What was one of the key priorities for the Labour govt?
Modernisation of the economy.
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By 1964, what was widely accepted about British economy?
Britain was lagging behind other countries such as West Germany and Japan.
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What was the British economy stuck in?
A cycle of stop-go, with bursts of prosperity leading to inflation, runs on the pound and problems with the BOP.
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How much did Labor inherit a deficit of?
£800 million, whcih they inherited from the conservatives.
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What were the two classic solutions to this problem?
Deflation or devaluation.
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What was devaluation?
Lowering the value of the currency in comparison to others.
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Who was chancellor?
James Callaghan.
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Which one did wilson and Callaghan want to do?
Neither.
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What would deflation to for the economy?
Support the value of the pound and prevent inflation. But it was the old 'stop-go' approach that Labour was determind to break away from. Plus, it may have stopped the Labour party meeting it's manifesto of extra spending on welfare and tech.
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What would devaluation do for the economy?
Make imports cheaper and help exports by making British goods cheaper in other countries. But, this would make Britain look weaker in the world. Wilson feared they may get the reputation of devaluing the pound.
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What did Wilson believe could fix the economic problems?
By careful planning and management.
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What new department was set up?
Department of Economic Affairs (DEA)
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Who was led by?
George Brown.
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What did Brown set?
Growth targets and devised a national system of 'economic planning councils'
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What else did he try to establish?
A voluntary agreement about wages and prices wiht industrialists, trade union leaders and civil servants.
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What was the aim of this?
To secure the restraint needed to prevent inflation from rising which the govt would then need to stop with controls.
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But what was the outcome of Brown's economic proposals?
Nothing. It didn't have a united government support.
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Who were in competition?
Brown and the DEA.
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Why did some blame Brown?
He could be impulsive and inconsistant.
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Why did others blame the civil servants?
They were old-fashioned and anti-Labour. The treasury and the Bank of England felt undermined Brown's efforts, refused to pass over papers and even tapped his phone.
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But why might the real problem have been political?
Harold Wilson tried to keep key personalities happy rather than pcking the best man for the job.
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What did Wilson do in 1966 and 1967?
Wilson moved Brown to the Ministry of Foreign Affairs, and the DEA was abandoned.
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What did the government bring in instead to keep down inflation?
The Prices and Incomes Policy.
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Who was this implemented by?
The Prices and Incomes Board.
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But what was there in 1966 that did not help the economy?
A sterling crisis, as a result of the strike by the National Union of Seaman.
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Even though the govt defeated the strike, what were people critical of?
Wilson's critical attitude to the strikers.
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What happened in the aftermath of the strike?
The trade unionist Frank Cousins resigned from the cabinet over the Incomes policy.
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What was the Prices and Incomes Policy?
Government interventation to set limits on price rises and to call for wage restraint in negotiations between unions and employers.
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What did the resignation of Frank Cousins symbolise?
That the relatonship between the govt and the trade unions was breaking down.
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Even though the Labour govt survived two sterling crises in 1965 and 66, what did the govt struggle to overcome?
A outbreak of war in the Middle East affected oil supplies and a major national dock strike in August 1967 affected the BOP.
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What did the government decide wasn't avoidable?
Devaluation.
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How much did the value of the pound drop by?
14%, to US$ 2.40.
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What else did Labour do to overcome this?
Introduced hire purchase restrictions and hihgher interest rates, Also made defence cuts.
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Because Labour tried so hard to avoid devaluation, what did this do to the credibility?
Damaged it's credibility.
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How did Britain's 2nd application to the EEC do?
It was rejected once more.
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What did the EEC rejection and the devaluation crisis do for the British economy?
Made British economic policies look futile.
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But hwo did the eocnomy improve after this?
Improved markedly from the low point.
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Who replaced James Callaghan as chancellor?
Roy Jenkins. He was strongly in favour of devaluation in 1964.
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What did Jenkins do as chancellor?
Raised taxes and tightened up government spending in all areas of the economy. Gave top priority to the BOP.
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How popular did this make the government?
Tough measures made the govt unpopular.
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But by 1969, whta did Jenkins achieve?
A BOP surplus, but inflation was still running at 12% in 1969/70.
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Other cards in this set
Card 2
Front
By 1964, what was widely accepted about British economy?
Back
Britain was lagging behind other countries such as West Germany and Japan.
Card 3
Front
What was the British economy stuck in?
Back
Card 4
Front
How much did Labor inherit a deficit of?
Back
Card 5
Front
What were the two classic solutions to this problem?
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