Topic 3: Heath's government (1970-74) Flashcards
5
Describe the promises of Heath’s government in 1970
- A break with interventionist policies
- Market solutions would be sought
- Legal reform of trade unions to bring them under control
- Taxpayer money would no longer be spent on helping ‘lame duck’ industries
- The rejection of compulsory wage control
6
List notable figures in Heath’s cabinet
- Ian MacLeod (CX) died 1 month after appointment
- Relatively unknown Anthony Barber (CX) who succeeded him
- Douglas-Home (FS)
- Maulding (HS)
- John Davies (trade and industry)
- Thatcher (Edu) - only woman in cabinet
2
Describe Heath’s personality
- ‘Wooden’
- Nicknamed the ‘grocer’ for working class background
4
Describe initial economic policies under Heath
- March 1971 budget
- ‘Competition and Credit Control’
- High growth
- Decimilisation in 1971
4
Describe the March 1971 Budget
- Replace purchase tax with VAT
- Relaxed exchange controls
- Both prerequisites for EEC membership
- Reduction of direct taxes -> led to high levels of economic growth and low unemployment
Purchase tax - tax on luxury goods
VAT - tax placed on product at each stage of production when value is added
Exchange controls - controls imposed by govt on purchase/sale of foreign currencies
2
Describe the liberalisation of the banking system under Heath
- Under title ‘Competition and Credit control’
- led to high lending and increase in money supply
3
Describe decimilisation 1971
- Agreed in 1965 under Wilson
- Previously 144p in £1
- Brought in line with other European currencies
6
Describe the problems the economy faced 1970-73
- Increasingly powerful trade unions
- Inflation had rose from 5% in 1969 to 10% by mid-1971
- Productivity remained low - growth rate decreased from 2.5% (1969) to 1.7% (1971)
- Record balance of payments surplus of £1bn in 1971 -> deficit of £1 billion in 1973
- Unemployment reached 1m in 1972
- Stagflation
3
Describe initial inflationary policies under Heath/Barber
- Abolished Price and Incomes Board
- Reduced standard rate income tax
- Signalled age of intervention was over
2
Describe initial deflationary policies under Heath/Barber
- Cuts in subsidies to council house rents and school milk expenditure (Thatcher ‘milk snatcher’)
- Signalled age of intervention was over
2
Describe nationalisation U-turns 1970-1974
- Rolls Royce nationalised in 1971 - major car manufacturer and symbolic of global status
- Upper Cylde Shipbuilders nationalised in 1971 after threat of unemployment
6
Describe the 1972 Barber Boom
- March 1972 budget cut taxes and inc public expenditure
- Dubbed ‘last Kenesian fling’ in Treasury
- Barber Boom pushed up growth rate to 7.4% by 1973
- Contravened Heath’s pledge to solve inflation
- Voluntary wage control was impossible to maintain in face of inflation
- Heath forced into an economic u-turn
1
Describe the cause of 1972 economic policy u-turn
- By Summer 1972, Heath had failed to secure trade union co-operation on wage restraint and anti-inflation measures
3
Describe the policies of the 1972-73 economic u-turn
- 90 day freeze of pay and prices
- Creation of Prices Commission and Pay Board to control inflation (Counter-Inflation Act 1973)
- Government had introduced own statuory incomes policy -> complete abandonment of Selsdon Man
4
Describe the floating of the pound in 1972
- Pound overvalued
- ‘temporary measure’
- Currency set by supply and demand rather than fixed rate
- Pound immediatley plunged in markets
2
What were the unemployment in figures in early 1972 and 1973 respectively?
1m
500k
3
Describe the causes of the 1973 Oil Price Crisis
- Yom Kippur War
- War prompted OPEC to declare oil emabrgo at nations percieved to be supporting Israel (inc UK and US)
- Oil exports suddenly stopped
OPEC - club of Arab oil nations
5
Describe the effects of the 1973 Oil Price Crisis
- Price of oil increases to 4x usual levels (reached $12 by end of crisis)
- Severe shortages of fuel for industry and petrol for transport
- £1 fell to $1.50
- Imports became more expensive - huge deficits
- Inflation grew to 16% by 1974
4
List industrial disputes when Heath came to office in 1970
- dockers strike
- large pay settlement for dustmen
- postal workers’ strike
- ‘go-slow’ by power workers which led to power cuts
5
Describe the Industrial Relations Act 1971
- Very similiar to In Place of Strife - Labour still opposed bill in August 1971
- Had abolished National Board for Prices and Incomes in 1970
- Agreements between employers and workers were to be legally enforceable
- Closed shop was to be banned
- Industrial Court was set up to try cases
4
Describe the failure of the Industrial Relations Act 1971
- Public standing of unions at highest level in 3 years at time of act passage
- TUC exploited legal loophole - if union refused to register they would remain beyond the reach of the new Industrial Court
- Immense political capital wasted
- Industrial Court had virtually no business as employers were fearful of consequences to labour relations
2
Describe the Pentonvile Five 1972
- 5 shop stewards arrested in London Docks in 1972 after threatening to provoke paralysing strike
- Political deadlock led to release
Shop stewards - employees who were also union representatives
3
Outline industrial relations in 1972
- Returned to policy of trying to manage wage demands through 1972 industry act
- 23m working days lost to strikes in 1972
- Highest since General Strike of 1926
3
Describe the 1972 industry act
- Involved Government, TUC, CBI
- Would agree wages, prices, etc
- policy criticised by Powell and right-wing MPs