1951–52: The Reactivation of Monetary Policy

Abstract

Labour lost the General Election of 25th October 1951, and the Conservative Party had a modest majority of 26 in the House of Commons. R.A. Butler became the Chancellor of the Exchequer in the new administration, which was led by Winston Churchill. The Conservative party’s election manifesto had excoriated Labour for ‘frantic extravagances’ and heavy taxation, and promised to cut out all unnecessary government spending. However, it supported the rearmament programme, promised to build 300,000 houses a year, and spoke of crying needs in education and health which were not being met.¹ The Conservative party was dedicated to a re-invigoration of economic enterprise and was therefore more inclined to cut taxes than to increase them, while serious cuts in public expenditure would have implied an electorally perilous reversal of the popular social programmes initiated by the Attlee administration, such as the National Health Service.² Seldon (1987, p. 67) comments that the Churchill administration ‘was remarkable perhaps above all for its consensus approach in most areas of policy, and for its continuity with policies pursued by the Attlee government’. Monetary policy was an exception, but public expenditure was not.³