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Key facts on 1997

1997 - Unemployment fell throughout the year thanks to stronger GDP growth of 3.1%, and ended up at 1.4m (approximately 5% of the workforce). Welfare to work programme introduced for LT unemployed in June 1997. Unemployment figures among the lowest in the EU.

Inflation rose during year to a peak of 3.7% in October, but then began to fall slightly. Happy 50^th Birthday Retail Price Index - started in 1947. In 1997 it takes the equivalent of £2,150 to buy what could have been bought for £100 in 1947.

May 1^st - Election victory for Labour. New PM is Tony Blair, new Chancellor of the Exchequer - Gordon Brown. Overall majority of 179 seats in the House of Commons.

Bank of England given operational independence in the first week of the new government and the Bank of England `Monetary Policy Committee (MPC)' set up with 5 members from the Bank of England (the Governor, 2 deputies and 2 others), and also 5 external members:

1. Charles Goodhart (LSE)
2. Dr. DeAnne Julius (Chief Economist at BA)
3. Sir Alan Budd (Chief Economic adviser to the Treasury)
4. Prof. Willem Buiter (Cambridge University)

New MPC kept raising interest rates each month to 7¼% by the end of the year (a 5 year high).

Gordon Brown's first Budget - July '97. Key features:

• Government will observe "Golden Rule" of borrowing (only borrow to finance investment and not current expenditure
• Windfall tax on privatised utilities raising £5.2bn over 2 years from 28 companies
• Cut in Corporation tax from 33% to 31%
• VAT cut from 8% to 5% on gas and electricity
• Government stuck to the tight spending limits set by the previous Tory government

PSBR kept falling sharply down to £1.1bn for 1997 - a dramatic fall from £22.7bn the previous year.

Halifax became a bank in June '97 with the shares floated on the Stock Market.

Minimum wage bill went to Parliament on Nov.27^th - requires Low Pay Commission to report to PM in 1998 with a recommendation on the level of the National Minimum Wage. Will come into effect April 1^st 1999.

October '97 - worldwide stock markets crash; partly caused by problems in Asia. However, markets recovered by December, so crash was short-lived. Asia though didn't recover so quickly!! New Stock Exchange trading system introduced.

Merger activity increased sharply with quite a bit of acquisition overseas thanks to the strong £. Biggest deal was the merger of Guinness and Grand Metropolitan to form the drinks giant "Diageo". Government also banned electrical manufacturers from recommending retail prices on their goods.

Sept.'97 - Royal Commission on Environmental Pollution demanded a curb on pollution and congestion from road transport. They put total cost (time lost, accidents, illness etc.) at between £27.4bn and £51.4bn per annum.

EU publishes Agenda 2000 proposals for enlargement of the EU. Preliminary negotiations to begin in early 1998 with the Czech Republic, Estonia, Poland, Slovenia, Hungary and Cyprus.

Balance of payments recorded a current account surplus (first for 12 years) of £4.5bn. Largely helped by strong invisibles balance. However, strong £ may cause export problems in the future (J-curve effect)??

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