In 1970, Ted Heath unexpectedly became Prime Minister, replacing Harold Wilson for what turned out to be a turbulent four years. His Chancellor, Anthony Barber, embarked on one of the most ambitious — and disastrous — economic experiments in modern British history.
The resulting “Barber Boom” was a huge dash for growth: tax cuts, relaxed spending controls, a dramatic expansion of borrowing and a sweeping liberalisation of banking under the banner of “Competition and Credit Control.”
The ambition was extraordinary. Heath and Barber hoped to deliver 10% economic growth over two years — roughly twice the economy’s productive potential.
Credit flooded into the economy. Bank lending exploded, government borrowing soared and money supply growth accelerated at remarkable speed. Broad money (M3), which had grown by around 25% in the three years to 1970, expanded by a similar amount in 1972 alone.
For a brief moment, it looked like it might work. GDP growth accelerated, unemployment fell and the government congratulated itself on having discovered a new route to prosperity.
Unfortunately, economics eventually intervened.
Inflation surged. Sterling came under pressure. Wage demands accelerated, producing the infamous wage-price spiral. Within months of Barber’s 1972 budget the government was forced to float the pound, causing a sharp depreciation and adding further inflationary pressure.
Then history delivered its coup de grâce.
On 7 October 1973, Arab oil producers launched an embargo in response to Western support for Israel during the Yom Kippur War. Oil prices quadrupled almost overnight. Heath’s government declared a state of emergency, imposed wage controls and eventually introduced the notorious three-day week in an attempt to conserve energy.
By 1975 inflation had reached 24%.
The Barber Boom collapsed into economic chaos.
But inflation was not the only strange legacy of Anthony Barber’s years at the Treasury.
Largely forgotten outside local government circles was a bizarre and unintended consequence of reforms to the local government finance system that produced some extraordinary results — nowhere more so than in the North East.
At the time, domestic and business rates were still part of the same local taxation system. Councils collected rates locally, but through a complicated system of redistribution and Rate Support Grant equalisation, money was effectively shifted from richer areas to poorer ones. The idea was simple: places with a weak tax base should still be able to fund decent local services.
Changes introduced around the 1972 local government reforms, combined with altered equalisation arrangements, disrupted this balance.
The interaction of three things created consequences nobody had really anticipated:
- changes to local government finance,
- alterations to Rate Support Grant equalisation, and
- huge industrial rate bases concentrated inside very small local authorities.
The result was that some tiny councils suddenly found themselves sitting on industrial tax bases wildly disproportionate to their population.
Two of the most striking examples were in Teesside.
Billingham, home to one of Europe’s largest chemical complexes, suddenly found itself awash with rate income generated by ICI’s vast industrial presence. For a relatively small local authority, the windfall was extraordinary.
Billingham responded by building what can only be described as a flat-roofed concrete socialist utopia: Billingham Forum, a vast leisure, sports and arts complex surrounded by shopping development. Half municipal ambition, half 1970s optimism, it remains one of the stranger monuments to Britain’s industrial age.
Further south on Teesside, South Bank Urban District Council — a small authority sitting beside the immense British Steel complex — developed even grander ambitions.
Flush with resources generated by an industrial base completely out of proportion to the size of the town, South Bank decided that the best way to put itself on the map was to create a Formula One Grand Prix circuit.
Yes, really.
The South Bank Grand Prix project was spectacularly ambitious. Parts of the infrastructure were built before the dream eventually collapsed. Today remnants survive in altered form as the Teesside Motor Sports Centre, not far from the home of the Redcar Bears Speedway team — where, on a Friday night, the atmosphere is rather more East Cleveland than Monte Carlo.
The experiment did not last.
The sheer geographical distortions created by local industrial tax concentration proved politically and financially unsustainable. Tiny authorities sitting on giant industrial assets enjoyed windfalls while poorer places without major industry struggled. Eventually the system was unwound and, later, Thatcher’s reforms centralised business rates through the Uniform Business Rate.
Yet the strange thing is this: politicians never quite stopped being tempted by Barber’s logic.
Four decades later, George Osborne seriously explored allowing councils to retain more locally generated business rates, arguing that authorities should benefit directly from economic growth and development.
The theory was appealing then, just as it had been in the 1970s.
Of course, this is not merely a historical curiosity.
Half a century later, almost everyone agrees that business rates are broken. Labour, the Conservatives, the Liberal Democrats and Reform all start from the same diagnosis: Britain taxes physical businesses too heavily, penalising high streets, pubs, manufacturers and firms that invest in premises while often giving online and logistics businesses structural advantages.
What differs is the cure.
Labour prefers reform within the existing system — lower rates for retail, hospitality and leisure, while retaining national redistribution.
The Conservatives have increasingly talked about major reductions or abolition for high street businesses.
The Liberal Democrats favour something much more radical: abolishing business rates entirely and replacing them with a form of commercial land value tax, shifting the burden from occupiers to landlords.
Meanwhile Reform UK, true to form, wants taxes lower but is vaguer about the mechanics.
What unites them is a shared recognition that taxing the occupation of physical property in a digital economy feels increasingly irrational.
What divides them is a familiar question:
if business rates go, who pays instead?
And that, perhaps, explains why Britain keeps tinkering with the system rather than replacing it.
This is the third in a series looking at the North East New Towns, the other 2 parts are:
This is a previous article about Redcar:
