Labours Economic Policy 1964-70 - Wilson

Labours Economic Policy 1964-70 - Wilson Problem Solution – effective?Slow Economic Growth 1964 -Department for economic affairs created – lead by alcoholic George Brown, had national plan for 4% economy growth but failed – lacked resources, authority, relationship with treasury. Faded by 1966.New ministry of technology created 1964 to stimulate economy with advancements (concord) but lacked funds and authority. Balance of Payment Crisis - £400m deficit, the worst since WWII. 1964, National Debt of £800m Inflation 1964 – Wilson didn’t want to devalue, wanted to maintain power. Labour promised more welfare, pensions and school spending which was at risk. Had Prices and Incomes policy to prevent inflation to limit price rises and cause wage restraint but 1966 – National union of sea men strike wanted pay increase 17% places strain on Labour. 1967 – verge of economic collapse, pound devalued by 14% with defence cuts etc. Callaghan resigned (COE) but stayed in home office, Wilson tried to only devalue pound in Britain, didn’t work – damaged Labours credibility. Inflation was not being managed by ‘stop – go’ economics Declining Trade Britain 2 nd attempt to join EEC was rejected due to economic grounds, country looked weak. Economic situation improved with new COE Jenkins, raised taxes and tightened spending so 1969 – achieved balance of payments surplus but new issues in industrial relations. British economy grew at a slower

rate than its competitors: 2.3% compared to Germany 5.1%

Industrial relations Strikes more problematic and militant, Wilson challenged unions, proposed new government powers to order pre strike ballots 28 days before and would fine if rules broke, electorate approved. Unions angry as well as 50 MPs, ready to rebel. 1969 Unions marched against Wilson, Wilson and Leftist MP Castle were isolated in Party, concerns they destroyed the party. 1970 – Labour lost General election. Unions opposed new tech, Britain lagging behind new advancing technologies = Japan and W.Germany Labour Government 1974-9 – Wilson and Callaghan Proble m Solution – effective?Slow Econom ic Growth Harold Wilson was older, bad health. – Alzheimer’s. Resigned in 1976 and Callaghan (previous COE) took over who had good links with unions and would try to maintain party unity. Massive cuts in spending needed and Keynesian economics failing, left of party said he caved to capitalism and privatisation.InflationDenis Healy – COE 1975 warned of dangers of increasing wage demands as wage inflation caused unemployment. Wanted to control public spending and wanted to increase taxation and limit wage increases. Angered left of party who didn’t want to anger unions. Gov tried to limit wage increase to 3%, later changed to 5% but was unsuccessful. 1976 – economic crisis, unemployment 1.25m, inflation 16%, interest rates 15%, balance of payments in £1b deficit.Declinin g Trade Callaghan went to the International Monetary Fund )IMF) for a loan of £3b. Was humiliating as IMF only help 3 rd world countries.Industri al relation s Late 70s, ½ workforce unionised, Callaghan wanted to limit pay increase 5% 1978 with vague social contract policy with unions. November Ford workers strikes and got 17% increase – embarrassing for gov and fire service union got 22% rise. 1978-9 Industrial unrest had devastating psychological effect on nation which damaged gov. many public sector strikes e.g. train drivers, grave diggers, dustmen so rubbish piled up, bodies on street e.g. Liverpool, 225 corpses in factory waiting for burial. 14 th Feb gov allowed pay rises of 10-15% and public thought unions were too powerful.Thatcher won 1979 election as Callaghan had a vote of no confidence.Conservatives’ economic policy 1970-74 – Heath PM Problem Solution – effective?Slow Economic Growth Heath and conservatives spent previous years planning. Key was EEC. Planned to allow inefficient businesses to go under, Heath wanted to move away from consensus. Wanted to reduce state intervention but had to take action, wanted to maintain full employment, gave state aid to key industries e.g. rolls Royce – nationalised in 1971 – famous U turn criticised by many, public money spent bailing out luxury car company – bad but helped workers Inflation COE Barber introduced cuts on taxes and spending, Inflation increased by 60% by 1970, and

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