Blood, toil, high taxes and jobs for all
Thursday 06 April 1995
Putting the country on a war footing stimulated growth and employment, and real incomes rose significantly between 1939 and 1945. National income - calculated for the first time in 1941 - increased by two-thirds, and income per head adjusted for inflation was 15 per cent higher than its pre-war level. The only combatant whose economy grew faster was the US.
The reason for the boom - and the flip side of the high tax burden - was the huge boost to government spending on defence. Central government spending rose sixfold in six years, to reach more than £6bn in 1945.
Taxes could not keep up, although rising nearly fourfold to £3.3bn. Borrowing plugged the gap, thanks to the advice of the economist Maynard Keynes, who told Winston Churchill that balanced budgets had to be abandoned. The borrowing requirement peaked at 38 per cent of national income in 1942 - a figure that puts 1994's 7 per cent of gross domestic product deficit in the shade.
Average earnings increased by 76 per cent during the war as the expansion of the armed forces put labour in short supply. The rise in the cost of living was far less, partly because the government controlled prices and subsidised some goods.
The pattern of consumer expenditure changed enormously, prodded by rationing. Spending on household goods, clothing and private motoring dived. Spending on books and newspapers, tobacco and entertainment grew.
Industrial production switched, too, geared entirely towards the war effort. Output of consumer industries suffered as heavy industry expanded. There was a massive rise in the output of the munitions industry.
Employment followed the same patterns, and with the influx of women the size of the civilian workforce actually increased. Unemployment fell to nearly zero.
As the economy boomed, society was buffeted by social change. Although Britain suffered far fewer military casualties during the Second World War - 270,687 compared with 743,702 in the First World War - the number of civilian deaths was much higher, at 67,365. The Second World War cost more than 40 million lives worldwide.
Britain's population grew, nevertheless. The number of marriages declined, while divorces increased. The number of births outside marriage rose.
The Central Statistical Office was founded by Winston Churchill in 1941. Its job was to provide impartial statistics to help adjudicate on the demands of ministers competing for resources.
As it happened, the statisticans were housed in the building directly above the Cabinet War Rooms. They would have come between the government and any direct hit by a bomb.
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