Austerity Britain

by David Kynaston

  Yet the reality was very different. ‘Nebulous but exalted’ was how one of the government’s economic advisers, Alec Cairncross, would in retrospect caustically describe central economic planning during these immediate post-war years, while according to Kenneth Morgan, probably the most authoritative historian of the Attlee government, the ‘attempt to plan private industry through the Treasury and the Board of Trade was half-hearted, indirect, and in many ways unsuccessful’. Indeed, he contended, ‘so far as Labour had a strategy of planning it was largely to renew and continue the physical and financial controls of wartime, to help exports, to direct industry towards development areas, and to direct the use of vital raw materials’ – in short, ‘nothing that resembled the dirigiste economic strategy of de Gaulle’s “popular front” government in France in 1945–6’. No output targets (even for industries identified as key), no way of fitting together manpower and cash forecasts, above all no powerful, autonomous institutional mechanism to give muscle to vague nostrums: the planning deficit was insurmountable.8.

  There were several main reasons for this anticlimactic outcome. The Treasury, not for the first or last time, gave a masterclass in institutional scepticism; there was much intellectual confusion as to what economic planning in peacetime actually meant and entailed, as epitomised by the muddle-headedness of Morrison, theoretically in charge of planning; and for more than two years there was the unwillingness of either the Ministry of Labour or the trade union leaders (for all their considerable goodwill towards the government) to countenance a wages policy, seen as a direct threat to the long, jealously guarded tradition of free collective bargaining – an unwillingness that more or less scuppered the chance of any meaningful manpower planning.

  But ultimately, what really killed central economic planning was the lack of willpower on the part of government. In particular, the Labour Party’s commitment to democratic socialism meant in practice an aversion to either new, unaccountable administrative mechanisms or any form of tripartism (ie government, management and labour) that seemed to threaten the sovereignty of the familiar parliamentary system. As for either the compulsory allocation of manpower or the planning of wages, neither was consistent with the traditional ‘voluntarism’ of the labour movement, with its deep distaste for outside interference, certainly in peacetime. ‘If the maximum of persuasion and inducement fails to attract enough men and women into particular occupations to fulfil the plans laid down at the centre,’ Durbin insisted as early as September 1945, ‘then the plans must be changed.’ Just over a year later, Sir Stafford Cripps at the Board of Trade was publicly accepting that no comprehensive plan could be carried out completely ‘without compulsions of the most extreme kind, compulsions which democracy rightly refuses to accept’ – which was why, he hardly needed to add, ‘democratic planning is so very much more difficult than totalitarian planning’.9.

  Not that planning would have been easy, even if the iron political willpower had existed. Quite apart from institutional and labour difficulties, there would have been intense resistance on the part of privately owned industry, which was hostile enough anyway towards such government schemes as Development Councils, intended to stimulate co-operation between firms in specific sectors. Given, in the words of the economic historian Jim Tomlinson, ‘the absence of a large cadre of potential industrial managers sympathetic to any form of socialism’, it was hardly surprising that the charge was sounded so faintly. The 1940s may have been the least unpropitious decade in the twentieth century for peacetime economic planning, but that did not make it propitious.

  Yet another reason why such planning failed to get off the ground after 1945 was the continuing existence of important physical controls exercised by the government, including controls on labour machinery, building and materials allocations. Such controls helped explain the almost complete absence of anything significant by way of investment planning, seen at this stage as superfluous. ‘“The City” in the middle of a socialist state is as anomalous as would be the Pope in Moscow,’ Attlee had observed in 1931, just after (in instantly created Labour mythology anyway) a ‘bankers’ ramp’ had destroyed Ramsay MacDonald’s minority Labour government, but in practice, Attlee’s own government did remarkably little to undermine the functions of the Square Mile and its inhabitants. In particular, the proposed National Investment Board, billed in the 1945 manifesto as the way to ‘determine social priorities and promote better timing in private investment’, was never established. Instead, in its place there was an almost wholly lame-duck, purely advisory National Investment Council, of nugatory achievement.

  There was also, looked at from a socialist or planning point of view, the feeble, half-cock nationalisation of the Bank of England in 1946. The minister largely responsible was Dalton, who despite his acknowledged expertise on public finance had a sketchy grasp of the City and by the time he became Chancellor still did not understand the functions of the government broker, let alone the difference on the Stock Exchange between brokers and jobbers.10Certainly he did not strike a great deal: the Bank kept its essential institutional autonomy, quite unlike that of a government department; governors were to be appointed for a fixed term of years and could not be dismissed; and the Treasury failed to secure the power to issue directives to the clearing banks, effectively putting it at the mercy of the Bank’s mediation. It is hard to resist the conclusion that the purpose of this particular piece of nationalisation was essentially symbolic – a way, in short, of appeasing the party’s demons after the 1931 fiasco.

  Of course, the taking into public ownership of a sizable chunk of the British economy was integral to the planning dream. The Bank of England was followed in fairly quick succession by Cable and Wireless, civil aviation, electricity, the coal mines, transport (including the railways and road haulage) and gas. Between them these newly nationalised industries employed some two million workers, with the majority either on the railways or in the mines. And, together with the postal and telephone services that were already in state ownership, these industries would for the next three decades form the core of the public part of the ‘mixed economy’.

