What were major problems facing the UK after World War II? What policies did the Government use to resolve these problems? And, how was Britain performing economically?

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What were major problems facing the UK after World War II? What policies did the Government use to resolve these problems? And, how was Britain performing economically?

The post-war era is a key moment in British economic history.  These decades came to be viewed as a golden age.  Immediately after the war, all available resources were needed for: the re-conversion from war to civilian production, re-construction of capital stock, and the recovery of living standards.  It was important that the decisions made by the Government would help improve the economy, as it was very weak at that time.   Some of these decisions, which were in the form of policies, helped better the economy and without them, the economy may not be the way it is today.

This essay will explore analyse and the UK economy during the 1960’s and 1970’s.  The major problems, main policy targets and instruments, and overall economic performance will be compared and contrasted over the two decades.

The Conservative government were in control of the economy from 1960 until 1964 before the Labour Government were elected in 1964.  Similarly, the economy in the 1970’s began under the control of the Conservative government until 1974.  The labour government then took over until 1979.  And finally, the Conservative government were elected again in 1979.

The 1960’s started with a Balance of Payments crisis in a rather slow-moving economy.  Economic activity did pick up again in the second half of the year until mid 1961, but it did not help the Balance of Payments.  In July 1961, the Bank of England feared a continuous drain on reserves and expected demand to carry on rising.  They feared that the spare margin of capacity that they had left would gradually disappear if no action were taken.  Therefore, deflationary measures were introduced.   These measures included the use of tax regulators to the full extent and exchange controls were tightened.  The bank rate was raised from 5% to 7% and a call was made for special deposits.  At this time, two reports were published.  These stressed the need for the government to take a longer-term view.  On July 25th, the Chancellor released a statement, which included a proposal for joint planning arrangements with representatives of employers and workers.  After two months, a formal invitation to join a National Economic Development Council (NEDC) was issued and was accepted by employers’ associations.  They hoped that there would be faster growth as many continental countries were doing better than the United Kingdom.  

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Efforts were made in 1961 to effectively slow down the rise in wages.  A ‘pause’ was called for in July 1961 by the Chancellor and later through a compact with the unions negotiated by George Brown in 1964.  This ‘pause’ did not last long and the compact didn’t help to slow down the rise in wages.  Hourly wages rose 10% from October 1964 until the following October.  Again this is very similar to the rise in hourly wages during the first few years of the 1970’s: hourly earnings rose by 10% in 1970, followed by a 13% rise over 1971 ...

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