7
Let Us Face the Future 1945–55
CRADLE TO GRAVE
On 26 July 1945 the election results showed that Labour would have nearly 400 seats in the new parliament, the Conservatives just over 200. To the world’s astonishment, the mighty Churchill, freshly garlanded with the honours of war, was suddenly out of office. With Bevin’s forthright support, Attlee went ahead with the formation of a Labour cabinet. It was (1931 aside) the most experienced ministry ever to take office. Labour may have run as the Opposition in the recent election, but the Party had it both ways in simultaneously benefiting from the credibility with which high office had endowed its new Big Five.
Morrison became Lord President of the Council, with wide responsibilities in domestic policy. Perhaps for that reason, Attlee decided at the last moment, and with the King’s approbation, to send Bevin not to the Treasury – where friction between him and Morrison was all too predictable – but to the Foreign Office. Conversely, this meant that Hugh Dalton, for all his pre-war apprenticeship in foreign affairs and his wartime stint at the Ministry of Economic Warfare, had to be switched into the vacancy as Chancellor of the Exchequer. Finally, a suitable berth was found at the Board of Trade for Sir Stafford Cripps. Cripps, a polished barrister who had been a left-wing rebel in the 1930s, starting the weekly paper Tribune to champion a popular front, had ridden a surging red tide during the war, notably as ambassador to the Soviet Union. The steely integrity of his Christian socialist convictions impressed Attlee, who now gave Cripps his big chance.
Though Dalton was later eclipsed by Cripps, it was really this constant inner core – Greenwood, replaced as deputy leader by Morrison in 1945, was fading fast and left the Government in 1947 – which saw the Government through its first parliament. In those five years the Labour Party had the unusual satisfaction of seeing its election manifesto, Let Us Face the Future, carried out with remarkable fidelity, at least in domestic policy. Legislation to create a welfare state was high on the agenda.
There was one statutory monument to the short period of office of Churchill’s ‘caretaker’ administration from May to July 1945: the Family Allowances Act. This fulfilled an objective set in the Beveridge Report, by making an allowance of five shillings a week (25p) for the second and subsequent children in all British families. The idea of ‘family endowment’ had been publicized for thirty years, notably through the tireless campaign led by one of the early women MPs, Eleanor Rathbone. Herself from Liberal stock, she had support from Labour, and the fact that the bill was put through by the Conservatives speaks for the strong cross-party consensus on this issue. Motives were mixed. Some saw it as an attack on the poverty associated with large families through the redistribution of income; others as a feminist advance since it was the mother who received the allowance. But if these were typically tender-minded arguments, invoking a New Jerusalem to be built regardless of cost, there were also tough-minded arguments for this particular welfare measure that spoke a rather different language of national (even ‘racial’) efficiency.
After the revelations of the Nazi treatment of the Jews, in particular, this sort of talk came to sound suspect, racist and reactionary; but concerns about ‘eugenic’ improvement of the nation’s offspring had, in earlier decades, often been intertwined with the conventional progressive arguments for welfare reform. Some of this was lazy thinking or ambiguous rhetoric. Thus Edwardian references to ‘breeding an imperial race’ might be nothing more sinister than a tactic for diverting imperialist enthusiasm into social reform; and it should be remembered that the term ‘racial’ was long used as a supposedly elevated synonym for ‘national’. Still, there was a strong eugenic undertow to discussion of demographic trends in the twentieth century. One taunt directed at birth control early in the century was ‘race suicide’. Fears of population decline seized public attention in the period between the two world wars – both of which were wars of attrition between mass armies, recruited from dwindling cohorts of men of military age.
The census gives a crude indication of the pivotal change that took place. In 1911 it showed that the population of England and Wales, which had quadrupled in the previous century, was still increasing at over 1 per cent a year. The next census in 1921 showed that this rate of increase had been halved – to an annual rate at which it was to remain for the next half century.1 The Registrar-General’s statistics for births and deaths show why this was happening. Continuing a trend which commenced in the late 1870s, the annual number of births dropped from about 30 per thousand of population at the turn of the century to about 20 per thousand by 1920 (ten years later in Scotland). This fall of about 10 per thousand compared with a fall in the number of deaths per thousand, over the same periods, of little more than half as much. So the death rate and the birth rate were both falling, but births much faster. One result was a decreasing rate of population growth. Another was an ageing population – produced not so much by the fact that more people were living longer but by the smaller proportion of young people in the population, caused by a lower birth rate. In 1901 almost a third of the British population was under the age of fifteen, while only 5 per cent were over sixty-five. By 1951 less than a quarter was under fifteen, but more than 10 per cent over sixty-five.
Where had all the babies gone? Someone reaching seventy in 1945 had been born at a time when there had been fifteen births each year for every hundred women of childbearing age in England and Wales; in 1911 this figure fell below ten, and by the 1930s it was stuck at around six. The initial fall was associated with a progressive postponement or the age of marriage, as shown by the four censuses after 1871; yet the proportion of women who were married crept up steadily during the first half of the twentieth century, which hardly accounts for the further fall in fertility. Births outside marriage contribute little to the explanation; the proportion of illegitimate babies declined from a shade over 5 per cent to a shade under 5 per cent of all births between 1870 and 1940.
The main explanation of the fall in fertility, as contemporaries were quick to note, lay in the deliberate restriction of births within marriage: a trend which was already clear by 1911 but which only revealed its full dimensions over the next quarter-century. Women who got married during the first decade of the century produced an average of 3.4 live births. This figure conceals a wide spread, with over 25 per cent of them still having more than five children – compared with fewer than 10 per cent among those who got married thirty years later. By the 1930s the two-child family was not only the average but normal; more than half of all new marriages produced either one or two children. Extrapolation of this trend suggested that the British population would fail to replace itself by the end of the century; and proposals for encouraging young couples to rear families found a readier hearing.
Initially this decline in fertility was more pronounced in certain occupational groups, like textile workers, whereas miners continued to rear large families until the coal industry fell on hard times after the First World War. Among the better-off classes, families with two children were already commoner than those with three in early-twentieth-century marriages – at a time when four or five children were normal for manual labourers. Hence the chorus, often ideologically inspired, of eugenic apprehension (or misapprehension) about the detrimental effect on the national stock. Indeed such concerns helped to generate the Registrar-General’s official classification of the British social structure.1 In fact the fertility gap between various classes was later narrowed. Among couples married in the 1920s, agricultural labourers now produced fewer children than farmers had done twenty years previously, and manual wage-earners fewer than non-manual wage-earners had done previously. Between 1931 and 1951, fertility apparently increased by 10 per cent in the Registrar-General’s two highest socio-economic classes, while it held fairly steady in the lower occupational groups. On the face of it, this should have allayed eugenic alarm.
Family planning, in any strict sense, relied on confidence that children would survive, which gains in infant and child mortality after 1900 steadily assured. It became a strategy which couples chose to adopt in a context of changing expectations about the costs and benefits of large families. The costs were increasing with restrictions on child labour,
better enforcement of school attendance, and the requirement to keep children at school longer. Conversely the benefits which folk wisdom attributed to children as a hedge against aged penury – whether relying on filial duty or, as the Poor Law claimed, on legal obligation – were questionable. Rowntree’s social survey of York at the turn of the century found that only one in seventy households harboured three generations. Old-age pensions after 1908 increased the bargaining power of aged parents, either in getting their families to take them in, or in maintaining their independence. None of these relationships was simple; but the indications are that changing expectations about the parental role militated against the burden of large families.
