DO BARBERS CONTRIBUTE TO AN ECONMY

1 ANSWERS

1. Ali Abdullah
   

   Hi, After winning the election in 1970, Edward Heath appointed Barber as Chancellor of the Duchy of Lancaster and gave him the responsibility for negotiating the entry of the UK into the European Economic Community. However, following the sudden death of Iain Macleod on 20 July, only 6 weeks after the election, Barber became the new Chancellor of the Exchequer. In line with the, initial, liberal instincts of Heath's 1970 government, he oversaw a major liberalisation of the banking system under the title of 'Competition and Credit Control', leading to a high level of lending, much of it to speculative property concerns. In his first Budget in March 1971, he proposed to replace purchase tax and selective employment tax with value added tax, and also relaxed exchange controls; both were prerequisites to membership of the EEC. VAT came into force in 1973 at a standard rate of 10%. A year later, the rate was cut to 8%. Barber also reduced direct taxes. High levels of economic growth followed, but the traditional capacity constraints of the British economy - especially currency and balance of trade concerns - quickly choked the economic boom. The banking system fell towards crisis as the bubble burst. During his term the economy suffered due to stagflation and industrial unrest. In 1972 he delivered a budget which was designed to return the Conservative Party to power in an election expected in 1974 or 1975. This budget led to a period known as "The Barber Boom". The measures in the budget led to high inflation and wage demands from Public Sector workers. He was forced to introduce anti-inflation measures in September 1972, along with a Prices Commission and a Pay Board. The inflation of capital asset values was also followed by the 1973 oil crisis which followed the Yom Kippur War, adding to inflationary pressures in the economy and feeding industrial militancy (already at a high as a result of the struggle over the Industrial Relations Act 1971). After a strike by the miners, and a three-day week, Heath called for a general election on 28 February 1974, asking "Who governs Britain?". The election returned a minority Labour Government and Harold Wilson as Prime Minister.

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