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1949 Cabinet conclusion on reducing government expenditure

Cabinet Conclusion 21 October 1949. The Economic Situation
Cabinet Conclusion 21 October 1949. The Economic Situation
CAB 128/16      CM 61 (49) 2

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This extract is from a document presented to the Cabinet at a time when the British economy was in a very precarious position. War had virtually bankrupted the country, leaving it with massive debts owed to America. Although there was a major economic recovery programme underway, much of it was financed by American loans. Once wartime government controls were lifted, wages and prices rose, but the economic recovery also brought the danger of inflation. The situation led to cuts in government spending and what the government called an 'austerity programme'.

Questions to consider

  1. What does this source reveal about the seriousness of Britain's economic problems?
  2. What measures were being proposed?
  3. Does this source reveal anything about the government's political concerns over the proposed measures?
  4. In what ways does this source contradict the expectations expressed in the Oliver Twist film clip and the Image of a trade union guide to NHS and NI Acts?


But the inflationary threat to the economy was serious and immediate, and no time should be lost in applying some of the remedial measures required. The Economic Policy Committee had therefore agreed that action ought to be taken now to secure reductions of between £250 million and £300 million in the forecasts of capital investment and Government expenditure, and that this sum should be roughly divided between capital investment and Government expenditure. As indicated in C.P. (49) 205, the Committee had recommended economies under these heads amounting in all to £256.5 million. This figure took account of a reduction of £7½ million in the cut originally proposed on the school building programme, and of a reduced saving of £700,000 on the legal aid scheme. The total fell substantially short of the total reduction of £275-280 million which should be made at this stage, and he therefore proposed that a further economy should be secured by reducing the subsidy on milk by ½d. a pint. This would produce a saving of £24 million in Government expenditure without any significant effect on the cost of living.

The general view of Ministers was that it would not be advisable to seek to secure further savings by reducing the subsidy on milk. The public would react sharply to an increased in milk prices. 

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