the conservatiive and post war economy 1951-64

Conservative Government, 1951–64

Why the Conservatives Won in 1951

• Returned to power because middle‑class voters switched from Labour.

• These voters opposed further nationalisation and wanted an end to wartime rationing and economic controls.

Economic Policy

• By 1954, all rationing had ended and an economic boom had begun.

• A post‑war political consensus between Labour and Conservatives shaped policy.

Full Employment

• Conservatives committed to full employment.

• Used Keynesian‑style public works schemes when unemployment rose.

• Unemployment averaged 500,000, with lows of 300,000 — no return to 1930s levels.

Mixed Economy

• Supported a mixed economy of private enterprise + nationalised industries.

• Promised no increase in nationalisation, but no reduction either.

stop and go economic

• 1954–64 saw major growth in consumer affluence, with people able to borrow and spend more than ever before.

• Government encouraged spending by relaxing laws on consumer credit and borrowing.

• Rising consumption caused inflation and increased imports, creating balance of payments problems.

• Conservatives used ‘stop–go’ economics:

  • Stop growth by raising interest rates and taxes when the economy overheated.

  • Go again by lowering them to stimulate borrowing and growth after a slowdown.

• As Eden’s Chancellor, Macmillan deliberately slowed the economy by raising taxes and interest rates, making exports less competitive and angering taxpayers.

• The cycle showed it was impossible to control unemployment and inflation at the same time.

• Commentators used the term ‘stop–go’ to describe the government’s failure to create consistent long‑term growth policies.

one nation conservatism - corporatism

• Macmillan believed in one‑nation Conservatism: uniting Britain across social classes.

• Experimented with corporatism to halt economic decline.

• Corporatism aimed to unite labour, management and government to plan and achieve economic goals.

• In 1962, two organisations were created to support this approach.

NEDDY (National Development Council and Office

• Created as a forum where management and unions could discuss economic development.

• Assumed both sides would co‑operate because long‑term growth benefited everyone.

• Had no legal power over industry or unions.

• Government hoped for voluntary agreements, but NEDDY could not enforce anything.

NICKY (National Incomes Commission)

• Formed because strikes increased in the 1950s and workers demanded higher pay.

• Treasury ministers feared inflation unless wage rises were controlled.

• NICKY was an advisory council of economists and industry experts.

• Gave guidance on what the government considered ‘reasonable’ pay increases.

• Had no enforcement powers.

• Unions ignored NICKY’s calls for wage restraint because members wanted higher living standards and to participate in 1960s consumerism.

Butskellism

• Term coined by The Economist to describe the similar economic policies of Labour and Conservatives.

• Named after R. A. Butler (Tory Chancellor, 1951–55) and Hugh Gaitskell (Labour leader, 1955–63).

• Conservatives accepted Labour’s post‑war reforms and used the same Keynesian economic management.

• Only major reversal: reprivatisation of steel and road haulage.

Economic Problems Under Butskellism

• Inflation:

  • Priority was keeping inflation low.

  • Government used ‘stop’ measures (raising tax, limiting pay rises) when prices rose.

  • Worked short‑term but failed to stop long‑term inflationary pressure.

• Unemployment:

  • Conservatives pledged full employment.

  • Used ‘go’ measures (cutting taxes and interest rates) when the economy dipped.

  • Accused of using ‘go’ policies before elections for political advantage.

• Slow Growth:

• Britain’s growth rate was 2.3%, far lower than Italy (5.6%) and Germany (5.1%).

• Caused partly by lack of investment in research and development outside defence.

 

Economic problems by 1964

• Unemployment rose sharply, reaching 878,000 in 1963 — the highest level since the end of the war.

• Rising consumer spending increased demand for foreign goods, creating a balance of payments problem and threatening the value of the pound.

• In August 1961, the government refused to devalue the pound.

• Instead, it borrowed £714 million from the IMF to support the currency

Wilson & Callaghan (Labour), 1964–79

• abour failed to improve on the Conservative economic record.

• Attempts to boost planning and investment through the ‘white heat’ of new technology made little impact.

• Inflation, unemployment and slow growth continued.

• Labour relied on the same ‘stop‑go’ responses as earlier governments.

1967 Devaluation

• Wilson was determined to avoid another Labour devaluation after 1949.

• By November 1967, after failed attempts to borrow out of trouble, he was forced to devalue the pound from $2.80 to $2.40.

• Wilson claimed the “pound in your pocket” was unchanged domestically, but his credibility collapsed.

• The same year, Britain’s application to join the EEC was vetoed by Charles de Gaulle, worsening the political blow.

Heath Government (Conservative), 1970–74

• UK unemployment and inflation worsened due to events in the Middle East.

• 16 October 1973: OPEC raised oil prices by 70% in retaliation for US support for Israel in the Yom Kippur War.

• By 1974, oil prices had risen by 400%, driving inflation (reaching 25% in 1976) due to higher energy and transport costs.

Labour Government After 1974

• Rising import costs forced Labour to try to cap prices and wages and cut spending.

• These measures were unpopular with voters and especially with trade unions.

• Unemployment doubled between 1974 and 1976 to just under 1.5 million.

• Economic crisis + union anger led to the Winter of Discontent (1978–79).

• This breakdown of consensus politics helped pave the way for Thatcher, who blamed irresponsible trade unions and aimed to destroy their power.