How effective was Wilson in dealing with economic problems labour faced in 1964-1970

What was the main issue for Labour in the economy?

- Balance of payments defecit

why was the BoP defecit an issue?

- foreign holders of the £ would have decreased confidence, thus they would sell the £ and it would depreciate in value

- if the £ depreciated by too much , bankers in London would quickly transfer their money into another currency and cause a "run on the pound"

- inflation would increase

- Britain appeared weak globally

how did the government attempt to tackle economic issues?

- Deflation

- Devaluation

- The National Plan

what is deflation? (for history) and purpose of it?

- tax rises / cuts in government expenditure.

- decrease the money of consumers and decrease import expenditure = decreasing defecit

what was devaluation and the purpose of it?

- depreciate the £

- advantages = make British X cheaper, M would become more expensive

- disadvantages = Rise in imports = inflation and Britain's international prestige would be damaged

why was Deflation put into place?

- to rule out devaluation

why did Wilson (initially) rule out devaluation?

- reduce savings of working class families

- aware Devaluation had damaged Labour in 1949 under Atlee

- He did not want to anger the Americans as a deval could cause run on the $

when was Deflation introduced? what was it?

- In Autumn 1964 . Callaghan intorduced series of deflationary measures:

- increase tax on alcohol and tobacco and temporary import subcharge

how successful was Deflation?

- It was not successful at all as it did not prevent devaluation

- did not prevent a run on the £

- Forced Britain to remain in the east in return for US financial assistance = exacerbate financial problems

why and when was Devaluation introduced?

- November 1967

- because it seemed like there was no other way out

which economic issues caused devaluation to occur?

- 16 May 1966 = seamen strike , damaged X and threatened another run on the £

- unemployment was extremely high = 1967 = 2.5 Million

when was the £ devalued?

- 18th of November 1967

what was the £ devalued too?

- before it was $2.80

- now it was $2.40

how successful was devaluation?

- Trade figures were slow to improve & the substantial balance of payments deficit remained,

- did not prevent cuts in spending

- deflationary measures still needed

Who replaced Callaghan as Chancellor?

Roy Jenkins

what deflationary measures were introduced to cure BoP defecit after Devaluation? by Jenkins?

-In Jan 68 gov announced that all British forces east of Suez apart from those in Hong Kon & Persian Gulf, were to be withdrawn by the end of 1971

-Prescription charges, abolished in 64, would be reintroduced

-raising the school leaving age from 15 to 16 was deferred from 1971 to 73, which undermined the education reform the gov believed essential to its plan to modernise

- Budget of March 1968 delivered a hefty dose of deflation, increasing taxation to £923m

During 1969...?

During 1969, there was finally a balance of payments surplus, the value of sterling rose & interest rates were reduced.

What did Wilson believe was the key to make Britain more competitive?

- Better long-term planning

What was the National Plan and who made it?

- Department of Economic Affairs (DEA)

- established 2 ambitious targets = annual growth rate of 3.8% over 6 years , increase in X of 5.25% each year

when was the National Plan published?

- September 1965

National Plan also required the government too..?

- Create a New National Board for Prices and Incomes (NBPI)

- provide investment funds for modernisation of British industry

Why was the National Plan limited?

- never had much chance of success

why did the National Plan never have much chance of success?

- The Treasury did not co-operate with DEA

- Recommendations of National Plan were undermined by Treasury's deflationary measures

- NBPI had no power to enforce decisions but relied on TU's

How successful was the National Plan?

- Not successful = The DEA was wound up in 1969

- successful = National Plan contribuited to success of 1966 general election as it suggested Labour had a clear vision for the future.

what slogan did Labour use?

- "You know the Labour government works"

how successful was Wilson in dealing with economic issues Labour faced in 1964-70? (X2) (1)

- not successful = rate of inflation had been increasing + unemployment reached staggering figure of 2.5 million in 1967 + Britain's share of world exports continued to decrease and by 1970 it was a mere 11%

how successful was Wilson in dealing with economic issues Labour faced in 1964-70? (2)

- Not successful = high defence expenditure and reasearch on military = less investment for other sectors of the economy

- Lack on investment due to deflationary measures