Topic 2: Economy/Industrial relations (1964-70) Flashcards
1
Q
3
Describe the economy in 1964
A
- £750m budget deficit
- £800m balance of payments deficit
- Overvaluation of sterling (£1 = £2.80)
2
Q
4
Describe opposition to devaluation in 1964
A
- To combat crises, choices were deflation or devaluation
- Wilson fearful of market devaluation
- devaluation could not succeed without cuts in spending - would abandon party’s promises months after taking office
- Wilson forced to pursue American-dependent economic policy subject to their conditions
3
Q
2
Describe the causes of the 1964 Sterling Crisis
A
- Callaghan’s autumn budget kept peldge to increase pensions and abolish persription charges despite huge deficit
- led to crisis in money markets (esp on Gold Reserves)
4
Q
5
List the measures taken to solve the 1964 Sterling Crisis
A
- Callaghan and Wilson unified in resisting devaluation
- bank rate raised to 7%
- temporary surcharge on imports
- income tax went up to 8s 3d
- Loan of $300m from US Fed and European Central Banks
5
Q
3
Describe the economy in 1965
A
- 30% Capital Gains Tax and Corporation Tax
- Unemployment avg 1.5% (1965-66)
- Market recovers and pound strengthens
6
Q
4
Describe the economy in 1966
pre-sterling crisis/seamens’ strike
A
- Balance of Payments Surplus £127 million
- American support crucial
- Prices 9% higher than 1964, but earnings 11% higher
- Lab capitalised on situation and called election for March 1966
7
Q
2
Describe the DEA
A
- September 1965, ‘National Plan’ published
- George Brown at helm
8
Q
2
Describe the ‘National Plan’
A
- Outlined idea that growth could be achieved through national economic planning
- Set growth rate target at 3.8% per annum - had been achieved in 1963/64
9
Q
4
Describe the failure of the DEA
A
- Events in 1964 made target improbable
- No govt plan to restrict incomes or increase productivity
- Brown moved from DEA to FO (after 1966 July Package)
- lost credibility by 1966, abolished 1969
10
Q
3
Describe Callaghan’s May 1966 budget
A
- Selective Employment Tax introduced
- Intended to subsidise manufacturing industry with proceeds of service industry
- would boost exports
11
Q
2
What were the causes of the 1966 Sterling Crisis
A
- Selective Employment Tax not sufficient to convince markets that sterling was immune from devaluation
- Stimulated by seamens’ strike
12
Q
3
What were the effects of the May 1966 seamen’s strike
A
- Damaged exports
- Run on reserves
- Run on exchange rate of sterling
13
Q
3
What were the effects of the 1966 Sterling Crisis
A
- Monthly trade deficit doubled
- Cousins resigned (Minister of technology) in protest over income policy
- Internal cabinet pressure from Castle, Callaghan, Brown, etc for devaluation
14
Q
6
How was the 1966 Sterling Crisis solved?
