Labour's difficulties in government - 1964-1970

Why did the Labour government find itself in economic difficulties? 

• Second half of the 20th century was undergoing a major shift in its economic and social structure. 
• Manufacturing in Britain was shrinking. 
• Service and finance industries were expanding. 

Why was Britain performing so poorly? 

• Britain had failed to match the growth rates achieved by the industrial economies of western Europe, Japan and the USA. 
• Britain also spent too much on defence and therefore very little on industry. 

What was the Department of Economic Affairs? 

• Led by George Brown. 
• Its aim was economic expansion. 
• They drew up the "National Plan" - it aimed to stimulate production and exports by encouraging co-operation between government, employers and trade unions. 
• Few targets were met so the Plan was quietly disbanded. 

What did Wilson have to do in 1964 and 1967? Who did he blame and why was he worried? 

• Deficit had grown so much that he had to ask the IMF for a loan in 1967, which he already did in 1964. 
• He blamed the trade union "trouble makers." 
• The IMF loan was only a stopgap which was worrying as government was losing control over its own finances. 

What was the "Prices and Incomes policy"? 

• Policy to keep down inflation. 
• It set limits on price rises and called for a wage restraint in negotiations between unions and employer.
• This brought on tensions with the Trade Unions. 

What was Wilson forced to do in 1967? Why did he want to avoid this? 

• Devaluation of the pound - from $2.80 to $2.40. 
• Wilson wanted to avoid doing this because he wanted to prove that Labour was not the "party of devaluation". 
• Instead, he wanted policies for economic growth and to catch up with Britain's international competitors. 
• His mistake was that he didn't devaluate the pound earlier, so it could have been passed off as a financial adjustment. Delaying it only made it looks like a political and economic failure. 
• The dramatic way he did this also did not help matters. In his speech, he said the "pound in your pocket was not worth any less" when in fact it was. 

How did Roy Jenkins help Labour's position by 1969-1970?

• He took over as Chancellor. 
• Used deflationary methods - raised taxes, tightened up government spending and made improving the balance of payments top priority. 
• He eventually managed a balance of payments surplus - a key factor for providing the Labour party confidence in winning the 1970 general election.