In 1964, Wilson’s Labour seemed to be more in touch with the social and cultural trends of the sixties. One of Wilson’s most effective campaign speeches had promised that Britain would catch up with ‘the white heat’ of technological change. This sense of a fresh start provided the impetus for Labour to consolidate its position with a thumping victory in 1966.
However, from 1966 to 1969, the government lagged well behind the Conservatives in the opinion polls and there was a sense of frustration that Labour had been ‘blown off course’. The Conservatives returned to power in 1970 and Labour went back into the political wilderness again. Many in the party blamed Wilson’s indecisive leadership for wasting its golden opportunity.
There were many achievements in social policy: comprehensive schools, the Open University, liberalisation of the laws on abortion and homosexuality. After the early stumbles, economic policy was under firm control by 1970 under the direction of Roy Jenkins as chancellor. If Wilson had won in 1970, his government might have gone on to achieve great things. As it was, the electoral defeat left Labour’s supporters feeling cheated. They were quick to contrast the muddles and delays of Wilson’s six years with the purpose and effectiveness of Attlee after 1945.
Wilson was the first prime minister educated at state secondary school. He had an air of political authority that others, such as Edward Heath, found difficult to compete with. He seemed to be in tune with modern trends. He had a genuine commitment to science and technology. He created a new government department of technology and strengthened the department of education and science. The 1963 Robbins Report on higher education was implemented; by 1966 seven new universities (Sussex, East Anglia, Kent, York, Essex, Lancaster and Warwick) were up and running. Colleges of advanced technology were given extra funding for expansion. There was a similar modernising approach to social issues. Roy Jenkins, Home Secretary from 1965, promoted liberalisation. Parliament voted against capital punishment in 1965. A new Race Regulations Act was passed.
Reorganisation of economic policy was less successful. Many Labour ministers put this down to factors outside the government’s control: to the difficult balance of payments situation inherited from the outgoing Conservatives, and also to the obstructive anti-Labour attitudes they felt existed among senior civil servants and at the Bank of England. Other people felt that Labour simply made a mess of their attempts to restructure the economy, especially the National Plan introduced by George Brown in 1965.
Wilson also showed a great deal of anxiety (some would say paranoia) about what he felt was biased, hostile coverage by the BBC and by the national press. In March 1966, he called a general election to try to consolidate his political position and small parliamentary majority. Despite the frustrations over economic policies, Labour was still regarded as a fresh start after ‘thirteen years of Tory misrule’. Labour won a majority of 98 seats and their share of the vote was the biggest since 1945.
Party members increasingly became frustrated at the ineffectual performance of both governments. Between 1964 and 1970, 150,000 members left the party.
Modernisation of the British economy was one of the key priorities for the Labour government. By 1964, it was widely accepted that Britain was lagging behind more advanced economies such as West Germany and Japan. The affluence of the post-war boom was not reflected in productivity or growth rates. Britain’s economy was apparently trapped in the cycle of ‘stop-go’ with bursts of prosperity always leading to inflation, pressure on the pound and regular crises over the balance of payments. Reorganising the economy to break out of this cycle was the aim of Wilson’s government in 1964, just as it had been for the Macmillan government before him and for the Heath government after 1970.
When Labour came to power in 1964, there was a serious balance of payments crisis waiting for them. The deficit was £400 million, the worst since the Second World War. The two classic economic solutions to this kind of problem were deflation and devaluation. Wilson did not want to do either. Deflation was the old ‘stop-go’ approach he was determined to break away from. Devaluation might well have been a good idea. Most economic experts thought the exchange rate in 1964, $2.80 to the £, was too high, but Wilson was desperate to prove that Labour was not ‘the party of devaluation’. Wilson and Callaghan made a massive effort to avoid devaluation in 1964, partly because Attlee’s government had been forced to devalue in 1949. Wilson wanted policies for economic growth to catch up with Britain’s international competitors. Yet the need to maintain the pound’s strength in the international money markets, encourage exports and restrict imports limited what the administration could do. As a result, certain key manifesto pledges had to be abandoned or curtailed. The government failed to build as many houses as had been promised, the raising of the school leaving age to 16 was postponed, and ambitious plans to restructure state pensions had to be abandoned.
The drive for economic expansion led to the creation of a new department of economic affairs (DEA) led by Gordon Brown. There were two problems with this approach:
The new DEA overlapped with the Treasury and the role of the Chancellor, James Callaghan. Civil servants found it difficult to know who they should be listening to. The Department itself suffered from the hostility of the Treasury, which resented another ministry having influence over economic matters.