Compared with this sort of motivation, the availability of mechanical means of contraception, like condoms, was secondary. Knowledge of the process of conception was more important, eroding a barrier of deliberately fostered ignorance about sex and reproduction. Keeping young girls ‘innocent’ was one side of late-Victorian sexual propriety and almost a test of respectability among rich and poor alike. There is now abundant evidence, even in this essentially private area, that couples who wanted to avoid conception practised abstinence and age-old techniques of coitus interruptus. Such methods were not foolproof but, backed up by abortion if they failed, they were demonstrably effective in achieving a general fall in fertility. The propaganda for birth control, especially by women scientists like Marie Stopes, author of the best-seller Married Love, helped break down some taboos in the 1920s; and, more informally, it seems clear that putting 10 million young men into uniform during two world wars served to disseminate a good deal of rough-and-ready sexual and prophylactic information.
Demobilization had its own demographic consequences. In 1920 there had been an upward kink in the number of births – at well over 1 million, the highest ever recorded. Nationally, this was a demographic compensation for the war dead; while for the new parents here was a compensation for babies forgone during the war. The effect was temporary and within five years the birth rate was lower than ever. The same thing seemed to be happening at the the end of the Second World War. In 1946–8 there were over half a million excess births above the established trend – a post-war ‘bulge’ which can hardly be attributed to the sole motivation of the new family allowances.
But the birth rate did not then fall back to the low level seen before the Second World War; instead of six births annually for every hundred women of childbearing age, there were at least seven in the early 1950s, rising to nine in the following decade – levels not sustained since the years just before the First World War. In 1963–5 there were more births than in 1946–8. Yet married women in the early 1960s were bearing only two children for every three borne by married women fifty years previously. What had happened was that more women were getting married – almost two out of three of those aged fifteen and over, compared with barely half at the beginning of the century. Above all, people were getting married younger. For England and Wales as a whole, in 1911 less than a quarter of women aged 20–24 were married; by 1951 half were, and by 1971 60 per cent. In the long term, therefore, a fall in fertility which was initially associated with a postponement of marriage (sometimes indefinite) was maintained in an era when it became normal to marry at relatively young ages. Not until the 1970s was this pattern again significantly disrupted.
The welfare state of the 1940s offered, as Churchill put it, ‘national compulsory insurance for all classes for all purposes from the cradle to the grave’. This was what the Beveridge Plan was all about. Child allowances were a necessary buttress, using general taxation to supplement incomes in families with several children. Otherwise the assumption was that a (male) breadwinner would earn enough to support a wife and one child; and out of his earnings a single weekly deduction would be taken as his contribution towards a comprehensive scheme of social insurance, also financed by an employer’s contribution and a state subsidy. What Beveridge’s tidy mind achieved was a consolidation of all the previous schemes, established haphazardly and incrementally, safeguarding the insured person from the hazards of injury at work, disability, sickness, unemployment, old age and even death (in the form of widow’s pensions).
Beveridge provided, broadly if not in every detail, the basis of the National Insurance legislation of the post-war Labour Government. Standard levels of benefit were established, based on the subsistence income necessary for the conventional household unit of husband and wife and child, thus implementing the poverty-line strategy set out by Rowntree half a century earlier. The whole employed population was covered, not just manual workers or those on lower incomes, as in the pre-war National Insurance scheme. A further provision was that those who fell through the cracks of this tessellated insurance mosaic would nonetheless receive National Assistance. This fulfilled the residual obligation, which the Poor Law had always recognized, for the community to relieve destitution. It did so by generalizing the function of the Unemployment Assistance Board, as implemented in 1935 to howls of Labour indignation about its means-tested benefits; but Labour’s National Assistance Board helped claimants not as of right but on discretionary grounds of proven need, which amounted to much the same thing.
The (contributory) state retirement pension was now made available to all – even to those who were too old in 1946 to have paid the contributions. The age limit of seventy for the original old-age pension meant that 3 per cent of the population had been eligible in 1911. By 1951, what with increased longevity and the reduction in the age limit to sixty-five for men and only sixty for women, nearly 14 per cent of the population were eligible. This was an expensive commitment, and bound to become more so.
What Beveridge did not disclose was how his airy assumption of a national health service could be implemented; and though the Coalition accepted the principle, it had not resolved either the administrative difficulties or the conflicts of interest with which health-care proposals bristle. There had been enormous difficulties in bringing the British Medical Association round to participating in the Health Insurance scheme in 1911–13. As formidable a civil servant as Sir Robert Morant had found his abilities taxed in the effort; and Lloyd George had required all his Welsh guile and pertinacity. After 1945 the doctors were to get another dose of the same medicine.
The Minister of Health in the post-war Labour Government was Aneurin Bevan. The son of a coal miner, Bevan had himself gone down the pit in South Wales before making a career in the Labour movement, initially through his education at the (Marxist) Central Labour College, and rapidly entering Parliament in 1929 as MP for his native Ebbw Vale. His eloquence and free-ranging mind made him an attractive figure on the backbenches, where he remained during the war as a gadfly critic of Churchill, whom in many ways he emulated: not only predictably (as a parliamentary orator) but also, more provokingly, in affecting a disdain for mere ‘bourgeois’ politicians. In the cabinet Bevan represented youth, radicalism, wit and charisma, marking him out as a predestined future leader of his party if he could only harness these gifts to a consistent political strategy, inspiring trust and support. As a minister he made an excellent start, showing a sure grasp of administrative technique for all his lack of previous experience in office.
Bevan knew how to walk softly, charming the BMA out of their largely self-induced anxieties about being reduced to the status of state employees; but he also carried the big stick of a decisive parliamentary majority, which he used to enforce his own priority of nationalizing the hospital service. At a stroke this imposed a simple principle on the inherited anomalies between ancient charitable hospitals, old poor-law infirmaries which had passed to municipal control, cottage hospitals, tuberculosis sanatoria established under Health Insurance auspices, and other diverse institutions. Once the hospitals were brought under state control (exercised through regional hospital boards) the general-practitioner service could be organized in a more decentralized fashion, through capitation fees paid by the state on behalf of every patient registered with a participating doctor’s practice.
Still this was not enough to allay the professional fears of the British Medical Association, speaking for the general practitioners and seeking to mobilize a boycott of the new scheme. It was here, in the two years between the passing of legislation and its implementation in 1948, that Bevan faced essentially the same trial as Lloyd George before him and it was to be resolved in essentially the same way – not only by cajolery (though that helped) but by buying off the doctors. The consultants were Bevan’s first target. Their opposition melted once they were promised the right to continue private practice within the NHS hospitals, thus getting the best of both worlds. The President of the Royal College of Physicians, Lord Moran, whose own best-known private patient was Churchill, was opportunely turned (some said twisted) into an agent of Bevan’s grand design. Outflanked, the leadership of the BMA persisted in its proposed boycott; but a referendum in May 1948 showed that half the country’s GPs were now in favour of cooperation, and the BMA capitulated.
The fact was that the NHS, like the panel doctor system before it, simply channelled more resources into medicine than doctors, especially in poorer districts, had previously commanded. The participation of over 90 per cent of doctors was assured by the ‘appointed day’ in July 1948, when the NHS came into operation. In the first two years expenditure exceeded the estimates by 40 per cent, provoking alarm that spending was out of control, though the real reason was an underestimate of what needed to be done for patients who had previously lacked adequate attention. For insured persons, under the National Insurance Act of 1911, panel doctors had already provided medical benefits, albeit of a more restricted kind. But these were overwhelmingly for men in the prime of life – the very social category which was least in need. For women, for dependent children, for the elderly, the NHS established a right to a quality of medical service which had previously been a narrow privilege, hedged by costs which cast a shadow over many unlucky households.
What Bevan did was to transform the National Health Service from a pipe-dream into an enduring British institution. It was to become Labour’s best card with the electorate for the rest of the century. In the short term, however, it became the vehicle of Labour’s worst party crisis for twenty years, which in turn permitted a Conservative resurgence on a scale unanticipated in 1945.
