Stop-Go Economics & Britain's Economic Problems (1951-1964)

Question 1

Britain’s Structural Economic
Problems

Answer 1

• Excessive Spending Commitments: Britain couldn’t afford to build a modern competitive economy, develop the welfare state and maintain defence commitments
• Balance of Payments Issues: imported more than sold abroad, always in deficit
• Growing Inflation
• Industrial Relations: inflation grew, workers demanded pay rises
• Rising National Debts: debts increased yearly, 1954-1964, £540 million to £800 million

Question 2

‘Stop-Go’ Economic Policies
(1951-1964)

Answer 2

• The use of interest rates to control economic growth
• ‘Stop’: Used when economy was growing too quickly causing inflation
• Taxes and interest rates would be increased, making the cost of borrowing more expensive, reducing demand
• ‘Go’: Used when economy was growing too slow causing deflation
• Interest rates and taxes would be cut, making borrowing money cheaper and increasing demand

Question 3

Conservative Opposition to
‘Stop-Go Policies’

Answer 3

• Peter Thorneycroft and Enoch Powell that managing the economy by using ‘Stop-Go Policies’ was not working
• They argued that the government should control the money supply by limiting spending by making cuts to house building and the welfare state
• These policies would be contrary to the Post-War Consensus and went against Butskellism
• Macmillan refused this, Powell and Thorneycroft resigned

Question 4

Macmillan’s Planning Economic
Growth (NEDDY & NICKY)

Answer 4

• Both set up by Macmillan
• The National Economic Development Council (NEDDY): representatives of employers, trade unions and government met to plan economic growth
• The National Incomes Commission (NICKY): regulate wage demands to prevent the ‘wage-spiral’ causing inflation
• Good decisions as British economy recovered quickly after Suez
• Sterling recovered against the US Dollar
• Government was able to make big tax cuts in the 1959 budget to help Macmillan win the election
• Economy grew quickest between 1960-1964
• 1961 International Monetary Fund: impossible to keep Britain stable with ‘S-G Policies’, had to apply for a loan

Question 5

The Economy by 1964

Answer 5

• Failure of being accepted to the EEC in 1963 due to Gaulle’s veto was a big blow
• Led Macmillan to resign
• Unemployment had risen to 800,000 in 1963
• Harold Wilson won the 1964 election by promising to escape the cycle of ‘stop-go policies’
• Promised to end Britain’s long-term economic problems