Thus at the very moment when Mayhew’s plotters were waiting for a signal from him to launch their coup to make him Prime Minister, Jenkins had bound himself not only to Barbara Castle, but to Wilson. By early summer 1969, as opposition to the bill mounted, his supporters were begging him to back off. Tom Bradley, his PPS, told him several times that ‘the bill was the only thing standing between me and the premiership’.140 Roy Hattersley recalled visiting East Hendred in an unsuccessful attempt to move him. His ‘lofty refusal even to contemplate deserting Barbara Castle both dashed any hope I had of his becoming Prime Minister and made my suggestion of a premature strike for Downing Street seem profoundly squalid’. Instead they sat in the garden academically discussing other potential Prime Ministers who had missed the bus.141 If Jenkins’ refusal was honourable, it was also realistic, since unlike the previous year he was no longer the only alternative to Wilson. By leading the opposition to the bill from within the Cabinet, Callaghan had reinvented himself as a powerful contender who probably commanded wider support across the party: any attempt to replace Wilson now, Jenkins told Hattersley, would lead to a ‘bloodbath’ and the new government would not last a year.142 Moreover – this he did not tell Hattersley – his own position was weaker than it seemed, since this was exactly the moment when he was contemplating having to resign in a couple of months if the balance of payments did not come right. So this was not really such a missed opportunity as it seemed.fn15
But then he did renege after all. At the critical meeting of the Cabinet on 17 June – actually two meetings – at which the Chief Whip, Bob Mellish, warned that they would not be able to get the Bill through the parliamentary party, Crossman, Crosland, Shore and others backed Callaghan in urging compromise. Wilson, defiant for once, refused to capitulate and threatened to resign if the Cabinet did not support him. Jenkins was conspicuously silent, ‘looking pretty worried’, according to Barbara Castle, and intervening just once to warn, rather feebly, that they were leaving her in a very difficult position.143 On the one hand, he had told Crossman that morning, he felt duty bound to support Barbara, ‘though I really believe in the policy less and less’. On the other, Crossman too was dangling the premiership under his nose, urging him to think of the party: if he resigned with Wilson and Castle he would leave Callaghan to take over unchallenged. They actually discussed the mechanism for replacing the Prime Minister: ‘how the Party meeting should be called and whether Roy could go to the Palace direct’. Jenkins promised to stand if Callaghan made a bid for the leadership.144 Before the second meeting he asked Mrs Castle to come to his room at 4 p.m.:
There he told me, with that evasive look he has been developing lately, that I would have gathered that he no longer thought the fight was worth the cost. I replied that, yes, I had noticed it. But he would realise that Harold and I could not back down. If we could not get an acceptable compromise we would both resign. He looked unhappier than ever, saying that this would have a very bad effect on the Party morale, ‘More because of your resignation than Harold’s, if I may say so’ . . . I replied that . . . it was impossible for Harold and me to capitulate . . . Now he was looking even more unhappy as a crash seemed inevitable.145
At the second meeting he said even less. In the end the Cabinet, to save Wilson’s face, agreed to give him a free hand to negotiate with the TUC; and the next day he and Mrs Castle secured a ‘solemn and binding’ assurance that the union leaders would use their best efforts to prevent unofficial strikes. Wilson did his utmost to present this as a satisfactory outcome; but no one was fooled. This was his second humiliating defeat on a major policy, which left him further damaged. But no one came out of this episode with much credit. In his memoirs Jenkins regretted the ‘sad failure of Mrs Castle’s trade union policy’.146 With hindsight, having once supported it, he would have done better to have had the courage of her convictions and stuck with it. The combination of Prime Minister, Chancellor and First Secretary might have been able to force it through. Alternatively he could have strengthened his position in the party by distancing himself from the start. As it was, his late defection left him with the worst of all worlds. He not only lost the policy for which he had given up his incomes policy, but he confirmed the suspicion of his critics (and some of his supporters) that he was not a fighter. David Owen was one who judged it a fatal mistake to ‘ally himself to a sinking ship and then abandon it’. The defeat of In Place of Strife, on this view, marked the beginning of Labour’s takeover by the unions and the militant left in the 1970s. Had the government stood up to the TUC in 1969, Owen believed, Labour would have won the 1970 election and Jenkins would have become Prime Minister in a year or two.147 This is probably exaggerated, typical macho posturing after the event. But the important thing for the future was that Owen came to believe it.