THE POST-WAR SETTLEMENT
The Attlee Government’s economic policy sought to reconcile two objectives. One was to take a number of enterprises into common ownership, the other to maintain full employment. Labour suggested that through ‘planning’ – whatever that meant – the one could be made the tool of the other. Indeed some on the left, like Aneurin Bevan, went so far as to dismiss the Keynesian claims of the Coalition’s White Paper on Employment Policy in 1944, with its commitment to maintaining ‘a high and stable level of employment’, on the ground that only a socialist regime would be able to do this.
In practice, of course, it was not so simple. The socialist goal of common ownership had been enshrined in Clause IV of the Labour Party constitution for a generation, but the means by which this would be secured had received little attention – except from Morrison. His creation of London Transport under a largely autonomous public corporation provided a model, which he did not impose on others – he did not have to – but which became the template for the nationalization measures of the Attlee Government. In fact Morrison’s programme owed a good deal more to pragmatism than ideology: that is one reason why, at Labour’s pre-election conference in December 1944, he had resisted calls for a hard-and-fast ‘shopping list’ of industries to be nationalized, which he saw as an election-loser. The left had their victory on this occasion, and since the subsequent election was not lost, their faith in the popular appeal of public ownership was reinforced. But Morrison’s expertise put him in the driving-seat, where he steered almost the whole programme through Parliament, with skill and caution; and applied the brakes before approaching one particularly awkward corner. It was the nationalization of the iron and steel industry which spelt political danger for Labour.
By contrast, putting the Bank of England under public ownership in 1945 moved few people – and arguably changed little in the already close cooperation between ‘the authorities’. The remodelling of the British Overseas Airways Corporation (BOAC), as created by the Chamberlain Government, caused even less of a stir. Even the nationalization of the coal mines in 1947, though emotive for all who identified with the miners’ unavailing struggle in 1926, had been on the political agenda since the end of the First World War; and had been preceded by the nationalization of coal royalties (by the National Government) in 1938. When the gas industry, still closely linked with coal before natural gas was discovered, was nationalized in 1948, this was more a measure of centralization than of extending public ownership, at least so far as it affected the third of the industry which had long been in municipal hands (in Birmingham, for example, since Joseph Chamberlain’s day). This did not stop the Conservatives putting up a great show of opposition in parliament, largely to revive their own spirits; but they found themselves more compromised the next year in arguing against extending public ownership to electricity supply (or rather to the third of it not already municipalized) since it was a Conservative Government which had established the national grid as a public utility twenty years previously. Nor was Churchill, that ancient proponent of railway nationalization, the best leader of the opposition to the amalgamation of the four oligopolistic companies into British Railways, part of an integrated British Transport Commission.
In all of these examples, a strong pragmatic case existed, in line with classical principles of free competition, for eliminating private monopoly by taking essential utilities into public ownership. This was not, however, the case which appealed to socialists, who preferred to dwell on the abolition of the capitalist system through dispossession of the tsars of big business. This raised the ideological temperature, in ways that generally helped the Conservatives, by subsequently making the perceived failings of the undercapitalized rail network or the played-out coal industry into object lessons in the inefficiency of nationalized industries. It also raised the stakes in the set-piece confrontation over iron and steel, the only major manufacturing industry on Labour’s list. Landed with this unwanted commitment, Morrison’s approach was half-hearted Fabianism: delaying until the moment appeared ripe, then, when it failed to ripen, delaying again, and finally striking anyway. The Iron and Steel bill was at last introduced in 1949, coupled with a measure to shorten the period for which, under the Parliament Act, the House of Lords could obstruct legislation (from two years to one). Even so, this left insufficient time to complete the process before a general election had to take place – and it kept an issue which was now hurting Labour on the boil. Though the Act eventually came into force in 1951, it was an easy matter for the subsequent Conservative Government to engage in their one centre-stage piece of ‘denationalization’ (though intermittent noises-off from the wings indicated the similar fate of the road-haulage industry).
The finance of nationalization proved the least of the problems. The Government issued public stock as compensation to the shareholders of the companies taken over.1 Most of them got a good deal, initially through a favourable valuation and subsequently through a perverse effect of Government monetary policy upon capital values. When, as Chancellor, Dalton tried to enforce ‘cheaper money’ than the already low interest rates which prevailed, he savoured Keynes’s dictum that a declining rate of interest – if it could be enforced – would bring ‘the euthanasia of the rentier’. The crunch, however, came with the failure of the issue of Government stock in 1946–7 (‘Daltons’) which attempted to fund part of the long-term national debt at the unprecedentedly low level of 2.5 per cent. The fact was that the markets could not be bullied into buying this kind of stock at par, and it had to be unloaded at a knock-down price. So much for ‘cheaper’ money – though cheap money, signalled by a bank-rate fixed at 2 per cent, persisted. The perverse consequence came through an appreciation of the value of assets with a prospective annual return higher than these rock-bottom official interest rates. Capital gains, which escaped the attention of the Inland Revenue until 1965, thus gave rentiers a tax holiday at Dalton’s unwitting expense. One effect was to question the wisdom of cheap money itself; another to expose the limitations of high income tax as a means of redistributing wealth.
This was one indication of the limits to which Labour could get its own way within a mixed economy. Yet the alternative was a fully articulated command economy, on the Soviet ‘Gosplan’ model, which held little charm for any of the ministers who successively held economic portfolios – and no appeal whatsoever for the Government’s American paymasters. The fact is that the UK had become dependent on economic assistance from the USA in the winter of 1940–41 and was to remain so for the rest of the decade. This was not through choice, on either side, but necessity, which each side had difficulty in recognizing. Hence the three phases of American support: each a generous shot-in-the arm for the exhausted British economy but each storing up horrible withdrawal symptoms.
First to come (and go, of course) was Lend-Lease. The strategic impact was decisive; quite simply it allowed Britain to win the war. The economic impact was equally decisive; it meant that Britain’s distorted, fully mobilized command economy was no longer independently viable or competitive in post-war markets. The financial burden of the Second World War for Britain was twice that of the First, wiping out 28 per cent of the country’s wealth, leaving a net deficit in overseas assets; in particular, a debt of £3 billion to the rest of the sterling area had been run up (the ‘sterling balances’). Above all, the war had reduced the export industries to a fraction of their pre-war capacity. True, domestic food production had been increased; but the prospective deficit on the balance of payments in 1945 approached £1 billion. Plans for a move by stages towards equilibrium, in the breathing-space between VE Day and VJ Day, when Lend-Lease was due to end, were blown sky-high at Hiroshima. The Japanese surrender was a mixed blessing for Attlee, in the first month of his premiership; within days President Truman innocently cut off Britain’s lifeline. If the beginning of Lend-Lease was the most unsordid act, its ending was surely the most unsettling act in Anglo-American relations. Though transitional arrangements were pieced together by sympathetic American officials, the alternatives now facing Britain were desperate – to beg, borrow or starve.
Keynes was sent to Washington, confident of his mendicant skills. When begging got nowhere, the haggling began over the terms on which the UK could borrow. In the end a loan was negotiated totalling $3,750 million, which was topped up by a (proportionately much larger) loan of $1,250 million from Canada. The terms were easy – or impossible, according to which way one looked at them. For American assistance depended on an undertaking to make sterling freely convertible with the dollar on a fixed timetable, set for the summer of 1947. The whole thing was delusive, outrageous, humbling: or so a discordant chorus from both the socialist left and imperialist right maintained. The alternative remained starvation, hardly less, since a siege economy would have required severe reductions in the already meagre British diet. As it was, bread went on the ration for the first time in 1946.
Keynes’s judgement prevailed; the North American loan was accepted. Thus began the second phase of dollar dependency, which virtually encompassed Dalton’s Chancellorship. The calculation was that Britain’s balance of payments could be turned round within a couple of years or so, bringing an equilibrium with the USA which would allow all obligations to be met. A fiscal squeeze was maintained on domestic consumption to allow resources to flow into exports. This is how the young Keynesian economists, concentrated in the Economic Section and later the Central Economic Planning Staff, conceived the problem; meanwhile the old hands in the Treasury were content that high taxation was moving the budget back towards surplus. From either point of view, the analysis pointed towards a tough budget in April 1947, when Dalton maintained income tax at its peacetime record level of 9s (45 per cent) and doubled tobacco duties – to save dollars rather than the people’s health.
For the ‘dollar gap’ was by now the crucial problem. British exports as a whole had already regained their pre-war volume and, despite difficulties in reconciling these estimates, it is now clear that the overall balance of payments was no worse than had been anticipated, though errors in the figures published at the time gave cause for general alarm. Britain’s problem, however, was specifically a dollar shortage. Crudely, the war had enriched the USA, making it essential to put enough dollars into the hands of its trading partners to finance their imports of American goods. Britain’s markets in the sterling area and other soft-currency countries were now as incapable as Britain of breaking into the hard-currency markets dominated by the dollar; so the traditional means of financing a British deficit with the USA, through multilateral settlements, did not work. Instead, through the sterling area in particular, the UK was piling up new investments to a value not far short of the dollar loan – which was meanwhile draining away to pay for essential imports (which included Hollywood movies and Virginia tobacco). It took two crises, in 1947 and 1949, to resolve the dollar paradox.
First, however, the Government faced another crisis of even more traumatic dimensions. Coal was still the source of over 90 per cent of British energy supplies, employing 700,000 miners to cut 200 million tons in a good year, which 1947 was not. It saw the worst winter of the century, with a prolonged freeze-up from January to March, followed by severe flooding in the thaw. This was unforeseeable; but a fuel crisis was not unpredictable – except, as he hubristically said himself, by the Minister of Fuel and Power, Emanuel Shinwell, Shinwell’s manifest lack of grip was the worst possible advertisement for nationalization as a cure-all. The energy shortage meant that the country was virtually shut down for weeks. The public’s honeymoon indulgence towards the new Government was replaced by a sense of having lived for two years in a fool’s paradise.
And the dollars were trickling away, month by month. In July 1947, as agreed, it became possible to convert sterling into dollars, which many people promptly did, turning a trickle into a torrent. The sterling crisis exposed the nakedness of the Government’s pretensions to be in control of a planned economy. Dalton, his nerve badly shaken, stumbled on; it was Attlee’s worst moment, his normal decisiveness temporarily lacking. The economic outcome was a suspension of convertibility in August, with American acquiescence; the political outcome, a cabinet reshuffle in September. Cripps, who had had a good crisis, boldly told Attlee that he thought it was time for a change of prime minister (preferably to Bevin). The prime minister checked with Bevin by telephone and told Cripps that he thought otherwise. But Cripps was adroitly shifted into a new post as economic supremo; and in November, when the hapless Dalton inadvertently disclosed the austerity measures in his emergency budget to a waiting journalist – an old-fashioned scoop which spelled resignation by the old-fashioned code of ministerial integrity which prevailed in that era – Cripps became Chancellor himself.
The names Cripps and austerity became synonymous. He imparted into his stewardship a stern sense of purpose which was almost providential, captured in Churchill’s quip: There, but for the grace of God, goes God.’ But what actually paid the bills were more dollars – a third phase of subventions from the USA. In June 1947 the American Secretary of State, George Marshall, gave a suitably uplifting commencement address at Harvard, asking that the European nations take an initiative over reconstruction of their devastated continent. Ernest Bevin pounced. Encouraging noises from Washington emboldened him to organize a concerted response from western European governments which resulted in the handsome offer of Marshall Aid. These grants from the USA can be called a form of enlightened self-interest and were not, it now seems, the beginning of European recovery, which was already under way. Even so, enlightenment of this order was rare enough, reconciling reconstruction with post-war social as well as economic expectations. Seemingly, the welfare state was made possible by Marshall Aid; and the growing warmth of social-democratic attitudes towards the USA needs to be understood in this context.
The final dollar-based crisis in 1949 was Cripps’s last. In only three years as Chancellor he established a new regime at the Treasury, removing much ambivalence about the adoption of a Keynesian approach. Rather than ‘Gosplan’, a liberal conception of planning now carried the day, relying on the budget as the main tool of demand management. Big surpluses were piled up in his three budgets, producing the required shift into exports. The overall balance of payments moved into a healthy surplus; estimates vary, but on any reckoning it was over £150 million in both 1948 and 1949. But with the dollar area, although the deficit of £500 million in 1947 was subsequently reduced to a net figure under £100 million, this was after Marshall Aid had been counted. Without it, the deficit with the dollar bloc in 1949 would have approached £300 million. The solution was not too difficult for an economist to see: a devaluation of sterling (and other soft currencies against the hard currencies of the dollar area, to bring the pattern of settlements into balance. There were by now enough economists, not only in Whitehall but in key ministerial posts, to ensure that this option was discussed.
The three young ministers who were left with this problem in the summer of 1949, while Cripps sought to regain his health in a Swiss sanatorium, were all professional economists. Hugh Gaitskell, the Minister of Fuel, was the most senior; he was joined in his advocacy of devaluation by the youngest member of the cabinet, Harold Wilson, President of the Board of Trade, and by Douglas Jay, Financial Secretary to the Treasury. Cripps thus became the agent of this policy; it was agreed by the cabinet at the end of August, then put on ice for three (leak-free) weeks while Cripps and Bevin visited Washington (by sea), with carte blanche to settle on a new parity, radically lower so as to be lasting. Instead of $4.03, which had prevailed since 1940, the pound was devalued by no less than 30 per cent, to $2.80. There was a determination to impose wholly different priorities in this crisis than in 1931. No longer did the authorities carry the day in their overriding anxiety that Britain should not repudiate its obligations; and it was, of course, true that the sterling balances would be worth 30 per cent less in dollars. The course adopted inevitably (and painfully) involved Cripps in denying the imminence of devaluation to the House of Commons: which he did to such good effect that the markets were taken by surprise, allowing Britain to reap the full advantage. This was considerable, and it was already apparent before Cripps, now fatally ill, was replaced at the Exchequer in October 1950 by Gaitskell.
Backed by a wages freeze at home, reinforced by physical controls to suppress inflation, and building on the existing strength of Britain’s trading position, devaluation finally corrected the chronic dollar deficit. So much so that in 1950 Marshall Aid to Britain was cut off early. British exports in 1950 were 50 per cent higher by volume than in 1937, at the peak of pre-war recovery; and the UK’s share of world trade in manufactures produced by industrial countries had now bounced back to nearly 25 per cent, compared with 21 per cent in 1937. Admittedly, the real competition from other European countries was still to come through. All told, though, there is some plausibility in the judgement, privately recorded by a Conservative cabinet minister a couple of years later, on the record of his political opponents: that ‘the story was one of achievement – a picture of substantial recovery from 1945–50, succeeded by a period of difficulty due mainly to circumstances beyond our control’.
ONE WAR TOO MANY
The strength of the British armed forces in peacetime had normally been under 400,000. With demobilization at the end of the Second World War the total dropped from 5 million in 1945 to 2 million in 1946; but in 1948 it was still nearly 1 million. A system of National Service was instituted in 1947, putting all eligible eighteen-year-olds into uniform for up to two years. This was to keep the strength of the armed forces at around three-quarters of a million until 1957, and only from 1961 did the numbers fall below half a million, with the phasing-out of National Service. Virtually every man born between 1880 and 1940 had been eligible at some time for military service, which gave three generations a taste of military discipline and an insight into what was meant by the term military efficiency – a common culture of reference which, for better or worse, a later generation, growing up from the 1960s, simply missed. For Britain, peculiar in its insular tradition, postwar National Service was a unique period of conscription during peacetime – if that is what this period was.
