When Chancellor Kwasi Kwarteng unveiled his mini-budget on September 23, he was making it clear that the government is prioritising economic growth over inflation – which was one reason the financial markets reacted so badly to his plan.
This clear willingness to risk higher inflation strongly echoed the budget of 1971, when Anthony Barber, the Conservative chancellor of the time, announced a large expansionary package of fiscal and monetary measures. He made it clear that he would not reverse his stance even if it produced sufficient downward pressure on the pound to force the currency, previously fixed in value, to be floated. The pound was indeed floated in 1972, but by the end of 1973 it was clear the boom was unsustainable, and the policy was reversed.
Margaret Thatcher took an entirely different stance when she took over the Tory leadership in 1975. For her, high inflation threatened not just serious disruption to economic activity, but to undermine the fabric of society by pitching all against all in a struggle to maintain real incomes.