In time the unions had cause to regret opposing In Place of Strife so bitterly. Two years later they defeated very similar (though more legalistic) legislation brought in by Ted Heath’s Tory government (with Wilson and Mrs Castle now opportunistically egging them on); then – ironically – they used their untamed muscle to destroy Jim Callaghan’s government in the ‘Winter of Discontent’ in 1978–9. Only when Mrs Thatcher and Norman Tebbit in the 1980s passed a series of Acts that really did emasculate them did they realise, too late, that In Place of Strife was a very moderate and constructive attempt to regularise the conduct of industrial relations which they would have done better to have accepted. In the long run, as Jenkins acknowledged, Wilson and Barbara Castle actually ‘emerged with more credit than the rest of us’.148
Three months later, the humiliation of In Place of Strife seemed to have been magically exorcised by the improvement in the economy. September’s stunning trade surplus was not a flash in the pan, but was followed by similar figures in the following months, so that the final balance for 1969 showed a surplus of £387 million (compared with deficits of £461 million in 1967 and £398 million in 1968) and sterling ended the year comfortably above its $2.40 parity for the first time since devaluation. From trailing the Tories by twenty-four points (55:31) in the Gallup poll in July, the government cut the margin to single figures (46:37) in September and to almost nothing (46:44) in October. Suddenly, from the certain prospect of defeat, it seemed possible that Labour could win the next election after all. In a series of cautiously boastful speeches around the country in November Jenkins claimed, with characteristic precision, that the economy had been turned around in 731 days – that is, exactly two years from devaluation (1968 was a leap year) – and looked forward to a balance of £500 million in 1970.149 The question he now faced was what to do with his hard-won surplus. The squeeze of the past two years having achieved its purpose, how much relief could he afford to give to taxpayers and consumers? His last critical challenge as Chancellor would be the 1970 budget.
At the beginning of February he asked the Treasury for comparative projections for three options: a neutral budget, a £100 million expansion, or a further £100 million restriction.150 All the official advice pointed to a broadly neutral budget. Jenkins was determined to do nothing to jeopardise the balance of payments. Nevertheless he thought that the Treasury was taking prudence too far. He interpreted ‘neutral’ as allowing tax reductions up to £100 million, and asked for a fourth diagram showing the effect of a £200 million expansion.151, fn16 While his junior ministers – Jack Diamond (Chief Secretary), Dick Taverne (now Financial Secretary) and Bill Rodgers (Minister of State) – all wanted to cut the standard rate of income tax, by threepence or even sixpence, Douglas Allen warned that too generous a budget would damage foreign confidence. Jenkins’ preference was to take more lower-paid workers (‘at least 2 million’) out of tax and extend tax relief further up the scale.153 He also wanted to help the elderly.154 In the meantime, however, he was becoming worried about soaring public-sector pay. At Cabinet on 12 February, when every spending minister in turn pitched for his own department’s deserving claimants – teachers, nurses, postal workers, the armed forces �
�� he delivered what Barbara Castle called ‘a typical Chancellor’s sermon’ warning that an ‘avalanche’ of claims (now running up to 20 per cent) would lead back to another round of deflation by the summer if it was not halted. With unblinking cynicism, Wilson proposed phasing in the increases so that the impact was not felt until after the election:
If the Labour Party were then returned to power, it would no doubt be distasteful to have to introduce a policy of restriction immediately thereafter; but this situation would have to be faced. If, on the other hand, they lost the Election . . . the Conservative Party . . . would have to shoulder the responsibility for dealing with the potentially inflationary problem which they would have inherited.155
In other words, Barbara Castle paraphrased, ‘He would rather win the election and have a November Budget than have July measures and lose the election. It was all pretty crude and Roy reacted loftily: “I would rather lose the election than jeopardise our economic success.”’156 What Jenkins actually said, according to the official minutes, was marginally more nuanced:
It could be argued to be better for the Labour Party that they should lose the next Election but should leave behind them a record of sound management of the economy than that they should put that record at risk in order to achieve an electoral victory which might be no more than marginal. He could not endorse this course; and . . . he would judge it wiser to continue to resist excessive wage claims.157