It hardly seemed so. In 1947 defence spending took nearly 18 per cent of gross national product (GNP); still 6 per cent in 1951. Some of the costs followed from the way the war ended. An army of occupation in Germany had to be maintained; moreover, the hapless German population in the British zone had to be fed – the main reason for bread rationing in Britain. Such were the spoils of victory. Britain behaved like a great power and offered a broad back for such burdens. The reality of dependence on the USA took time to sink in, just as its counterpart – the inescapability of opposition to the USSR – took time to be acknowledged. In Germany the result was an effective amalgamation of the British and American zones in 1947, as their common aims (if unequal resources) in rehabilitating the west diverged increasingly from Soviet policy. The British Army of the Rhine (BAOR), which had gone to hold down the Germans, stayed on to hold off the Russians.
Churchill supplied two images which nicely capture British perceptions of the post-war world. One was that of an iron curtain descending across Europe, the other of Britain standing at the intersection of three overlapping circles: Europe, the Empire, and a transatlantic partnership. When the apprehensions generated by the first perception drove the grandiose ambition of the second, the result was an overextension of Britain’s role in all directions simultaneously. No more than Churchill did Bevin, the most masterful Foreign Secretary of the century, regard Britain’s great-power status as a matter for debate: simply as a given end to which the exertion of will and skill supplied the means. When he told the miners that he would give them a new foreign policy if they would give him more coal, his realism did not extend to cutting back commitments ruthlessly in line with resources. Although his efforts were prodigious and his achievements not inconsiderable, they did not, of course, permanently reverse the trajectory of British decline. Indeed, the question which seems obvious fifty years later is how much Britain was weakened by fighting above its weight. A few people asked this at the time – Keynes, for example, in his advice to the cabinet in the closing months of the war (and of his life) or the chief scientific adviser (Sir Henry Tizard) with his prophecy: ‘We are a great nation, but if we continue to behave like a Great Power we shall soon cease to be a great nation.’
It is, however, inconsistent to applaud the bloody-mindedness which was responsible for 1940 while expecting a wholly different gut reaction to the challenges of the post-war world. Hitler cast a long shadow. A whole generation of British statesmen resolved not to become guilty men, whatever the price exacted by a show of resolution. Signs of Soviet intransigence were interpreted, not by extending the benefit of the doubt to the country which had suffered most from the war, but on a worst-case scenario, intent on checking the march of another totalitarian regime bent on expansion. On the left, there had been talk of a socialist foreign policy, which Bevin himself was misinterpreted as entertaining at the end of the war. In fact he needed few lessons in scepticism towards the Soviet Union from the Foreign Office mandarins. Instead, anecdotal incidents from Bevin’s career as an anti-Communist trade-union leader, wearyingly reiterated, clothed his guiding insights – giving some ground for the gibe that he treated the Soviet Union like a breakaway branch from the TGWU. Bevin’s suspicion of Communist activities in Greece in the aftermath of the war was an early example of his equal determination to resist both Soviet influence and the vocal left wing of his own party. While Churchill, freed from responsible office, made widely reported speeches pitched at ‘the English-speaking peoples’, Bevin took practical steps to create an Anglo-American axis.
Labour’s policy was clearly different from Churchill’s, however, when it came to India. Attlee himself, a veteran of the Simon Commission, took charge here. He did what he thought necessary with a good grace and an iron nerve, moving beyond the endless talk about Dominion status by conceding the case for independence, even at the price of partition of the subcontinent between a Muslim state (encompassing West Pakistan and, in the east, what later became Bangladesh) and India itself, a non-sectarian state but a predominantly Hindu society. The last Viceroy was sent out: Admiral Lord Mountbatten, the former allied commander in south-east Asia. Immaculately well-connected and relentlessly self-promoting – Noël Coward’s wartime film In Which We Serve talked up his naval exploits – Mountbatten behaved like minor royalty, which he was, but with a provoking radical twist. It was Attlee’s policy, however, which was implemented: to withdraw expeditiously while securing the goodwill of the leadership of the successor states. Faced with prevarication, Attlee reacted by bringing forward a firm deadline for the transfer of power; meanwhile the Mountbattens hobnobbed with the Congress leaders, especially with Nehru. Delhi was the backdrop for the most piquant chapter in a glittering career: In Which We Scuttle.
It was Churchill, as leader of the opposition, who introduced the term ‘scuttle’. True, the dark side of withdrawal was the intercommunal bloodshed which accompanied partition in 1947. But the loss of life – Gandhi’s too, indirectly – which accompanied the end of the British Raj at least saw the realization of Indian independence without open war – and (under a formula designed to accommodate the new republic) without severance from the Commonwealth. This seemed the greater prize, since Labour set great store by fostering the conception of a multiracial Commonwealth. The old Dominions, which had shown themselves Britain’s only real friends when the chips were down in 1940, would in due course be augmented by other peoples, set on the path to self-government under the tutelage of the inventors of the parliamentary system. In this sense the new Commonwealth rhetoric can be seen as updating the old paternalist approach – imperialism with a human face. Scuttle had served well enough in India but there was no plan to work on such a timetable in Africa. In Tanganyika an ambitious neocolonial plan was conceived for promoting the cultivation of groundnuts for vegetable oils, and all within the sterling area – the sort of thing Joseph Chamberlain went in for. Its failure became a frequent taunt against the extravagance and waste of socialism, at home or abroad.
The central achievement of post-war British foreign policy was to yoke the USA to the future security of a renascent western Europe, once eastern Europe had fallen under Soviet domination. Bevin’s role in making a reality of the Marshall Plan pointed the way; and the fact that, as expected, in July 1947 the Soviet delegation walked out of the talks about implementing Marshall Aid merely confirmed that Europe was now divided into two camps. Bevin now worked on a further plan of his own. The initial stage involved the creation of a Western European Union in March 1948, pledging Britain, France and the Low Countries (the future Benelux) to create an integrated defence system. The completion of the grand design depended on its transatlantic dimension. As in 1939, Canadian help was forthcoming but it took longer to bring the USA round to the view that its security was bound up with that of the touchy and unreliable French or the importunate and stubborn British. Far from leading an anti-Soviet crusade, at this point the USA had cold feet about its cold-war allies.
Bevin’s vision of what needed to be done received persuasive corroboration from Soviet behaviour. In February 1948 there was a coup in Prague, overthrowing again the democratic government of Czechoslovakia. The effect on social-democratic opinion was decisive; Bevin’s firm line met with little further dissent within the Labour Party. Four months later, the Soviet Union cut off the land corridor to west Berlin. Rather than simply acquiesce or simply jump into a conflict on the ground, a third option was chosen – an airlift of all necessary supplies. This was a mammoth operation, successfully accomplished, month by month, until Stalin finally called off the blockade in May 1949; and the political effects, in establishing the US Air Force in British bases, were long-lasting. In this context smoother progress of the negotiations for an alliance became possible, and the North Atlantic Treaty (soon to become known as Nato) was signed in April 1949.