  The principal architect-cum-draftsman of the 1946–9 wave of national isations was Herbert Morrison – usually depicted as the ultimate machine politician (especially in his capacity as leader of the London County Council through much of the 1930s) but also in fact a sincere believer in socialism’s ethical dimension. ‘Part of our work in politics and in industry must be to improve human nature,’ he would tell Labour’s conference in 1949, adding that ‘we should set ourselves more than materialistic aims’. He believed, as did the party as a whole, that the nationalisation of several key industries would generate a wide range of economic, social and political gains. These included helping to coordinate production, distribution, investment and pricing policies within and across industries; encouraging economies of scale that in turn would provide opportunities for modernisation of plant and equipment; creating a virtuous circle of a more contented workforce, improved labour relations and rising productivity; and making it harder for the despised rentier class to prosper through unearned income (memories perhaps of Aunt Juley in E. M. Forster’s Howards End and her tidy, predictable dividends from shares in Home Rails).

  In May 1946, shortly after James Lansdale Hodson had noted, almost certainly accurately, that ‘the nation isn’t behind grandiose nationalisation to anything like the degree the Front Bench pretends’, Morrison explained to the Commons, in the context of the Civil Aviation Bill, how it was to be done: ‘Competent business people will be appointed to manage the undertaking, with a considerable degree of business freedom; on the other hand, it will be a public concern, appointed by public authority, and therefore, the spirit of the public interest must run right through the undertaking.’11Based to a large extent on the inter-war public corporation, this model for the post-war years was accepted with remarkably little debate – and with remarkably few realistic alternatives being put forward. />
  Over the years, though, there would be many criticisms of the way in which nationalisation took place. The financial and business guidelines were unduly restrictive, resulting in an unrealistic pricing policy and an inability to diversify into such areas as manufacturing; too many ‘non-believers’ were appointed to the nationalised boards, including not just businessmen but a motley crew of peers and retired generals; it was too easy for ministers to interfere or, according to some, too difficult; there was little coherent planning that related the newly nationalised industries to the economy as a whole; and so on. The criticism, though, that would resonate most through the years, at least from the left, was that a golden opportunity had been missed to institute a meaningful form of workers’ control.

  Yet at the time there were few who saw this as a runner. ‘From my experience,’ Cripps discouragingly told a Bristol audience in October 1946, ‘there is not as yet a very large number of workers in Britain capable of taking over large enterprises.’ He added that ‘until there has been more experience by the workers of the managerial side of industry, I think it would be almost impossible to have worker-controlled industry in Britain, even if it were on the whole desirable.’ Morrison did not disagree, and, more significantly, neither did the left-wing Aneurin Bevan. There is no evidence, moreover, that the workforces themselves, certainly in the form of their union leaders, wanted control or even a measure of control. When Emanuel (Manny) Shinwell, responsible for the nationalisation of the coal mines in his capacity as Minister of Fuel and Power, on two separate occasions in 1946 offered two seats on the National Coal Board (NCB) to the miners’ leaders, he got nowhere. ‘They refused, saying that administration was not their affair’ was how he recalled the outcome. But it went down in the folklore of industrial relations that (in the subsequent words of the veteran industrial correspondent Geoffrey Goodman) ‘the NUM President, Sir William Lowther, awkward and gruff as they used to chisel them in the Durham coalfield, told Shinwell to go to hell’.

  Indeed, it is far from certain that the majority of workers in the relevant industries were especially keen on the prospect of nationalisation as such. Hodson, visiting South Yorkshire in May 1946, was told by a colliery managing director that his workers were about equally divided on the subject: ‘Of those for it, 25 per cent are Socialists who accept it as they accept all the Government does, and the other 25 per cent believe it means more pay for less work. Of those against it, 25 per cent think these particular pits are well run and will be less efficient under the government and that they’ll suffer; the other 25 per cent hate change of any sort.’ It was a lack of enthusiasm that contrasted sharply – and ominously – with the scenes in Westminster a few months earlier, as old miners, now Labour MPs, shed tears as they passed through the ‘aye’ division-lobby to vote for the takeover of the coal mines and even burst into song. ‘The strains of “The Red Flag” and “Cwm Rhondda” were heard clearly in the Chamber,’ recalled one very socialist, already rather bored newish Labour MP, Tom Driberg, pre-war founder (as William Hickey in the Daily Express) of the modern gossip column.