Tony Benn was equally disgusted by Wilson’s cynicism, and his account confirmed the other two.158 All three Cabinet diarists, however, were worried that Jenkins’ high-minded attitude would lose Labour the election. That weekend, after he and his family had all been to lunch with Roy and Jennifer (and Edward) at East Hendred, Crossman described what he took to be the Chancellor’s dilemma:
Roy is now making up his mind about his budget. He can be cautious and conventional, and keep his reputation as Chancellor, making an election defeat absolutely certain and keeping himself in position to seize the leadership afterwards, or he can conceivably take the other risk and have a more expansionist budget, which could give us a chance of election victory but could also ruin his reputation if it went wrong. I wonder.159
Three days later Mrs Castle, Benn, Peter Shore and Tommy Balogh all dined at Crossman’s and tried to guess which way Jenkins would jump. They all took it for granted that he would do whatever he thought would serve his own interest, and were afraid he reckoned his best chance of becoming leader was following an election defeat. ‘If Roy thought we were going to win the election he would produce a Budget that would help us,’ Benn summed up, ‘and if he thought we were going to lose he would produce a Budget that would allow him to leave as the Iron Chancellor, with his reputation unaffected . . . Barbara said that Roy would then go into the City and get a well-paid job and this was his real interest.’160 Crossman thought rather that he feared that if Labour won ‘the whole thing will continue in the same way with Harold and Jim at the top and Roy as number three. Then he might join me in writing books.’161 (Crossman was leaving Parliament at the election to become editor of the New Statesman.) Benn believed that Jenkins probably did want Labour to win ‘because he wanted to be Foreign Secretary, and subsequently Prime Minister when Harold was got rid of’.162 They agreed that they must somehow persuade him to have a popular budget. ‘It was settled that Dick and I should try to dine with him next week,’ Mrs Castle recorded, ‘and convince him that, if he made a Budget that contributed to our defeat, he would be finished politically.’163 One way or another, as Crossman put it, they all felt that the government’s fate lay in the hands of ‘this strange, inscrutable young man, this extraordinary mixture of ingenuousness, feminine petulance and iron determination’.164, fn17
Garland, Daily Telegraph, 17.3.70 (British Cartoon Archive, University of Kent)
At a special meeting of the ‘Inner Cabinet’ (about half the full Cabinet) at Chequers on Sunday 8 March Crossman and Mrs Castle were joined by Tony Crosland in pressing for a ‘class redistributive budget’ with big tax concessions targeted at the lower paid. Mellish begged emotionally, ‘Don’t do a Stafford Cripps on us, Roy.’ But Jenkins stood firm:
He insisted that we had invested so much political capital in solving the balance of payments that confidence in the Government depended on our maintaining a good surplus . . . It was far better not to do too much in the Budget and reflate selectively in the summer by other means if the outlook was propitious.165
Crossman despaired of Jenkins’ ‘conventional, rigid, narrow, low-risk’ strategy, aimed solely at protecting the balance of payments. ‘But it was quite clear he had swung Harold to his side and that Callaghan and Healey were also with him.’166 Crosland apart, it was a broadly left–right split. Jenkins did agree to dine with Crossman and Castle three days later; but after the Chequers meeting he was not prepared to talk any further about the budget, so Crossman expanded the event into a social evening with spouses. ‘It was good fun,’ Barbara recorded. ‘But we didn’t succeed in getting much out of Roy, except that he needs a lot of sleep and never works in the evenings. When I asked him casually what job he would like other than Chancellor, he headed me off.’167
Maybe Jenkins was more influenced than he let on, since back in the Treasury the next day he told his officials that the projected £100 million giveaway was too pessimistic: he now thought he could afford to boost demand by £150 million.168 At least one academic adviser, Michael Posner, was alarmed that ‘£100 million between friends has increased by about 50%.’169, fn18 But MacDougall’s latest forecast supported the case for a mildly reflationary budget. Whatever his final judgement, Jenkins was anxious to present it as positively as possible, leading to some discussion between his officials about how to massage the figures. ‘On this basis,’ Douglas Wass (who had succeeded David Dowler as Jenkins’ Principal Private Secretary in 1969) minuted William Ryrie on 3 April, attaching the most favourable formulation he could contrive, ‘the Chancellor would reasonably be able to show that his proposals come very close indeed to forming a £200m Budget.’171 In the end Jenkins announced a giveaway of £220 million, composed mainly of increased personal allowances for the lower-paid and raising the earnings limit for pensioners. But this was widely regarded as disappointing, and it was in truth a remarkably dull budget, delivered with something less than his usual style. The only welcome novelty was the abolition of stamp duty on cheques (which was Bill Rodgers’ idea). Labour backbenchers were visibly unenthusiastic (‘Muted welcome for a Scrooge-like Budget’ was the Times headline);172 while the Treasury’s press digest summarised the consensus of the rest of Fleet Street:
The Telegraph finds it dull. The Guardian says it’s almost too cautious. The Mail, Sketch, Express and Star are more disappointed. The Star talks of a few crumbs after a 2-year hard slog. The Express also talks of crumbs, and the Sketch of a miserable share out of the petty cash.173
Significantly, however, both the Daily Mirror and the Sun dubbed it ‘an honest budget’.174 And curiously, in view of their earlier anxiety, the diarists were surprisingly positive. Crossman thought the limited giveaway ‘the correct, prim and proper thing to do, and it is also positively socialist, because the remission only apples to people with incomes between £16 and £19 a week’;175 and Barbara Castle conceded that ‘psychologically he [Jenkins] is striking the right note of sustained growth, much as I would have liked him to do more. We have now invested so much political capital in his strategy we had better stick with it.’176
On television that evening Jenkins adopted the tone of the responsible bank manager. He celebrated the fact that Britain’s trading position was now ‘one of the strongest in the world’ and the pound once again ‘a strong currency’, and explained that his purpose in the budget was to ‘consolidate success’ by pursuing ‘a sensible middle course, neither rash nor mean’. He warned against excessive pay rises (‘If wages were not going up so fast I would have been able to make more concessions in the budget. T
hat is simple common sense. You cannot have things twice over’), but stressed that while it was not a soft budget, ‘virtually everything in it is a benefit’. There was ‘no effective increase in tax for anybody. And nothing to cause or justify an increase in prices.’ In short, he concluded, ‘I believe it is a fair budget’, which had been made possible by the hard work and national success of the past two years: ‘a budget not just for today but for the year as a whole, and for the future as well’.177
Gradually over the next few days it appeared that the public – reflecting the Mirror rather than the Express – appreciated his responsibility. Within a week the polls were showing Labour, for the first time since 1967, moving into a lead over the Tories. David Butler interviewed Labour party workers and found them attributing the swing explicitly to the budget. ‘Jenkins’ Budget had made a good impression because it was without tricks or gimmicks and . . . Jenkins himself made a very good impression on television,’ said one regional organiser. The Transport House Press Officer admitted that ‘Roy Jenkins’ budget was now seen to have been a very good thing. It really would not have done Labour any good to offer goodies in an election year.’178 Even Crossman now conceded that ‘not having an election budget might have been electorally the cleverest thing to do. It is clear that Roy’s posture has paid off. He is honest Roy, Aristides the Just.’179
After Labour lost the 1970 election Jenkins’ over-fastidious refusal to bribe the voters with a giveaway budget was widely blamed, particularly by the left, for the result. Barbara Castle, for one, quickly reverted to her earlier view and spent the next thirty years bitterly propagating it. ‘I remain convinced,’ she wrote in her memoirs, ‘that Roy Jenkins’ Budget was the primary cause.’180 Once Jenkins had become a hate-figure – first over Europe in 1971–2 and later for defecting to form the SDP – it became a settled part of Labour mythology to make him the scapegoat for the government’s defeat. But this mythology flies in the face of the facts. If anything, it was Jenkins’ budget that very nearly won Labour an election it had never looked like winning before. All the evidence is that voters were sick of transparently cynical pre-election giveaways and responded positively to Jenkins’ more adult approach. The economic wisdom of the budget is still contested. With hindsight Jenkins himself came to believe that the Treasury advice had been too cautious, overstating the level of demand already in the economy, so that he could have afforded to give away a little more than he did (though even that was more than they approved). The counter-argument, made at the time only by The Economist, is that unchecked wage inflation was already doing quite enough to stimulate the economy.181 Given that the Conservative government inherited both rising inflation and rising unemployment, either position is tenable. ‘Purely economically’, Jenkins later reflected, the budget might have been a bit too restrictive. ‘But politically it was the best budget we could have had.’182 Arguably it was too popular. The only way the 1970 budget can be said to have contributed to Labour losing the election two months later was that its success tempted Wilson to go to the country too soon, before the turnaround in the balance of payments was incontrovertibly established – thus inviting the very charge of opportunism to which he was most vulnerable.
Roy Jenkins Page 46