World Economy – The British Economy 1945-1979
EVOLUTION OF THE WELFARE STATE
1944 – Education Act (free secondary schooling)
1945 – Family Allowance Act (payments to mothers after first child)
1948 – NHS, National Insurance Act etc
Welfare spending as a share of GDP:
● 16% in 1951-52
● 24% in 1981-82
Why? Lowe cites:
● Pressure groups
● Expensive admin reforms due to greater professionalism
● Labour emphasis on redistribution of income.
In 1960’s social security exceeded defence as the most expensive item of public expenditure.
● A simple idea became complex. By 1970’s there were 45 different means tests.
● 1959 pensions placed on earnings-related basis; most insurance benefits added in 1966.
● Poverty actually rose despite social security, 14.2% in 1960. Why? The old and young
children in families and low paid couldn’t get Supplementary benefit when employed
Over time, post war tax system became more REGRESSIVE
● Higher tax rates reduced, and inflation made the real income at which tax became payable
fall.
● Increasing use of flat rate indirect taxes (VAT)
● Greater tax relief for companies and individuals e.g. tax-deductible mortgages
● Tax system didn’t improve income distribution over time.
NATIONALISATION
Dunkerley and Hare
● Labour government had extensive programme of nationalisation as a plank of its industrial
policy
● Under Tories, only steel was returned to the private sector, reflecting post-war consensus.
Atlee government nationalises the BOE, coal mining, supply of electricity and gas, railways, some
road transportation, civil aviation etc.
Motives: underinvestment, industrial unrest, changed attitudes to role of public sector.
Precedents: public corporations set up in the interwar years to solve market failure.
No significant opposition to majority of nationalisation
Coal:
● Believed restructuring needed due to under-investment – also to avoid industrial relations
strife
● Goals were modernisation and large-scale production
● Reorganised into 8 divisions with cross subsidisation across pits and decentralised
management.
Electricity:
● Already in public control since 1933 and the private part of industry highly regulated.
EVOLUTION OF THE WELFARE STATE
1944 – Education Act (free secondary schooling)
1945 – Family Allowance Act (payments to mothers after first child)
1948 – NHS, National Insurance Act etc
Welfare spending as a share of GDP:
● 16% in 1951-52
● 24% in 1981-82
Why? Lowe cites:
● Pressure groups
● Expensive admin reforms due to greater professionalism
● Labour emphasis on redistribution of income.
In 1960’s social security exceeded defence as the most expensive item of public expenditure.
● A simple idea became complex. By 1970’s there were 45 different means tests.
● 1959 pensions placed on earnings-related basis; most insurance benefits added in 1966.
● Poverty actually rose despite social security, 14.2% in 1960. Why? The old and young
children in families and low paid couldn’t get Supplementary benefit when employed
Over time, post war tax system became more REGRESSIVE
● Higher tax rates reduced, and inflation made the real income at which tax became payable
fall.
● Increasing use of flat rate indirect taxes (VAT)
● Greater tax relief for companies and individuals e.g. tax-deductible mortgages
● Tax system didn’t improve income distribution over time.
NATIONALISATION
Dunkerley and Hare
● Labour government had extensive programme of nationalisation as a plank of its industrial
policy
● Under Tories, only steel was returned to the private sector, reflecting post-war consensus.
Atlee government nationalises the BOE, coal mining, supply of electricity and gas, railways, some
road transportation, civil aviation etc.
Motives: underinvestment, industrial unrest, changed attitudes to role of public sector.
Precedents: public corporations set up in the interwar years to solve market failure.
No significant opposition to majority of nationalisation
Coal:
● Believed restructuring needed due to under-investment – also to avoid industrial relations
strife
● Goals were modernisation and large-scale production
● Reorganised into 8 divisions with cross subsidisation across pits and decentralised
management.
Electricity:
● Already in public control since 1933 and the private part of industry highly regulated.
