The Dash for Growth — and its Consequences
Although the money boom which helped to fuel the secondary banking crisis seems astonishing in retrospect, it can be better understood against the background of the economic scene in the early 1970s. By the autumn of 1971, fifteen months after the Conservatives under Mr Heath had won the General Election of June 1970, Britain’s economy was in the doldrums; unemployment was at what was then regarded as a high level of 800,000, and was heading for the politically ominous one million mark which it was to reach in January 1972. Total output remained subdued and, worst still, manufacturing industry’s investment was forecast to fall, by 6–8 per cent, in 1971 as a whole. In July, the Chancellor, Lord Barber, had cut purchase tax and certain other taxes and had introduced more public works, but with little apparent reviving effect on activity. In these circumstances, it is scarcely surprising that interest rates were low — Bank Rate being only 5 per cent — and were to drop further to reach, in January 1972, their lowest since 1964.
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