The Heyday of Industrial Assistance (Late 1970s)

Unemployment peaked around March 1972, at about the time that the government had embarked on its programme of industrial expansion, and strong growth followed, so that by the end of 1973 unemployment had nearly halved to stand at just under half a million. Fiscal and monetary measures were taken during 1973 to curb demand, but such was the strength of growth that a deterioration in the balance of payments developed, despite currency depreciation following the floating of sterling in June 1972. These problems were compounded in October 1973 by steep increases in oil prices and by industrial action, which led to the abandonment of the statutory incomes policy. The Labour Party came to power in March 1974, and after a further election was returned to office in October of that year with a small majority. While the industrial action was settled quickly, the new government faced both a balance of payments deficit and inflationary pressures. It sought control of wage increases through voluntary restraint by trade unions and in return took a series of measures as its part of a ‘social contract’. In the first of three Budgets in 1974, food and rent subsidies were increased by £570m, and further consumer subsidies were introduced in a July Budget to help curb inflation, which was running at 17 per cent.1 REP, which had been reprieved when Labour came to power, was doubled at this time to help restore its real value.