George Brown was impulsive and lacked consistency. Brown’s National Plan was agreed after extensive consultations with industry and the unions but it did not have united government support; Brown and the DEA were virtually in competition with the Chancellor, James Callaghan, and the orthodox economists at the Treasury. It is easy to blame Brown for the confusion that followed but the real problem may have been political caused by Harold Wilson trying to keep key personalities happy rather than pick the best team for the job.
After the 1966 election, Brown was moved to the foreign office and the DEA faded away, which highlights how even the government regarded it as a failure. The government brought in a prices and incomes policy to keep down inflation. But there was another sterling crisis in 1966, caused in part by a long and bitter strike by the National Union of Seamen. In 1967, there was a major docks strike, affecting London and Merseyside. This time, the sterling crisis threatened to run out of control. In November 1967, the government decided on devaluation: the pound dropped by 14 per cent to $2.40.
The devaluation crisis damaged Labour’s credibility. A few weeks later, Britain’s second application to join the EEC was rejected. Just as in 1963, President de Gaulle played a decisive role. The application to join the EEC had been made above all on economic grounds. Wilson was lukewarm about Europe and much of his party hated the idea of joining. Having the application rejected hard on the heels of the devaluation crisis made the government’s economic policies look futile.
The economic situation improved markedly from this low point. Callaghan’s replacement as chancellor was Roy Jenkins, who had been strongly in favour of devaluation in 1964. Jenkins used deflationary methods. He raised taxes and tightened up government spending in all areas of the economy, giving top priority to improving the balance of payments. These tough measures made the government unpopular but, by 1969, Jenkins had achieved a balance of payments surplus. The improvement in the economic situation from 1969 was a key factor in making Labour confident of victory in the 1970 general election. By that time, however, Labour had also run into serious problems in industrial relations.
Investment in research and development of new products was largely swallowed up by the arms industry. What remained tended to be used for a few high-profile projects such as Concorde or nuclear energy.
There was a narrowing of the gap between the richest and the poorest in society, largely achieved by an increase in benefits, rather than in direct redistribution of wealth through higher income tax.
The Labour government and the trade unions
One of the key elements in the post-war consensus was the influence of the trade unions. Since the war, all governments, Conservative as well as Labour, had seen it as essential to maintain full employment and to keep the unions happy. In opinion polls in the 1960s, nearly 60 per cent of people said they had a favourable view of the unions. Both Macmillan and Wilson had relied on union cooperation when they brought in their prices and incomes policies. In 1964, Wilson made the trade unionist Frank Cousins minister of technology. Wilson also relied on keeping a good relationship with the TUC.
Relations with the trade union movement soon became strained as the new government continued the Conservative freeze on pay increases. In 1966 and 1967, this previously cosy relationship began to fall apart. The big strikes by the seamen and the dockers caused massive problems for the government. These strikes also showed how the old-style union bosses were losing some of their control. A great deal of strikes started with ‘wildcat’ strikes by local activists who would not take orders from the top. The Conservative opposition under Edward Heath announced a policy they called A Fair Deal at Work. Wilson and his new employment minister, Barbara Castle, started planning to use the law to limit unofficial strikes, even though this would cause uproar on the Labour left.
Ralph Milliband in Parliamentary Socialism felt that ‘the government could have had all the support it required from trade unionists had it been genuinely engaged in the creation of a society marked by greater social justice’.
Barbara Castle believed strongly in a powerful trade union movement but she was also convinced of the need for it to act responsibly. Castle’s 1969 white paper, In Place of Strife, would strengthen the unions in dealing with employers but three aspects were seen as too radical:
There was to be a 28-day ‘cooling off’ period before a strike went ahead.
The government could impose a settlement when unions were in dispute with each other in ‘demarcation disputes’.
Strike ballots could be imposed.
An industrial relations court would be able to prosecute people who broke the rules. Voters liked these proposals and Labour’s standing in the polls went up. The unions and the Labour left hated them. There was a storm of protest from unions and MPs, including the powerful boss of the National Union of Mineworkers (NUM), Joe Gormley and the Home Secretary, James Callaghan. At least 50 Labour MPs were ready to rebel. Some people warned of a party split as bad as the one that had destroyed Ramsay MacDonald in 1931.
The row went on for months until Wilson gave in. In June 1969, the TUC negotiated a face-saving compromise but everyone knew it was really a humiliating climb-down by the government. Reform of the unions was left to be tackled by later Conservative governments in ways much more damaging to the unions than In Place of Strife would have been. Philip Whitehead, in the Writing on the Wall, noted that ‘The government had lost both trade union support for being too tough and some public support by appearing in the last analysis to be too weak’.