A
- July Package 1966
- Britain’s economy would run with larger margin of spare capacity
- Bank rate rose to 7%
- Spending cuts at home and abroad
- Hire purchase restricted
- Complete wage/price freeze
short-term success, long-term failure
spare capacity - available land, labour and capital
15
Q
4
Describe the effects of the July Package 1966
A
- National Plan confirmed dead - Brown left DEA
- wages/prices frozen for 12 months
- Economic growth little more than 2% in 1966-67 (half of envisaged National Plan target)
- Balance of Payments surplus (of £127m) for first time in 3 years, before plunging into heavy deficit
short-term success, long-term failure
16
Q
3
Describe the economy in 1967
A
- Dock strikes
- Monthly trade deficit for October was £107m, easily the worst on record
- Run on pound (Sheldon question)
17
Q
3
Describe defence cuts (1967-68)
A
- Triggered by sterling crisis 1966
- 1967, Wilson rejected USA plan explicitly linking support for sterling with continued British presence in Far East
- Jan 1968, instead plans made for withdrawal East of Suez
18
Q
4
Describe the causes of devaluation 1967
A
- ‘Six day war’ between Israel and Egypt in June 1967 → resulted in temporary oil embargo
- Shattered hopes of balance of payments surplus
- Unofficial dock strikes 1967
- Question by Robert Sheldon MP about foreign loans caused market chaos (run on pound that cost govt £500m would occur)
19
Q
2
Describe devaluation 1967
A
- 18 Nov 1967
- Pound devalued from $2.80 to $2.40
20
Q
6
Describe the effects of devaluation 1967
A
- Standy credit loan of $1.4bn from IMF
- Severe terms attached e.g. bank rate set at 8%
- Callaghan resigns on 30 Nov
- '’the pound in your pocket has not been devalued’ (irresponsible and untrue)
- Economic competence ruined - previous sacrificies nullified
- Govt loses by-elections by swings of up to 18% - largest since war
21
Q
4
Describe the economy in 1968
A
- Jenkins had replaced Callaghan
- March 1968 budget warned of ‘2 years of hard slog’
- £923m of cuts
- Tax rises on high incomes, fuel and consumer goods
22
Q
7
Describe the March 1968 budget
A
- Jenkins warned of ‘2 hard years of slog’
- £923m taken out of economy in massive deflationary package
- Defence spending fell from 6% of GNP to 4% within 7 years
- Postponed raising of school leaving age to 16
- Abandoned target of 500k new houses
- Higher taxes levied on alcohol, high incomes, fuel
- Led to £800m balance of payments surplus by 1970, but deeply unpopular with public
23
Q
3
Describe the economy in 1969-70
A
- 1969 Budget - £340m tax rises
- Balance of payments reached £500m surplus in 1969, £800m surplus in 1970
- Jenkins had turned economy around - but through deflationary Treasury rather than expansionary DEA
24
Q
5
Describe harmonous relations with unions (1964-66)
A
- Opinion polls in 1960s showed public had 60% approval of unions
- Wilson made Frank Cousins, former Union official, as Minister of Technology
- ‘Beer and sandwiches’ - codename for hard-ball policy discussions
- Govt needed unions on side with inflation-restrictionary policies
- 1965 Trade Dispute Act
25
Q
2
Describe the Trade Dispute Act 1965
A
- Closed loophole Unions had found in previous act in 1906
- liked by unions
26
Q
4
Describe unofficial dock strikes 1967
A
- Series of unofficial strikes in September 1967
- Savagely disrupted exports at critical time (following July Package)
- October monthly trade deficit = £107 million - easily worst on record
- Contributed to devaluation
27
Q
5
Describe Mad Friday 1968
A
- 6 December 1968
- Threat of General Strike swirled
- Caused run on pound of £100m that day
- Wild rumours (further devaluation, Wilson’s resignation, Queen’s abdication)
- Showed power of unions
28
Q
3
Describe In Place of Strife (1969)
A
- White paper by Castle (Employment Secretary)
- Led to Industrial Relations Bill 1969
- Intended to extend socialist planning to increasingly militant trade unions
29
Q
3
What were the 3 main provisions of In Place in Strife (1969)
A
- a 28 day cooling off period - govt had more power to negotiate due to less urgency
- imposed settlements in inter-union disputes
- enforcement of strike ballots - prevent repeat of unofficial dock strikes
30
Q
5
Describe the reaction to In Place of Strife (1969)
A
- Divided cabinet and infuriated unions
- TUC voted it down by circa 8m votes to around 850k
- Wilson and Castle had lost
- Bill forced to be humiliatingly withdrawn
- Led to inflationary wage settlements causing economically difficult winter of 1969-70
31
Q
4
Describe the Prices and Incomes Board
A
- set up 1965 under Wilson
- initially set with pricing of soap, bread, road haulage
- headed by Aubrey Jones, conservative MP
- abolished 1970
