Britain’s Budget Deficit in 1967–84: Its Consequences, Causes and Policies to Control it

Abstract

In the period in question, Britain’s Public Sector Borrowing Requirement has varied from negative borrowing, in 1969 and 1970, to 9 1/2 per cent of the gross national product in 1975. It was reduced from 4 1/2 per cent of the national product to zero by Mr Roy Jenkins, a Labour Chancellor of the Exchequer, allowed to rise to 7 1/2 per cent by Mr Edward Heath’s Conservative government in 1970–73 and by a further 2 percentage points to 9 1/2 per cent in 1974–75 by Mr Harold Wilson’s Labour government which succeeded it. The Labour party continued to govern from 1975 to 1979, but after 1976 led by Mr James Callaghan it ceased to favour high deficit policies and managed to reduce the deficit to an average of 5.1 per cent of the gross national product in 1977–79. Mrs Margaret Thatcher’s Conservative government managed to reduce it further to an average of 3.2 per cent of the gross national product in 1981–84, and it hopes to reduce it to 1.75 per cent by 1989. In Britain, therefore, Conservative and Labour governments have each expanded the deficit sharply, and at other times both have also made strenuous efforts to reduce it.