Wilson also faced serious problems over Rhodesia and Northern Ireland.
This came as a stunning surprise. The new chancellor, Roy Jenkins, was credited with achieving economic and financial stability, allowing Labour to call the election at a time of its own choosing. Harold Wilson was considered to be a master campaigner, far more experienced and more popular than Heath.
However, between 1966 and 1969, Wilson’s government had suffered a series of setbacks and real or perceived failures. The Conservatives were consistently ahead in the opinion polls throughout this time, even though Heath’s personal approval ratings were not impressive. Although Labour’s polls improved sharply in the spring of 1970, this did not reflect a complete turnaround. The Conservatives did quite well in the local government elections. Special polls in the key marginal constituencies showed a narrow Tory lead. Heath was confident of winning.
In the 1970 campaign, Heath resisted pressure from within his own party to make immigration an election issue. Heath had sacked Enoch Powell from his shadow cabinet in 1968 after his ‘rivers of blood’ speech. He refused to let Powell take part in the election campaign, even though he would have clearly boosted the Conservative vote in several key constituencies. The immigration issue did not go away, however, (nor did the problem of Enoch Powell) and tensions over immigration remained very divisive within the Conservative Party after Heath came to power.
Heath was well prepared for government. He had spent his time in opposition developing detailed policies, especially on industrial relations and economic modernisation. For securing Britain’s entry to the EEC, he had a deep understanding of the issues, having been the chief negotiator in 1961-63. In January 1970, the Conservatives held a conference at Selsdon Park to approve Heath’s policy programme. The Selsdon meeting set out a number of tough approaches to economic problems, many of them influenced by the ideas of Sir Keith Joseph, such as allowing inefficient businesses to go bankrupt and not prop them up with state aid.
Heath’s ‘U-turn’ in 1971-72 was his retreat from the free-enterprise economic principles his government had tried to follow from 1970. Heath’s desire to maintain full employment led him to gave state aid to key industries, especially Rolls Royce. This policy was heavily criticised by Enoch Powell, Keith Joseph and, later, Margaret Thatcher, all of whom opposed state intervention in industry.
Due to his famous ‘U-turn’ in 1972, a myth took hold that Heath had too easily given up on his aims and objectives, that he lacked a clear sense of direction. This was not the case. Heath’s government was to some extent blown off course by economic circumstances, but Heath’s political aims, including a belief in ‘One Nation Toryism’ and the post-war consensus, remained consistent. The Selsdon Park programme had never been intended to be an all-out repudiation of consensus politics.
The fate of Heath’s government was decided by economic issues, above all by the consequences of the 1973 OPEC oil price crisis and the miners’ strike of 1974. His first priorities, however, were British entry into the EEC and resolving the ‘troubles’ in Northern Ireland.
Negotiating the terms of Britain’s entry into Europe was relatively easy. Heath’s main political task was to gain parliamentary approval. There were doubters in the Conservative Party, especially those who believed strongly in the Commonwealth. The Labour Party was also badly divided on the issue of Europe. There were committed pro-marketers, such as Roy Jenkins, but the Labour left was mostly hostile. The party leadership was neither for nor against but was obsessed with party unity. In the end, 69 rebel Labour MPs helped the Conservative government to win the decisive Commons vote. The Labour Party was badly split. Wilson could only keep a semblance of unity by promising a national referendum as and when Labour came back to power.
The incoming Heath government inherited huge problems in Northern Ireland. There was an explosion of sectarian violence, the British army was struggling to keep the peace and the political situation in Belfast was close to complete breakdown. The strenuous attempts of Heath’s government to find a political solution came close to success in the Sunningdale Agreement of 1973 but ultimately failed. At the time, it did seem that Heath’s typically tough and persistent negotiating style might well have achieved success but for the bad timing of the economic crisis that undermined him.
Since late 1968, the civil rights movement in Northern Ireland had challenged the old ‘Stormont Ascendancy’ - the domination of the Belfast parliament and the whole socio-economic system in Northern Ireland by Protestant Unionism. In 1969 and early in 1970, there was serious sectarian violence. The Wilson government sent in the British Army to keep the peace. Northern Ireland had not been much noticed by people on the ‘mainland’ since Ireland was partitioned in 1922.
Since 1912, the Ulster Unionists had always been part of the Conservative and Unionist Party but now Heath felt that he had to force the Unionist politicians in Belfast to accept change. At first, Health backed the Belfast government’s leader, Brian Faulkner. In 1971, Heath went along with Faulkner’s policy of internment, locking up terror suspects without trial but this policy was ineffective as a security measure and it alienated the nationalist communities. The British Army came to be regarded as an enemy occupying power. Then, on ‘Bloody Sunday’ in January 1972, attempts to control a demonstration in Derry ended with British soldiers firing live ammunition. Thirteen civilians were killed.