  Still, these were early days. Clause Four may have become the cornerstone of Labour’s constitution back in 1918, but in his book-length tract Labour’s Plan for Plenty, published in early 1947, Michael Young saw public ownership as only at the start of its journey:

  No one in the Labour Party would claim that the last word has been said about nationalisation, or that the Party’s views on the subject need not undergo further development . . . There is scope for variety in structure and for continuous experiment in methods of public administration. That is the way in which the organisation of nationalised industries can be steadily improved and the ground cleared for a rapid extension of public enterprise.12

  6

  Farewell Squalor

  What really enthused the Labour Party and its supporters was welfare and the Attlee government’s creation of the modern welfare state. Even The Times, daily organ of the British establishment, was strongly in favour of a national health service, seeing it as a desirable trade-off between state and citizen. ‘The new social services will come to claim too large a share of the national income,’ it warned in friendly rather than threatening fashion in May 1946, ‘if the citizen, in pursuit of security, leisure, and comfort, fails to understand that what he expects of society can only be secured by the enterprise, diligence, and self-discipline with which he makes his personal contribution to the enlargement of the national product.’

  The optimistic assumption that welfare and productivity would go hand in hand was not shared by the Financial Times and (presumably) its readers, still mainly in the City. ‘Britain is piling up a large burden of social services in outlays on health, education, national insurance, family allowances and subsidies for housing and for food,’ it had declared balefully a few weeks earlier:

  We are a nation of producers with an ever-increasing overhead of social charges . . . With these extensive commitments, we shall have to meet the competition of the United States for the markets of the world, once the immediate famine for goods of all kinds has abated. When we have topped our potential wave of prosperity, how shall we deal with the challenge of reviving German and Japanese exporting industries, now temporarily out of commission?

  Forty years later, the historian Correlli Barnett took up the charge, arguing forcibly in The Audit of War (1986) and then The Lost Victory (1995) that Britain during and after the war had made a profoundly mistaken choice by not giving economic reconstruction clear, unambiguous, unsentimental priority over social reconstruction. Instead, according to his pungent reading, the country fell victim to a hugely damaging and economically illiterate virus of elite-driven ‘New Jerusalemism’ – in his caustic words, ‘the creation of that better, more equal Britain to be built when there were blue birds over / the white cliffs of Dover’.

  Barnett’s assessment of the existence of that mood, at least among the ‘activators’, is surely correct. Yet as others have pointed out, the notion that a long, arduous, ultimately victorious ‘people’s war’ did not have to result in welfare improvements for that people, at least in the short term, is essentially ahistorical – flying in the face of the inescapable political realities of that time. If the Tories had been returned to office in 1945, they almost certainly would have created a welfare state not unrecognisably different from the one that Labour actually did create. Moreover, even within the strictly economic parameters of the debate, it is possible that Barnett has significantly overstated the cost of that welfare state. ‘An austerity product of an age of austerity’ is how one of his main adversaries, Jim Tomlinson, has crisply characterised it, showing in detail how, whatever may have happened later, the Attlee government could not be justly accused of extravagance in its welfare provisions. By 1950 the 10 per cent of British GDP that comprised public spending on social welfare may have been above the comparable proportions in Scandinavia, Italy and the Netherlands but was significantly below those of Belgium, Austria and West Germany. ‘The welfare state was created,’ Tomlinson gladly concedes, ‘but in a context where it consumed a quite limited level of resources, and where it was continuously vulnerable to a resource allocation system which gave priority to exports and industry, and restrained both private and collective consumption.’

  Unsurprisingly, at a time when relatively few activators quarrelled with the assumption that a collectivised economy was not only more benign than a free-market economy but also more efficient, there was little debate about whether the public provision of health, education, housing and so on was the right road to be going down. Anyway, it seemed glaringly obvious to almost everyone that only if the state were actively involved as provider was there a chance of reasonable equality of outcome in the receipt of welfare services. Might the welfare state lead to a dependency culture? Barnett has written, in a notorious passage, of how the New Jerusalem ‘dream’ turned into ‘a dank reality of a segregated, subliterate, unskilled, unhealthy and ins
titutionalised proletariat hanging on the nipple of state maternalism’. To which one can retort that there were indeed many free lunches between 1945 and 1979 – but that it was not society’s losers who ate most of them, let alone the best of them.

  Instead, if there was a flaw at the heart of the classic social-democratic welfare state, it was the assumption that those operating it were by definition altruistic and trustworthy, together with the accompanying assumption that those receiving its benefits should be passive, patient and grateful. Or, as Julian Le Grand has put it, echoing the Scottish philosopher David Hume, it was a system designed to be ‘operated by knights for the benefit of pawns’, certainly not by ‘knaves’ on behalf of ‘queens’.2. That paternalist model may have seemed psychologically convincing in the 1940s – though even then it was questionable, given a realistic analysis of popular attitudes – but over the ensuing decades it would become ever less so.

  ‘He is a big, heavy man, not very tall but thick set, with very powerful arms and shoulders, dark, round-headed, and beetle-browed with eyes, nose and chin all rather prominent and large, speaks with a lisp and a Welsh intonation’ was how in August 1945 a Ministry of Health official, Enid Russell-Smith, described her new chief, Aneurin (‘Nye’) Bevan. Some months later, on a visit to Doncaster with him, she noted that ‘here and there among the audience one sees that beatific expression on a worn old face which means that some pioneer in the Labour movement is seeing all Heaven in a Labour Minister in a Labour Government expounding a Socialist policy’.3.