Managing the British Economy in the 1960s: A Treasury Perspective

318 Pages·1996·76.518 MB·English

by  Sir Alec Cairncross (auth.)

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Managing the British
Economy in the 1960s
A Treasury Perspective
Sir Alec Caimcross
~
in association with
MACMILlAN St Antony's College, Oxford
© Sir Alec Cairncross 1996
Softcover reprint of hardcover 1st edition 1996 978-0-333-65075-2
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This book is published in the
St Antony's/Macmillan series
General Editor: Alex Pravda
First published 1996 by
MACMILLAN PRESS LTD
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ISBN 978-1-349-13946-0 ISBN 978-1-349-13944-6 (eBook)
DOI 10.1007/978-1-349-13944-6
A catalogue record for this book is available
from the British Library.
10 9 8 7 6 5 4 3 2 1
05 04 03 02 01 00 99 98 97 96
To my ex-colleagues in the
Economic Section of the Treasury
Contents
List of Tables viii
List of Figures ix
Preface x
Part I
1 Introduction 3
Part II
2 The First Cycle, 1957-61 29
3 The July Measures and After, 1961-2 44
4 The Maudling 'Dash for Growth' 65
Part III
5 A Change of Government, 1964 91
6 A Strategy for the Pound? 112
7 The Exchange Crisis of 1965 120
8 The Exchange Crisis of 1966 141
9 The New Strategy, 1967 159
10 The Countdown to Devaluation 180
Part IV
11 From Devaluation to the Gold Rush 195
12 A Long Hard Slog, 1968 211
13 Success at Last, 1969 232
14 Monetary and Financial Policy in the 1960s 243
15 Economic Management in the 1960s: A Summing-up 262
Appendix: An Economic Anatomy of the 1960s 276
Notes 283
Calendar of Main Events, 1960-9 290
Dramatis Personae, 1960-70 299
Index 305
vii
List of Tables
2.1 Gross Domestic Product: forecasts and actual growth,
1958-61 35
3.1 Estimates of increases in stocks, 1959-61 55
3.2 Gross Domestic Product: forecast and actual growth,
1961-4 59
4.1 Successive forecasts of changes in the constituents of
final demand, 1962-4 77
7.1 Central government borrowing and lending, 1963-4 to
1969-70 122
11.1 Preliminary forecasts, December 1967 201
14.1 Public borrowing and monetary growth, 1960-9 252
14.2 Net sales of government stocks, 1960-9 252
14.3 Total international reserves in 1949, 1955 and 1969 255
A.l Changes in the allocation of resources, 1959-69 278
A.2 Balance of payments estimates then and now, 1960-9 279
viii
List of Figures
1.1 British share of world trade in manufactures, 1959-70 19
1.2 The balance of payments on current account and
the gold and dollar drain, 1959-70 20
1.3 Half-yearly changes in GOP and unemployment,
1960-70 23
7.1 Public and private investment, 1959-70 (at 1985 prices) 135
12.1 Dollar rate of exchange, 1968-9 213
13.1 Volume of exports and imports, 1959-70 233
A.l Annual increases in fixed investment, exports and GOP,
1960-70 280
A.2 Unemployment and hourly wages, 1959-70 282
IX
Preface
This is an account of economic management in Britain in the 1960s
from the standpoint of the Treasury, in which I served between 1961
and 1969, first as Economic Adviser to HMG and subsequently as
Head of the Government Economic Service. It is simultaneously a his
tory of events - how, when and why they occurred - and of the govern
ment's efforts to influence events - how policies took shape and what
success they had. It focuses on economic fluctuations and economic
change and the efforts of the Treasury to influence or control them.
The book is almost entirely confined to macroeconomic policy, with
the emphasis on growth, unemployment, inflation and external bal
ance. Issues of industrial and social policy, relations with the European
Community, structural changes such as the rise of the Euro-dollar market
and the expansion in international capital flows are largely neglected.
So also are changes that seized public attention at the time, such as
decimalisation, the Channel Tunnel, raising the school leaving age and
student unrest. Much that occupied the Treasury is left out of account:
changes in the system of public expenditure control (PESC); new fi
nancial objectives for the nationalised industries (e.g. the test rate of
discount); efforts to improve the competence in economics and admin
istration of young civil servants (first the Centre for Administrative
Studies in 1963 and later the Civil Service College); and the host of
other concerns with which an administrative staff of nearly 200 wres
tled from day to day.
Since I was a participant in the process by which policy was formed,
I have drawn on my personal recollections and such records as I re
tain, including a diary I kept, like my two predecessors, James Meade
and Robert Hall, contrary to official regulations. This gives the book a
more personal cast than I would have wished and mixes memoir with
historical analysis; but it also allows me to offer the counterpart by an
ex-official to the various Ministerial surveys of the period in the memoirs
of Harold Macmillan, Harold Wilson, James Callaghan, Roy Jenkins
and others and in the diaries of Tony Benn, Dick Crossman and Barbara
Castle.
The staff of economists who served under me in the Economic Sec
tion included some of the most distinguished applied economists in
the country. Although none of them are mentioned by name, the reader
x