But where did Britain stand in the third circle, Europe? Bevin had furthered western European integration through his initiative in responding to Marshall and his Plan; the Committee of European Economic Cooperation (CEEC) was the result. Yet the British ignored the Europeans when they decided to devalue the pound, instead taking the Americans and the Canadians into their confidence. This snub to CEEC was characteristic of British condescension towards European countries which, generously enough, did not quickly forget who had liberated them. The trouble was that the British too had forgotten nothing – and learned nothing either, at least about their changing international role. Britain pursued a foreign policy which threw sops to European initiatives – this was how Bevin treated the Council of Europe in 1948 – with an overriding anxiety not to compromise Britain’s independent status in the eyes of the USA (though the Americans, unimpressed, favoured Britain’s involvement). Churchill’s lush oratory in opposition gave him a reputation as a good European; but the fine print already hinted at what his return to power clearly disclosed – that his high-sounding notions for European unification did not embrace actual British participation. So it was that, when France came up with an invitation (or ultimatum) for Britain to join a new European Coal and Steel Community in 1950, the cabinet was unanimous in its refusal.
Declining its opportunities to shape the new Europe, the British Government persistently looked to a world role. This explains the decision to build a British atomic bomb; that Britain was capable of doing this in turn flattered pretensions to global influence. The development of a nuclear capability, under the leadership of the brilliant mathematician William Penney, and without the benefit of US cooperation, was certainly a tribute to the high calibre of British scientific expertise in nuclear physics. The Cavendish laboratory at Cambridge, with the New Zealander Lord Rutherford as its head from 1919 to his death in 1937, had pioneered research on nuclear fission. It was here that two of Rutherford’s ‘boys’, the young physicists John Cockcroft and E. T. S. Walton, had developed the high-voltage particle accelerator with which they had succeeded in disintegrating lithium nuclei in 1931. In an experiment which created worldwide interest, the atom was thus ‘split’ for the first time by artificial means; and twenty years later the two men split the Nobel prize for physics.
It was a long scientific journey from the lab-based possibilities unleashed at the Cavendish – Rutherford had called the idea of harnessing nuclear energy ‘moonshine’ – to the capacity to explode an atomic bomb at Hiroshima, let alone the first British test at Monte Bello, Australia, in 1952. Moreover politics inevitably jumped into the driving-seat. The moral dilemma of making such terrible weapons had been largely resolved by the even more terrible prospect that the Nazis might get there first. It was the British Maud Report in 1941 which had initially persuaded the Americans of the feasibility of nuclear weapons, and in a wartime context the practical problems of pooling allied expertise were overcome. A group of Cambridge physicists under Cockcroft became the core of an Anglo-Canadian team based in Montreal, and other British scientists were integrated into the ‘Manhattan Project’ at Los Alamos, New Mexico. Thus the British stake in making the first atomic bomb reinforced a commitment, at least at the top level in government, to maintaining a nuclear presence after the war; and once it became clear, in 1946, that the USA would cease further cooperation, this meant deciding whether to mount an independent weapons programme. The decision to do so, basically taken by Attlee and Bevin, was belatedly acknowledged in Parliament in 1948. This may have been secretive but it was hardly furtive.
Labour ministers had a robust sense of rectitude about their international stance, feeling that, at any rate, Britain had met successive international challenges more effectively than in the late 1930s. The higher level of defence spending was an affordable if onerous price to pay. Whether the British people would pay any price, or could bear any burden, was shortly to be tested by another quarrel in a faraway country of which they knew little – Korea.
Following a general election in February 1950, the Attlee Government found itself on a knife-edge. It had maintained the extraordinary record of never having lost a by-election. In this it was aided by some luck, since swings against it in double figures had been recorded in several previously safe seats, like the north London suburb of Edmonton in November 1948. Still, Labour’s hold among its traditional supporters remained strong; and the 1950 general election showed that Labour support had slipped by only 2 per cent since 1945, while the Conservatives increased their share of the poll by 4 per cent. There were, however, major boundary changes which not only corrected Labour’s previous over-representation in depopulated urban areas but created a new bias against it. Thus the Conservatives’ small gains in votes were magnified into an impressive gain of 88 seats, putting them only 17 MPs short of Labour. Since there were 9 Liberals, this cut the Government’s majority to single figures. Though the Liberal vote held steady at 9 per cent nationally, this was achieved by putting up far more candidates than in 1945: a total of 475, of whom two-thirds lost their deposits, thus virtually bankrupting the Liberal organization. It was with this much-reduced majority that Labour hobbled through twenty months of crisis, facing a now rejuvenated Conservative opposition, baying for blood.
Why, at this juncture, an assault by the corrupt, repressive North Korean regime upon the corrupt, repressive South Korean regime should have enlisted such concern was a function of the cold war and of a cold-war mentality. The fact that Russia now had the atom bomb raised the stakes. Revelations of Soviet aggression made for a plausible scenario in which North Korea was simply a cat’s-paw in the onward march of international Communism, masterminded from Moscow and (following the Chinese revolution) Peking.
Here was a theatre where the US strategic interest had been much disputed; but for Britain the preservation of Nato was the crux. There was also the leverage exerted by the United Nations, an organization thwarted in its early years by constant exercise of a Soviet veto, but opportunely freed (through temporary Soviet withdrawal) to act as the conscience of the world community in resisting aggression. Again, remorse over the failure of collective security in the 1930s brought belated overcompensation. The call for action in defence of South Korea, formally under UN auspices, but effectively as part of an alliance with the USA, met a weary and reluctant, but impressively unanimous, response from Britain. By the end of August 1950 British troops had landed in Korea, where they remained embattled in a messy conflict, prolonged by Chinese intervention, for the next three years.
Yet again, Britain was at war. A small war, to be sure, distant too; but one with implications of the first order for the economy and domestic politics. The painfully achieved economic recovery was halted in its tracks. Part of this was unavoidable, given that the US war machine was bidding up commodity prices in world markets, in ways that were bound to be unfavourable to British trade. The marginal cost of the war itself, it can be argued, was not very great, given the immense stockpiles of obsolescent supplies left over from 1945. But general rearmament now became a priority. In January 1951 Attlee announced a three-year defence programme for 1952–4 estimated at £4.7 billion. With the GNP standing at about £13 billion, the implication was that well over 10 per cent per annum would be spent on defence. It had been done before, of course – with American assistance. This time, despite encouraging; hints, the USA’s profuse support for British rearmament was to be verbal, not financial.
Hugh Gaitskell faced the problem of finding the money in his first Budget in April 1951. Only forty-five when he succeeded Cripps, suddenly challenging Bevan as Labour’s rising star, Gaitskell was well fitted to be Chancellor by his previous career as an academic economist. He was, however, no mere technocrat, juggling the figures, but, for all his upper-middle-class background, a strongly egalitarian social democrat, with a passionate undertow of emotion lurking beneath the cold polished surface of his lucidly articulated arguments. Given his implicit support for Bevin, Gaitskell set about willing the means to achieve the agreed ends. His budget piled up taxation to shift resources out of private consumption into defence production. The standard rate of income tax went up to 9s 6d (47.5 per cent); with surtax, the top rate was 97.5 per cent. The political flashpoint was not here but in the accompanying proposals to levy charges for false teeth and spectacles supplied under the NHS.
This was the occasion – hardly the full reason – for the resignation from the cabinet of Aneurin Bevan. The NHS was his creation; though no longer Minister of Health, he took a proprietorial interest in it and stuck by the principle that there should be no charge at the point of use. The sum at stake was £13 million within an expenditure totalling over £4 billion. The issue was not well handled. Bevan had made cogent criticisms of the impossible scale of the rearmament programme, given the real resources available – on which Gaitskell could profitably have taken a lesson in economics – yet Bevan chose a peripheral point on which to leave the Government. Harold Wilson, whose surprise resignation came the following day, took his stand squarely on the scale of the defence programme. No doubt Bevan was egged on by his left-wing friends, to whom ‘Nye’ was an inspiring if volatile hero; and no doubt he felt sore about being fobbed off with the Ministry of Labour when a younger man was catapulted over his head into the Chancellorship. For the poor handling of this crisis betokened an imminent changing of the guard in Labour’s leadership. Bevin died in office – as Lord Privy Seal, having become too ill to continue as Foreign Secretary in March 1951 – only a week before Bevan resigned; Cripps had gone; Attlee was in hospital. Bevan and Gaitskell were locked in a struggle about the leadership and identity of the Labour Party which was to last for most of the next decade.
