wage Cap
Wilson announced 5% wage increase cap in 1977
Wave of strikes in 1978-79, known as the ‘Winter of Discontent’
Public lost faith in ability to manage economic crisis- elected Thatcher, end to consensus
