Conservative Great Britain (1951-1964)

Conservative Governments 1951-64

Recovery

• Conservative policies were successful by 1953 in that: exports recovered; new industrial plants produced steel, planes and petro-chemicals; The Korean War ended and prices thus fell quickly; import bill fell so more imports were allowed; rationing and licensing ended
• Full employment came as a result of:
• Government policies
• Investment in nationalised industries and building for welfare services
• 1952-55 house building up 50%
• Welfare services and these needed more workers of all sorts
• Exports had doubled by 1951 and continued to grow and increase employment
• Welfare spending by people on pensions and other benefits created demand for goods, services and workers
• The opening of many new factories increased demand for workers
• Housing development expanding – more workers needed
• High consumer demand because more families could afford it
• Women found it easy to get work – gave families at least 2 incomes

Immigration

• To get workers to take the lowest paid jobs they were brought in from India, West Indies etc
• The ‘Macmillan Boom’ attracted 56,000 immigrants (1960)
• 1961 – 136,000 more
• 1964 a million ‘coloured’ immigrants in Great Britain
• Also – ‘second generation’ i.e. the children of immigrants born in Great Britain

Limiting Immigration

• Fear that parts of the country would be ‘swamped’ and this would cause racial violence
• Led to 1962 Commonwealth Immigration Act to restrict numbers

Industrial Locations after 1945

• Depressed areas continued to have above average unemployment
• Wartime report suggested taking industry to such areas
• Government measures included licensing for new factory buildings and trying to persuade industrialists to build in such areas
• Incentives to attract companies into these areas included: low interest loans; tax breaks; housing for key workers
• Development agencies in depressed areas became development areas to attract industry in NE and NW England, West Scotland and South Wales

Problems

• The above policy is very costly
• Firms close as soon as recession starts

1955 Election

• RA Butler Chancellor since 1951
• Able to lower tax because:
• Less spent on re-armament than Labour had planned
• More tax-payers due to full employment so people had to pay less
• Rationing and licensing ended
• Allowed Macmillan to build 300,000 houses a year
• Government was popular
• Eden replaced Churchill (retired) and wanted a mandate from the public
• Called an election

Result

• Conservatives – 344 seats
• Labour – 277 seats
• Liberals – 6 seats

Inflation after 1955

• Rise in prices by ‘cost-push’ inflation caused by –
• 1945-53 higher import prices
• Higher wages to meet this cost
• Higher taxes e.g. Purchase Tax
• ‘Demand-pull inflation’ caused by rise in prices when demand for goods is too high due to home demand and export demand
• Employers tried to attract other employers’ workers
• Unions saw the chance to secure higher wages for their workers

Rising Imports

• A result of higher family incomes
• Volume of raw materials rose to make the goods
• More manufactured goods came in to meet home demand too

Balance of Payments

• Deficits caused by Great Britain not earning enough from exports to pay for imports
• The problems of inflation and deficits was tackled by
• Credit squeezes – higher interest rates to make borrowing more expensive and so reduce demand
• Hire Purchase regulations changed to make people repay debt in a shorter time
• Hire Purchase tax to increase prices and reduce demand
• Government appeals to workers

Harold Macmillan

• Replaced Eden after Suez Crisis
• Had to reunite Tories – split into pro-Suez hardliners and anti-Suez faction
• He had to win electoral popularity after Suez
• Deal with threat from Gaitskell (new Labour leader) popular with middle classes
• 1957 allowed Thorneycroft (Chancellor) to resign when he wanted a balanced budget) asking for cuts and/or tax increases
• Heathcote Amory became new Chancellor
• He went on to reduce interest rates, ease Hire Purchase regulations and have a budget deficit allowing government spending to rise without extra tax to pay for it

Result

• 1958-60 economic boom
• More women entered the work force
• This increased family affluence
• Immigration increased

1959 Election

• For first time in 20^th century a Party won a third consecutive election
• Result –
• Conservatives – 365 seats
• Labour – 258 seats
• Liberals 6 seats

Problems 1960-3

• Balance of payments deficit continued
• Inflation made Great Britain goods more expensive so that more foreign manufactured goods were imported
• Exporters found things difficult
• Trade Unions claimed right to demand ever higher wages
• National output slowed
• Foreign rivals produced at a higher rate because -
• Investment better planned  and larger than Great Britain’s
• Their workers produced more goods, more cheaply and for higher wages
• European states hadn’t developed same welfare system as Great Britain
• Their system was paid for by payments made by workers and employers who had to devise labour saving methods so they paid less into the welfare fund
• Also kept more of their pay because income tax was lower

The Start of ‘Planning’ 1961

• Macmillan feared there would be national bankruptcy and a fall in money’s value
• He made 3 policy changes –
• Decided to apply for EEC membership

National Economic Development Council (NEDC or Neddy) established

• Ministers, employers and unions met to plan the future of the economy

National Incomes Commission (NIC or ‘Nicky’) set up to regulate wage increases

Results

• Great Britain not allowed to join EEC
• Neddy produced good discussion papers but little change happened
• Nicky was ignored by Selwyn Lloyd (new Chancellor) who, in July 1961, imposed a credit squeeze and wages pause – government employees not allowed a wage rise
• Private industry was advised to do the same
• Government had to give in to the central Electricity Board workers who threatened to strike if they didn’t get a wage rise
• Government and public cut spending after the wage and credit squeeze which caused rise in unemployment
• Tories lost by-elections 1962-3 as a result

Macmillan steps down

• Retired summer of 1963 due to the above problems and because of spy scandals and the Profumo Affair

The Maudling ‘Boom’ 1963-4

• Chancellor in government of new Prime Minister Sir Alex Douglas-Home
• Tried to restore Tory fortunes by ‘buying our way to prosperity’
• His measures included lower interest rates and lower taxes
• He hoped it would encourage industry to invest in new machinery
• Success in that government became more popular but –
• Failed to get industry to improve
• Most of the increased purchasing power from tax cuts went on imports
• Result 1964 balance of payments problem

1964 Election

• Gaitskell had died in 1963; Labour led by Harold Wilson
• People believed his promise to get the country back on track
• Result –
• Labour 317 seats
• Conservatives 304 seats
• Liberals 9 seats