How stable was Britain’s economy between 1957 and 1964? In this lesson, we will: Describe the key events in Britain’s economic history between 1957 and 1964. Assess to what extent living conditions in Britain improved under Macmillan’s governments. Starter: On your cartoon, explain each part of the cartoon using contextual knowledge. Overall – what is the cartoonist try to say with this drawing?

How did Macmillan take over office? Following Anthony Eden’s resignation, Harold Macmillan took over leadership of the country. As Chancellor, he had told the Cabinet: “The Suez operation has been a tactical defeat. It is our task to ensure that, like the retreat from Mons and Dunkirk, it should prove the prelude to a strategic victory” On choosing his cabinet, he demoted his biggest rival, RA Butler, to Home Secretary. Although Britain had picked up economically, it’s recovery was sluggish compared to in Europe and America. However; Macmillan’s chancellors made no serious attempts to change this. Instead, the continued to follow Butler’s ‘consensus’ economic model.

Who held the position of ‘Chancellor of the Exchequer’ under Macmillan? Peter Thorneycroft, 1957-1958 Derick Heathcoat-Amory, 1958-1960 Selwyn Lloyd, 1960-1962 Reginald Maudling, 1962-1964

Did Macmillan continue with ‘stop-go’? The budget was often used as a tool by the Conservatives to ‘buy voters’. In 1959, Heathcoat-Amory boosted support by introducing £370 million in tax cuts – this led to higher consumer spending so inflation went up. To counter this, he introduced deflationary measure e.g. cap public spending and limiting wages. Macmillan’s government revered these measures – lowering taxes and increasing public spending. Higher demand for goods therefore imports increased – as a result, the payment deficit increased to £800 million by 1964 https://www.youtube.com/watch?v=lnvbq7Kk08E

1957 1958 1959 1961 1962 1963 1964 Massive pressure from cost of Suez and US pressure started run on the pound (£ worth less than $). Peter Thorneycroft wanted to limit wage increases and cut money supply. This heavily divided Tory’s – some opposed this as it would lead to unemployment e.g. Iain McLeod. Macmillan decided to side with McLeod – Thorneycroft resigns alongside Enoch Powell. Macmillan shrugs this off as “a little local difficulty”. 1959 budget provided huge tax cuts of £370 million. Tory’s were riding the wave of affluence – the economy was doing very well. However the threat of inflation was every present. As wages went up, so too did the price of goods. From 1960 – 1964, trapped in cycle of “stop-go” Pay-pause introduced to hold down wage inflation. IMF prop up the £ by loaning Britain £1.5 billion. Britain struggles to keep up with rest of Europe without access to EEC. Trade within commonwealth not enough. NEDC and NICKY set up to keep an eye on wages and pricing. Made up of government representatives, academics, employers and trade unions. Shows willingness to work in collaboration Beeching Report published and recommends massive cuts in Britain’s rail network. Closing 30% of the rail network. Many communities left isolated. Public outrage. Reginald Maudling, the new Chancellor, pushed the economy into a go stage by lowering the bank rate to encourage spending. Exports at 10%, imports at 20%. BOP in £800 million deficit!

Did Britain experience a boom? British economy changed structure shifting towards a service sector economy from its manufacturing and industrial origins leaving some regions economically depressed. Growth continued to struggle, at about only half the rate of that of Germany or France at the same time. However, industry had remained strong in nearly 20 years following the end of the war, and extensive housebuilding and construction of new commercial developments and public buildings also helped unemployment stay low throughout this time. Despite the boom, the Prime Minister remained desperately concerned about inflation. He described the dilemma of how to maintain growth and employment but keep a lid on prices as the “64,000 dollar question” https://www.youtube.com/watch?v=rNHKzSyliAQ

Higher wages Continuous rising of wages, grew ahead of prices, majority of population gained in material prosperity Average weekly salaries rose from £8.30 in 1951 to £18.70 in 1964. 4% increase. Wages rose steeply (above inflation) throughout the 1950s from an average of just £5.8s a week in 1951 to about £7.15s by 1959 More credit Allowed people to borrow more money than they could save thus, enabling consumers to buy an unprecedented amount of manufactured goods. The money would be paid back over a number of months or years. Sales of cars from 1950-65 quadrupled from 1.5 million to 5.5 million. More housing 1.7 million houses built over Conservative years. House buying increased with ease of access to credit. 350,000 built in 1955!

However… Economy picked up after 1950 as world trade improved – but Britain falling behind competitors. 1951 – 1964, Britain’s economy grew 40% (France 50%, West Germany 250%, Japan 400%) Share of world exports of manufactures goods: Britain’s share fell from 20% (1954) to 15% (1960) while Germany’s rose from 15% to 19%. All exports rose between 1952 and 1962: Britain +29%, France +86%, Germany +247%, Japan +378%! In January 1957, Macmillan told the cabinet that Suez had increased Britain’s debt by £564 million. Hindered by lack of access to EEC.

But Britain had new industries, right? However… Well, yes… By 1960 the UK had dropped from being the world's second largest motor vehicle producer into third place. Labour-intensive methods, and wide model ranges hindered opportunities to reduce manufacturing costs – the UK's unit costs were higher than those of their major Japanese, European and American competitors. “Buy British” meant poor quality – British Leyland was nicknamed “British Eland” (German for misery) Manufacturing was still Britain’s industrial bedrock. In 1952, it produced a third of the national output, employed 40 per cent of the workforce and made up a quarter of world manufacturing exports.  However Japan had overtaken Britain as the world’s major producer of ships in 1956, and remained in that position for the rest of the century. The industry’s share of world output had declined from 38% in 1950 to 10% by 1965. By 1955 five companies produced 90% of the UK's motor vehicle output: BMC, Ford, Rootes, Standard-Triumph and Vauxhall. Between 1951 and 1964, exports of British cars increased from 1.9% to 3.5%. The first section of the M8 motorway and the first motorway in the country was the Preston By-pass. It was built by Tarmac Construction and opened by the Prime Minister Harold Macmillan on 5 December 1958! In 1959, a 67 mile strerch of the M1 opened. Stretches of the M60 and M6 appeared between 1960 and 1963; the first section of the A1 (M) was completed in 1961 and the M5 in 1962.

Evidence of economic prosperity Evidence of economic strain

Learning Task Two Evidence that life quality improved between 1951 and 1964 Evidence that life quality did not improve between 1951 and 1964. Read through the sources that your teacher has provided you. Using this information, argue for and against the following statement: “Between 1951 and 1964, the quality of life in Britain improved”