The worsening situation led Heath to suspend the Stormont parliament and to bring in direct rule from Westminster. Heath’s policy was not only to try to defeat the IRA, as the unionists and loyalists wanted, but to look for a permanent political solution. In 1973, Heath and Willie Whitelaw achieved the Sunningdale Agreement, a complex plan for a power-sharing government. Extremists, both republicans and loyalists, denounced Sunningdale as a sell-out, but there seemed a good chance of achieving a settlement.
The prospects of a settlement, however, were undermined by political crisis in mainland Britain - first the miners’ strike and then the February 1974 election in which Heath lost power. Loyalist opponents of power sharing organised an Ulster workers’ strike that brought the whole province to a standstill. The Sunningdale Agreement collapsed and the cycle of sectarian violence and political stalemate went on for another 24 years.
Economic and industrial relation, the area of policy in which Heath was better prepared than any post-war Conservative leader, brought him to political disaster. Heath had a genuine commitment to economic modernisation and had put together unusually detailed plans to make it happen. But almost from the time he came to power, Heath’s government ran into difficulties over the economy. Heath’s first choice as chancellor, the able and experienced Iain Macleod, suddenly died in 1970 which removed a key asset from Heath’s team. The new chancellor, Anthony Barber, introduced tax cuts and cuts in public spending. One small but controversial aspect of these cuts was the ending of free school milk, which brought the then little-known minister of education, Mrs Thatcher, into the public eye. The ‘Barber boom’ began, with a rapid rise in wage inflation.
Many people blamed the steep rise in wages on the power of the unions and their willingness to hold the country to ransom through strike action. Inflation was not accompanied by economic growth. Unemployment actually went up, something that was highly unusual at the same time as inflation. This led to the invention of a new word, ‘stagflation’, referring to the unusual combination of inflation and stagnant economic growth (which often produces unemployment) occurring at the same time.
The government wanted to reduce state intervention in industry but now felt compelled to take action. This was the famous ‘U-turn’. The prestigious engineering firm, Rolls Royce, had to be nationalised in 1971. Government money was poured in to prevent Upper Clyde Shipbuilders going to the wall.
In 1971, the government also brought in the Industrial Relations Act. This resembled In Place of Strife. It set up an Industrial Relations Court and provided for strike ballots and a ‘cooling off period’ before official strikes could begin. The policy did not work as expected. Both the Trades Union Congress (TUC) and the Confederation of British Industry (CBI) were opposed to it. The Industrial Relations Court proved ineffective in dealing with disputes. For the first time since the 1930s, unemployment in Britain rose above one million. There were major strikes in 1972: by the miners in January and by the railwaymen three months later.
The miners’ strike lasted six weeks, at a time of harsh winter weather. The strike virtually stopped the movement of coal around the country. Industry nationwide was placed on a three-day week to conserve energy supplies. The NUM leader, Joe Gormley, was a moderate Lancastrian with a good sense of public relations. He negotiated a generous wage settlement accompanied by other concessions. The strike looked like a clear victory for the miners against the employers and against the government. It encouraged many left-wingers to see industrial action as a political weapon, not just a way of bargaining for better pay and conditions. It also encouraged a right-wing backlash against excessive union power.
The post-war consensus was fraying at the edges in 1972 but it is often forgotten that the government seemed to be making a good recovery in 1973:
There was wide support for stages one and two of his prices and incomes policy: limits on wage increases imposed by the government pay board in line with rises in the cost of living.
The number of working days lost through strike action was cut in half compared with 1972.
There was a great deal of government investment to boost the economy.
Unemployment dropped sharply, to about 500,000.
North sea oil was due to come on stream in the next few years.
The government started to become more popular, drawing about level with Labour in the opinion polls.
Heath’s parliamentary private secretary (PPS) Douglas Hurd wrote in his diary in autumn 1973, ‘If no horrors occur this time next year might be best to have an election’.
The end of the long post-war boom was symbolised by the oil price crisis of 1973 and the energy crisis that followed. This economic crisis then became a political crisis when the coal strike turned into a confrontation between the NUM and the government. It ceased to be an individual dispute about wages and conditions. It became a struggle to decide ‘who governs Britain?’ The result was a lengthy period of political turmoil, leading to two general elections in the same year.
