Subsidy and failure

Oil and the economy

From 1973, the Organization of the Petroleum Exporting Countries (OPEC) reduced the amount of oil available in international markets. By the end of 1974, the price of oil had quadrupled, releasing powerful inflationary forces in the British economy and elsewhere. In 1976, the government faced a financial crisis which forced it to apply to the International Monetary Fund (IMF) for a loan.

Collapse of private companies

Although the incoming Conservative government planned to limit interventions through industrial policy, the collapse of prominent private companies soon caused the government to step in with rescue packages. For example, in 1971, Rolls Royce ran into serious financial difficulties in the course of developing a new engine, and the government nationalised the strategically important company. The government was forced to act in the shipbuilding industry particularly, where company closures carried great social costs.

The Industry Act 1972

This turn-around in Conservative policy was formalised in the Industry Act of 1972. The act aimed to promote industrial growth by the regional distribution of industry through tax incentives, development grants and, in some circumstances, financial assistance.