Economic challenges 1918-1979

Post-WWI National Debt

Britain’s debt rose from £625 million in 1914 to £8 billion in 1918; interest payments on this debt consumed 40% of all government spending during the 1920s.

The Geddes Axe (1922)

Sir Eric Geddes recommended £87 million in cuts to public spending; the government implemented £52 million in cuts, primarily hitting education, housing, and social welfare.

Gold Standard Return (1925)

Winston Churchill returned the pound to its pre-war exchange rate of $4.86; this overvalued the pound by roughly 10%, making British exports (especially coal) too expensive for foreign markets.

Great Depression Unemployment Stats

Unemployment doubled from 1 million in 1929 to 2.5 million by 1930; in "staple" industry towns like Jarrow, unemployment reached as high as 70% of the workforce.

The May Committee (1931)

Predicted a massive budget deficit of £120 million by 1932; recommended a 10% cut in unemployment benefits and public sector pay, leading to the collapse of the Labour government.

1930s Economic Recovery Indicators

Bank rate was lowered to 2% to encourage borrowing; a housing boom saw 300,000 new houses built per year by 1935; industrial production rose by 46% between 1932 and 1937.

Post-WWII Debt to USA

Britain ended the war with £3.5 billion in debt; the 1945 American Loan provided $3.75 billion at 2% interest but required the pound to be convertible to dollars by 1947.

Lend-Lease Scheme

A wartime arrangement where the USA supplied Britain with food, oil, and weapons; it was abruptly ended in August 1945, creating an immediate "financial Dunkirk" for the Attlee government.

Keynesian Economics and Consensus

The post-war policy of using government spending to maintain "Full Employment"; defined as keeping unemployment below 3% of the workforce; remained the primary economic model until 1976.

Nationalisation Scale (1946–1951)

The government took over 20% of the economy; including the Bank of England, Coal (1947), Railways (1948), and Steel (1951); aimed to ensure industrial stability and investment.

1947 Fuel Crisis

A severe winter led to a coal shortage; industrial production stopped and unemployment temporarily spiked to 2.3 million; highlighted the fragility of post-war recovery.

Devaluation of the Pound (1949)

Stafford Cripps devalued the pound from $4.03 to $2.80; a 30% drop designed to make British exports cheaper and more competitive globally.

Stop-Go Economics Cycle

The 1950s/60s policy where the government encouraged growth (Go) until inflation rose or imports exceeded exports, then used high interest rates/taxes to slow the economy (Stop).

NEDDY and NICKY (1962)

National Economic Development Council (NEDDY) and National Incomes Commission (NICKY) were established by Macmillan to coordinate planning between government, management, and unions.

Wilson's 1967 Devaluation

After years of defending the currency, the pound was devalued from $2.80 to $2.40; Wilson famously stated this did not mean "the pound in your pocket" had been devalued.

The 1973 Oil Crisis

OPEC declared an embargo following the Yom Kippur War; oil prices quadrupled from $3 to $12 a barrel; caused UK inflation to soar toward 25% by 1975.

Barber Boom and Stagflation

Anthony Barber’s 1972 budget slashed taxes to spark growth; instead, it fueled "Stagflation"—a combination of stagnant growth and high inflation (over 15%).

The IMF Loan (1976)

Chancellor Denis Healey requested a $3.9 billion loan from the International Monetary Fund; in exchange, Britain had to cut public spending by £2.5 billion.

The Social Contract (1974–1978)

An agreement between the Labour government and the TUC; unions agreed to voluntary wage restraint in exchange for social reforms; collapsed when the government tried to impose a 5% pay limit in 1978.

Winter of Discontent Data

Over 29 million working days were lost to strikes in 1979; the highest number since the 1926 General Strike; marked the failure of the government's ability to control inflation and the unions.

Monetarism (1979 Shift)

The theory that inflation is caused purely by the supply of money; Margaret Thatcher prioritised controlling the money supply over maintaining full employment, signaling the end of the post-war consensus.