British budgetary policy 1945‐1954: a‘Keynesian revolution’?

Abstract

'Keynesian revolution' occurred in economic policy-making in the postwar period.2 This article, which is based largely on Public Record Office material, concentrates on the role of budgetary policy, upon which the debate has centred. In some ways this is doubly paradoxical: firstly, that it is through the study of the control of inflation rather than the alleviation of unemployment that some understanding can be gained of the reasons for the introduction of demand management; and secondly that it was budgetary policy, which received little consideration in either Keynes's General theory of employment, interest and money or the I944 White Paper on Employment policy, that came to be seen as central to the use of demand management in practice. This debate on the role of budgetary policy has only come to the fore in the last few years as attention has shifted away from consideration of an intellectual 'Keynesian revolution'. Attention has now come to focus on attitudes in Whitehall and the actual implementation of demand management, but it is necessary to separate these two aspects, especially as there has been a tendency to confuse them. With this in mind, it should then be possible to assess Treasury acceptance of demand management and the extent to which demand management, via the budget, was introduced into counter-inflationary policy. It will be argued that Treasury acceptance was not whole-hearted, that willingness to use budget surpluses did not necessarily imply an equal acceptance of deficit financing, and, with regard to implementation, that this was a gradual process, which makes the selection of a particular date an almost worthless exercise.