The PSBR Takes Over, 1974–76

Abstract

On 4 March 1974, Harold Wilson returned to Downing Street at the head of a minority Labour government.² The economic prospects were not good. Despite the recession, inflation was at its highest peacetime level since 1920.³ Following the oil shock, the current account deficit was forecast at £4 billion (5 per cent of Gross Domestic Product [GDP]) for the year ahead, and continuing industrial action meant much of the country was on a three-day week. The next two and a half years were amongst the most turbulent in recent British economic history. Growth was anaemic, unemployment rose to levels not seen since the 1930s, inflation peaked at 26.9 per cent, and a sterling crisis precipitated yet another application to the International Monetary Fund (IMF).⁴

Britain’s monetary regime was not built on the back of a stable equation or model of money, but on a conceit intended to shackle the state’s spending bureaucracies.

A.C. Hotson, 2010.¹