Bevan’s resignation in April 1951 signalled the outbreak of a kind of factionalism which Labour had previously escaped under Attlee’s leadership; indeed his strength as prime minister was as the executor of an agreed programme. Now the Bevanites voiced a left-wing alternative to the Government’s cautious consolidation, with renewed pressure for nationalization and a persistent tinge of anti-Americanism. A minority in the parliamentary party, but able to carry the constituency activists, the Bevanites challenged not only the official leadership but its reliance on the trade-union block vote as its means of controlling the Labour Party conference.
When the inevitable further general election came in October 1951, however, Labour’s resilience was surprising. The party split proved less damaging than might have been imagined. Propaganda against nationalization was hurting Labour; its proposal in 1950 to add sugar to the next shopping list provoked the industry into a particularly effective campaign based on the cartoon figure, ‘Mr Cube’, whose message was projected from every sugar packet. But Labour had hard-hitting lines of its own, playing on fears that the Conservatives might dismantle the welfare state or bring back mass unemployment. Moreover, the Conservatives did not enjoy their customary advantage on defence and international issues, and a scaremongering campaign against Churchill in the Daily Mirror simply asked, ‘Whose Finger on the Trigger?’
Opinion polls had forecast a Conservative lead of between 4 and 8.5 per cent; yet Labour, though it won fewer seats, narrowly outpolled the Conservatives nationally, both breasting 48 per cent. This left under 3 per cent for the Liberal Party, now unable to finance much more than 100 candidates. The result was a boost for the Conservatives in the hundreds of constituencies where Liberal voters – left-leaning in 1945, but now leaning towards the right – had no candidate of their own. That they did not usually abstain is evident from the high turnout figure of 83 per cent. The Conservatives had a narrow but workable overall majority of 17. This was the apogee of the two-party system; and had the half-dozen Liberals in the new parliament accepted Churchill’s offer of participation in the new Government, their party’s history might easily have ended at this point.
CHURCHILL (AGAIN)
Housing, along with jobs and social security, had been a key issue working in Labour’s favour in 1945. It was one plank in Labour’s platform which was not effectively nailed down by the Attlee Government, thus giving the Conservatives an opportunity to prise it away from their opponents. During the war about half a million houses had been destroyed or made unfit for habitation, while the construction of new houses, which had been running at 350,000 a year in the late 1930s, totalled fewer than 70,000 in the last five years of the war. Put together with the war-related blip in the marriage rate (with peaks in 1940 and 1945) and the post-war bulge in the birth rate, this spelt out the need. Ex-servicemen starting families in shared or inadequate accommodation would not have been impressed to learn that, measured by the statistics of persons per room, overcrowding declined slightly between the census of 1931 and that of 1951. Post-war expectations were judge and jury.
Under Attlee, legislation was passed giving government new powers over town and country planning – indeed a new ministry was created – but housing remained the responsibility of the Ministry of Health (and Housing, as it now became). Since Bevan was preoccupied with the creation of the NHS, this lent colour to the joke that the Government kept only half a Nye on housing. But the real problem was a shortage of resources: materials for construction, labour in the building industry, room for investment within an overstretched economy. The Government’s first priority was industrial reconstruction; housing lagged. Admittedly the housing stock was increased by the rehabilitation of war-damaged dwellings as effectively as by new houses; and prefabricated houses, using aluminium and asbestos, were introduced as a temporary expedient, which lasted long enough for many children to grow to adulthood knowing only a ‘prefab’ as home. Moreover, Bevan made it hard to achieve high quantitative targets by setting high qualitative standards for council houses, which produced fine homes but frustrat-ingly few of them. Even so, in 1948 the total number of houses built approached 250,000, only to be cut back to under 200,000 in each of the next three years.
This was the Conservatives’ opportunity. Grassroots pressure at their party conference forced a target of 300,000 a year upon the leadership and this claim became central to their election campaign in 1951. As prime minister, Churchill created a separate Ministry of Housing, to which he appointed one of his cronies, Harold Macmillan. A left-wing rebel in the Conservative Party in the 1930s, Macmillan had found his career transformed by the Churchillian takeover of the party. Churchill had sent out Macmillan as minister-resident in North Africa, where he worked cheek-by-jowl with the Allied commander, Eisenhower, and, on a more elevated plane, with the leader of the Free French, de Gaulle. This was heady promotion at the time (and was to be the basis of useful, though also delusive, personal contacts in the late-1950s) but it did not make Macmillan into a front-rank political figure at home. The hot seat at the Ministry of Housing did that.
Macmillan had an able junior minister, Ernest Marples, who understood the industry and proved his efficiency in the execution of the big plan. Macmillan’s role was, first, to make it all much easier by scaling down the building standards for council houses; secondly, to secure the claim of housing upon the Government’s allocation of resources; thirdly, to trumpet the achievements of his Ministry once they came through. In 1953 the famous target was reached; Macmillan handed over the keys to the 300,000th house, to the accompaniment of exploding flashlight bulbs; and the totemistic number was maintained for five years. In economic terms this was not so difficult, given that similar levels had been commmonplace twenty years previously. It followed from a shift in priorities, which was at the expense partly of defence, with the ending of the Korean war, and partly of industrial investment. Over-commitment of resources to housing in Britain, and a parallel failure to invest in production, is the other side of Macmillan’s success.
Although private housebuilding was now moving towards parity within the programme, the expansion of council housing was the distinctive post-war development. In the ten years 1945–54 over three-quarters of all new dwellings were built by local authorities, compared with less than a quarter during the 1930s. So Macmillan’s achievement was to beat Labour at its own game; only later, during his premiership, did the strategy change. Accommodation rented from private landlords still accounted for nearly 60 per cent of British housing in the immediate post-war period. But with rent control this was economically unprofitable for the landlords, while it was politically unprofitable for the traditional landlords’ party to defend them. The Rent Act of 1957 was to bring a measure of decontrol, at a disproportionate political price, which demonstrated to the Tories that the ‘property-owning democracy’ of which they had talked might be a better bet. The abolition of Schedule A followed in 1963, giving a tax subsidy to owner-occupiers.1 Well over half the new houses built between 1955 and 1964 were owner-occupied; and by this time mortgage offers came to exceed half a million a year, twice the pre-war level. While owner-occupied properties were of all ages, council houses and flats were obviously newer – indeed in Scotland over 85 per cent of all dwellings built since the First World War were owned by local authorities in 1965. In the twenty years after the war, the net result was to extend owner-occupation to half of the housing stock, while simultaneously lifting the local authority share to over a quarter.
If housing gave the Conservatives something to crow about, so did the abolition of controls and, above all, the ending of rationing. Much of this had been in the pipeline in the late 1940s, but Labour had undoubtedly become identified as the party of rationing which, after ten years, was increasingly unpopular. The use of controls to suppress inflation in a high-pressure economy inevitably gave rise to a black market in which that quintessentially mid-century figure, the spiv, found his niche. The ending of the Korean war brought a peace dividend which allowed the Conservatives to end rationing of sugar and sweets, eggs and bacon, margarine and butter, cheese and meat. Here was the ‘red meat’ which Churchill had promised.
