Labour Economic Policy, March 1974–May 1975: ‘A Phoney Phase’

Abstract

This chapter outlines the economic policy strategy during the first year of the 1974–79 Labour Government. I argue that the domestic political imperatives that guided and limited the Government’s policy choices during this period stemmed from its arrival in power in the midst of a worldwide recession with a minority position in Parliament, an ideologically divided Cabinet, a left-of-center Manifesto, and a Social Contract partnership with the trade unions. However, the financing-over-adjustment emphases in the international political economy (discussed in Chapter 4) proved to be a relatively favorable environment, given the Government’s domestic constraints. Conditions changed, however, in June 1975 with the first sustained run on sterling and the emergence and intensification of external pressure on the Government for policy retrenchment.

‘A Phoney Phase’ is the title of a chapter of Chief Secretary of the Treasury Joel Barnett’s memoirs (1982: 31–47).