The trigger for the economic crisis in October 1973 was the Yom Kippur War in the Middle East, the third Arab-Israeli war since the formation of Israel in 1948. The war prompted OPEC to declare an oil embargo. Exports suddenly stopped. The price rocketed up to four times the usual level. Long queues formed outside petrol stations. This was the context for the NUM to demand a huge new pay rise in November 1973. At a time when Heath was deeply concerned about oil supplies, about the economy, about his prices and incomes policy and about the talks over a political settlement in Northern Ireland. In December, the government announced the imposition of the three day-week.
Many people felt the NUM had a good case for improved pay and conditions to match recent rises in other industries, even though the NUM had won a big pay award after their 1972 strike. The victory in 1972 had also convinced many in the union that its industrial muscle was strong enough to get its own way, not just against the employers but against the government.
There was a sense that the NUM was directly challenging the power of a democratically elected government. In January 1974, the NUM called a national strike. There was massive support for the strike among the miners, even from moderate areas like Nottinghamshire. The shortage of coal, together with rising oil prices led to a balance-of-payments crisis. Heath called a general election for February 1974. While the opinion polls had favoured the Conservatives for most of the campaign, the final result showed a small swing against them. Labour won five more seats than the Tories. Indirectly, the miners’ strike had indeed brought down the government.
The general election result of February 1974 was very inconclusive, leading to a ‘hung parliament’ in which no party had an overall majority. This reinforced the idea that 1974 was a political crisis not just an economic one.
One clear feature of this election was the increase in representation for other parties. The Liberal Party now had 14 seats. Nationalist parties from Scotland, Wales and Northern Ireland had 23 seats. If Edward Heath had gained the support of some of these other parties, he would have been able to continue as prime minister. If the Ulster Unionists had continued their traditional support for the Conservative Party, Heath would have won anyway. Times had changed, symbolised by the fact that Enoch Powell had joined the Unionists and had campaigned fiercely against Heath. Heath failed to make a deal with the Liberals.
When the Labour government came back into power in March 1974, there was little chance of having a free hand in parliament because Labour had to depend on support from other parties to get legislation through parliament. The economic situation was awful. The Labour Party was less united than ever. Wilson himself was older, less energetic and less certain of the way he wanted to govern. He was anxious to call another election as soon as possible to obtain a working majority. He didn’t want to enter into a coalition and make numerous compromises.
In an attempt to solve the economic and industrial relations crisis that had caused Heath’s fall, the Industrial Relations Act and the pay board were abolished. The immediate cause of the election, the Miner’s Strike, was settled within two days of Wilson becoming Prime minister. The trade unions were sent a clear message that the government was not looking for any confrontations. Wilson’s new chancellor, Denis Healey, issued two budgets, first in March and then in July, aiming to deal with the economic crisis without annoying the unions. The miners won another 22 per cent pay rise and weekly wages nationally rose by 33 per cent in 1975.
In October 1974, Wilson felt safe enough to call a new election, Voters still associated Heath and the Conservatives with the three-day week and conflict with the miners; they were not much impressed with Heath’s new idea that there should be a government of national unity. Wilson only just won his working majority. Labour gained 18 seats. The Conservatives lost 21. Labour’s overall majority was only three, but their lead over the Conservatives was 42.
Heath seemed to be in a strong position, despite having lost three out of the four elections he fought against Wilson in eight years. All the shadow cabinet made it clear they would not run against him.
Thatcher’s promises on policy were generally to the right of Heath and Macmillan (she was sympathetic to the monetarist policies put forward by Powell and Joseph) but she was certainly not yet anti-Europe. Later in 1975 she worked enthusiastically for a ‘yes’ vote in the EEC referendum. She had only brief experience in the cabinet, as minister for education.
Many of the people who did support her only did so reluctantly due to a lack of alternatives. Some Conservatives were saying ‘anyone but Ted’; others were persuaded by Thatcher’s obvious self-confidence and conviction.
Thatcher did not win because of a sudden surge of positive support for her, or her specific policies, but she and her campaign manager, Airey Neave, cleverly exploited the sense that things were going badly wrong, both win the party and with the country. They appealed to the backbenchers that their support was necessary to win. Thatcher won 130 votes and Heath won only 119 in the first ballot and immediately resigned. New candidates, who had not run before because of their loyalty to Heath, emerged but Thatcher had gained too much momentum to be stopped. She won 146 votes on the second ballot; her nearest rival, Willie Whitelaw, won 79. After her victory, Thatcher received the support of most of the party. Willie Whitelaw became a loyal deputy prime minister. Most of Heath’s shadow cabinet stayed on.