In what was obviously his last premiership, Churchill wanted nothing more. Though he had growled about the enormities of the Attlee Government, he had no intention of undoing its work. If he promised to “set the people free’ in 1951, this was good politics, not a commitment to the full rigours of traditional sound finance, of which he had had a bellyful thirty years previously as Chancellor. Still less did Churchill, pushing seventy-seven when he took office, propose to learn new tricks. While he was busy writing his war memoirs and composing great speeches to world audiences, he had taken a fitful interest in leading the Opposition, and had been content to leave the hard task of reconstructing his own party in more capable hands. Lord Woolton, the post-war party chairman, had been charged with making the Tory Party palatable to the British people, just like wartime food. The party machine had been democratized and its fund-raising made more purposeful; it was no longer possible for a rich amateur simply to buy the Tory candidature in a somnolent constituency. Policy too, especially under the reign of R. A. Butler at the Conservative Research Department, had come to terms with the welfare state. Well and good, smiled an inattentive Churchill; but when it came to mouthing appreciative remarks about his party’s new policy document, The Industrial Charter, he had privately expostulated, ‘I do not agree with a word of this.’
Sure enough, little more was heard of these airy commitments once the Conservatives were in office. To be sure, there was a short-lived innovation in the cabinet system, with the appointment of three ‘overlords’, senior ministers charged with coordinating departmental responsibilities in key areas – but not the most crucial of all, the economy. Otherwise, like the Republicans after the New Deal in the USA, the Tories were content to live down their reputation as the party of unemployment by adopting ‘me-tooism’. Churchill’s approach to industrial relations signalled a wary acceptance of the enhanced status of the trade unions, now with nearly 10 million members, with whom he was determined not to pick a fight. The Ministry of Labour was given to Sir Walter Monckton, a lawyer who had negotiated a settlement of the Abdication crisis; his emollient skills earned him the name ‘the oilcan’. Especially in the nationalized industries, where the Government was the ultimate paymaster, industrial trouble was bought off. Conversely, although the unions would not deliver to a Conservative Government the formal commitment to wage restraint which they had given Cripps, settlements were reached which did not unleash serious inflation. One reason why retail prices did not race away was that wholesale prices actually fell by 10 per cent in the years 1951–4. There was a shift of the terms of trade in Britain’s favour. The same imports into the UK required 12 per cent less exports to pay for them in 1954 than three years previously. So long as there were customers for British exports at the prevailing prices, this was a real windfall.
Not that Butler, as Chancellor of the Exchequer, inherited a bed of roses. The finance of the Korean war was his main headache. Defence costs absorbed almost 10 per cent of GNP and 30 per cent of total government expenditure. But the sheer size of the programme set its own ceiling. The Churchill Government was forced to concede what the Bevanites had said all along, that it could not be done. Commitments were trimmed accordingly. The persisting problem here was the ratchet effect upon the defence estimates which, once Korea was out of the way, showed no reversion to their previous level. Still, the buoyancy of the national income – 40 per cent higher by 1955 than five years previously – made such burdens easier to bear. This permitted Butler to make cuts in the standard rate of income tax, first from the crisis level of 9s 6d (47.5 per cent) to a Crippsian 9s (45 per cent); but more tellingly, with an election pending in 1955, to a new post-war low of 8s 6d (42.5 per cent), which was to set the norm for a quarter of a century.
It was in 1954 that the Economist coined the term ‘Butskellism’ to describe a supposed continuity of policy at the Treasury. Perhaps it would be fair to say that broadly the same policy instruments were used by Gaitskell and Butler, but to different ends. The limits of divergence between them are shown by one actual and one abortive departure in policy. The modification that was implemented – though even here Gaitskell had toyed with this idea – was to use bank-rate as a tool of economic management. In November 1951, in the first peacetime change for nearly twenty years, bank-rate was raised, as was by then expected: from 2 to 2.5 per cent initially and to 4 per cent the next year. From this point, manipulation of bank-rate became the classic means of exerting a credit squeeze, or applying disinflationary pressure, in a way that became thought of as Keynesian. In fact it owed much more to the traditional techniques which the authorities had developed in the days of the gold standard.
Moreover, the authorities’ discreet campaign for a further policy departure – or reversion – was only narrowly thwarted. What was proposed here was a scheme (code-named Robot) for solving the balance-of-payments problem by letting the pound float. The implication was that the necessary defence of sterling by the traditional methods would introduce a salutary discipline, automatically triggered, into financial policy. What this meant in practice was that full employment might well have to yield to other priorities. Butler himself went a long way with this line of thinking, and Robot was only quashed by the mobilization of an informal coalition against it. Eden, in line with his reputation as a thoroughly modern liberal Conservative, was primed to tell Churchill that this would be like the return to the gold standard all over again. And that, for Robot, was that. It took twenty years for such ideas to gain a serious hearing.
Anthony Eden was becoming restive as crown prince, a role which he had already occupied for more than a decade. His tenure of the Foreign Office, he hoped, would be brief, his move to Downing Street swift. Churchill did not see it that way; he was determined to savour fame and power while he could, and believed that he could perform one last irreplaceable service: as healer rather than warrior. At home, he watched King George VI dying before his eyes; but the succession of the young Queen Elizabeth II in February 1952 encouraged his romantic fancy of playing Melbourne to her Victoria, and the Coronation in 1953 was a pleasing festival, uniting the Commonwealth. The aged Churchill had learnt to call Nehru ‘the light of Asia’. This irenic vision was one which Churchill was determined to translate into international détente, preferably through a dramatic personal initiative, following up on his campaign promise in 1950 to seek ‘a parley at the summit’.
Eden, a highly professional Foreign Office man, was apprehensive about where all this might lead. Though his immediate predecessor had been Morrison (a brief and unhappy interlude for all concerned), the shoes Eden really filled were, of course, Bevin’s. Not for the first time – one gibe about Bevin was that Anthony Eden had got fat – a substantial continuity was observed in foreign policy. On Korea, the United Nations, the Commonwealth, Nato and relations with the USA, the Conservatives followed much the same line. So too on nuclear weapons; the development of the atom bomb under Labour was now openly acknowledged and a hydrogen bomb was authorized. Moreover, despite some Europhile noises in cabinet from Macmillan, Eden prevailed in his scepticism about moves towards integration; and barely a peep was heard from Churchill, for all the expectations he had aroused. There was indeed something like a left-right split on one issue, the proposed rearmament of the German Federal Republic, formed from the three zones occupied by the western allies and now ready to enter Nato. Even here, however, the front benches were united, and the fracture line ran through the Labour Party, where the Bevanites took up the anti-German cry.
For Churchill, pursuit of a summit became what Home Rule had been for Gladstone: an ever-receding goal, solely sufficient to prolong his leadership. Churchill’s lack of grip on ordinary business was becoming embarrassing even to those of his colleagues whose names he could remember; and he was lucky that routine exposure by television came just too late for him. When he had a stroke in 1953, and was out of action for months, his luck held – Eden too was ill, very unluckily for himself, undergoing major surgery which left him permanently less robust. Churchill sought to use personal links forged in wartime: with Stalin, who died, with Eisenhower, now American President, who was not interested. By the time of Churchill’s eightieth birthday in November 1954, everyone wanted the party to go well – and the prime minister to go soon. When he finally resigned in April 1955, Eden’s impatience was at last rewarded. He called an immediate general election, seeking a mandate in his own right.
In the Labour leadership too it was clearly time for a change of generations. The fact was that Morrison’s moment had come and gone; hanging on as deputy leader in hopes of the reversion, he had no more insight than Attlee into what the party should do next. Attlee had been a fine chairman, an adroit conciliator, a trusted captain of a united team; such skills were no longer enough to hold Labour together in opposition, still less to present it as an effective alternative Government in 1955. His retirement soon followed. For fifteen years – longer than Gladstone and Disraeli – he and Churchill had been rival party leaders.