Chapter 22: Economic Issues

when did britain's economy recover?

1952

population

1961: 51mil (5% more than 1951)

post-war boom

other countries' economy started to recover so increased overseas trade, high levels of earning from exports and plentiful employment

employment in traditional jobs (fishing, coal) fell

service industries

increased

1960: nearly 5mil; 1/5 of population, same as heavy industry

world trade terms benefit

allowed britain to import 29% more goods than it had in 1951 for the same amount of exports

industrial production growth comparison

west germany: 126 (1952) to 225 (1959)

italy: 117 to 202

UK: 101 to 129

yet higher income per head than any other major country except usa

world trade shares compariosn

uk: 25 (1950) to 17 (1959)

west germany: 7 to 19

butler's oct 1951 memorandum recommendations

imports reduction

cutting food subsidies + abolishing identity cards (no rationing)

denationalisation of iron and steel industries

raising interest rates from 2% to 4% to prevent borrowing

uk balance of trade

1945-50: -56mil

1951-5: -19 mil

1956-60: +132mil

what did channon call it?

the 'brilliant bourgeois budget' as it pleased the conservatives

what was used to steady the economy, maintain growth and stop inflation?

interest rates: to discourage borrowing

import controls: limit purchases from abroad to reduce trade gap

taxes increased: check overspending or too rapid wage rises

if fall in demand for goods, taxes and interest rates lowered to stimulate spending

1951-2, STOP

weak economy due to BoP crisis, deflation necessary so bank rate and credit restrictions

1953-5, GO

BoP recovering... controls were removed (income and purchase tax lowered in 1953)

1955-9, STOP

economy overheating; wage demands and too many imports (causing inflation); higher interest rates and spending cuts

1955 budget

'pots and pans budget'

putting up taxes not good option of conservatives so decided to cut income and purchase tax

butler had to create another budget (oct 1955) and raise taxes on various household objects

dented reputation as not doing what is best for economy

gaitskell on butler

'he has behaved in a manner unworthy of higher office. he began in folly, continued in deceit, and has ended in reaction'

stop-go economic weaknesses

fails to develop a consistently performing economy

gov reacting to events instead of directing

weakness of britain's economy

did not keep up with its european counterparts (w germany)

failed to seize oppurtunity offered by worldwide demand to invest in industrial research + development to increase growth

thorneycroft 'monetarism'

limit wage increases and cut money supply to stop reactionary inflation - 'one-nation tories' opposed as would lead to increased unemployment

incomes vs outcomes

1948-56: incomes risen 75% but outcomes risen only 28%

thorneycroft on stop-go economics

'we have slithered from one crisis to another'

worker productivity comparison

british: 125

german: 159

french: 177

macmillan's answer to inflation

'what we need is restraint and common sense in how we spend our income'