Farewell to prices and incomes policies: Conservative economic policy-making, 1974-79

From 1960 to 1979, Prices and Incomes Policy ('PIP') was central to Labour and Tory attempts to manage the economy. Since 1979, no Government has attempted direct controls on wages or prices. The Conservatives moved away from controls in the late 1970s. This paper considers two aspects of that change: the move away from PIP and the debates over joining the EMS. In the 1970s, the Conservatives were playing out in microcosm the central economic debates which had tormented policymakers since the 1960s and which were to preoccupy them throughout the 1980s and beyond. In contrast to the Wilson, Heath and Callaghan governments, they were moving away from PIP but they were doing so uncertainly. By default, they decided that markets should fix wages and prices, but with a little discreet assistance from a 'forum'. Whether that would turn back into PIP remained to be seen. They embarked upon, but did not resolve, a key question that then arose: should economic management depend upon close linkage with Europe and the Deutschmark? Or was the UK to be a monetarist island, 'entire of itself'? It is tempting to think that the abandonment of PIP, and British refusal to join the EMS, were inevitable. But this is not so. By 1979, the Conservatives had posed many questions about inflation, but they had arrived at very few answers.