Political Consensus 1945/79 - A Changing Political and Economic Environment 1918 - 79
The post-war consensus
can be characterised as a belief in:
· Keynesian economics
· A mixed economy
· Nationalisation of major industries
· The National Health Service
· Commitment to full employment
· A welfare state in Britain; social security and
national insurance
· Introduction of nuclear weapons
Why did WW2 set the stage
for consensus?
o
The
National Government proved the Ministers from rival parties could work together
and that a broad agreement on key policies could be reached.
o
Success of
collectivism – an approach where certain problems are tackled by taking away
some rights for the common good.
o
The war
changed the role of government, as the state was forced to take more control–
Emergency Powers Act of 1940
o
There was
a shift from a mainly free-market economy to a more mixed one, where the
government used rationing, the Essential Work Order, conscription and
censorship all in a bid to engage Britain in a total war– by 1945, 1/3 of
citizens were taking in war-related work.
o
The led to
the Beveridge report in 1942 – in the report Beveridge envisioned a welfare
state that could care for a person from cradle to grave. His ideas were hugely
popular – the report sold 635 000 copies- and Labour’s promise to fulfil the
report was a huge contributing factor in them winning the election.
Why did Labour win by a
landslide in the 1945 General Election?
· Leadership
- Atlee portrayed himself as a
‘man of the people’, though Churchill led the country through WW2 people were
unsure whether he was the right leader for peacetime. During WW2 Atlee had managed the home front, showing that himself
and the Labour party were capable leaders.
· Campaigns
- Labour broke off the wartime
coalition after the war to force an election, campaigned on the slogan ‘let us
face the future’ and campaign posters centred around the British people, with
pictures of women of soldiers accompanied by the text ‘Labour for him’ or
‘Labour for her’. Atlee spent a lot of time touring the country. Churchills
campaign was lacklustre as he was so confident in him victory after winning the
war - Conservative slogan ‘let’s finish the job’ Churchill’s spiteful ‘Gestapo’
speech was seen as distasteful and poorly judged.
· Policies
- Labour promised to implement
the policies of the extremely popular Beveridge Report, Churchill rejected the
report and did not have a clear strategy for post war recovery. Labour’s manifesto
seems more specific, ambitious, detailed and thought through
· Public
Mood - Public wanted a change
after the harsh war years, they associated the Tories with the high
unemployment of the 20s and 30s and failed appeasement
Atlee government 1945-51
From 1945-1951 the
key consensus policies were established: a mixed economy, universal healthcare,
a welfare state, full employment and cooperation with the trade unions.
Key
achievement/policies:
- The 1944 Education Act - Introduces
universal secondary education split into three parts Grammar, Modern and
Technical schools. It also created a Government Minister for education and
raised the school leaving age to 16 by 1973.
- The 1945 Family Allowance Act – gave money to
support those with children (child benefits).
- The 1946 National Insurance Act – paid for
through taxes the Government provides support or ‘benefits’ in cases of sickness,
unemployment, retirement, maternity, widow, guardians allowance for
orphans and a grant for funeral expenses.
- The 1946 National Health Service Act – a major law
that gave healthcare to all paid for by taxes but free at the point of
need. Allowed for the creation of the NHS is 1948. (Bevan)
- The Industrial Injuries Act - provided
cover for accidents that happened at work.
- Nationalised the coal, steel, iron and railway industries, which
prevented their collapse
- More housing
- by 1948 125 000
‘prefab’ homes had been built, and by 1951 1 million good quality council
homes were built, 4/5 homes
built by the state
- Means-testing abolished
- Improved education - built 900
primary schools (for baby boom) and 250 secondary schools - School leaving
age raised to 15
The changes implemented during this time were hugely popular with the
public, which led to the Conservatives 1947 Charter, which accepted many of the
consensus views. The charter; accepted the idea
of a mixed economy, gave a commitment that the party would protect labour rights, stressed the need for fairness and opposed protectionism.
Why did labour lose the 1950
and 1951 election?
Growing dissatisfaction over continued rationing.
Austerity (after 1947) wasn’t being perceived as bringing economic
recovery quickly enough.
Taxation at 45% at a standard rate was seen as too high.
Labour Ministers were tired, beginning to divide and were disillusioned; Labour
became divided after the Bevanite revolution in 1951, and over the issue of
nuclear weapons and the Korean War.
Conservatives were seen as a united party – particularly over the
nationalisation of iron and steel which impressed the electorate.
The Conservative 1947 Industrial Charter showed that Conservative were willing to adapt and
adopt consensus policies
Also, 1950 saw an influx of bright young Conservative politicians.
Churchill, Eden and
Macmillan governments 1951-1965 - ’13 Golden Years’
Key policies/achievement:
· Housing
(under Macmillan) 1951-1955
o
Conservatives
made a commitment to 300,000 new houses a year, which they achieved. 1953:
327,000 were built 1954: 354,000 were built
o
1952 –
Housing subsidy increased from £25 to £35 per home - Supported by Butler.
o
Mortgages
were to be more readily available.
o
Still 80%
of house building was state.
· Iron
and steel were largely denationalised in 1953
· War
time rationing ended 1954
· Health
o
1959 Metal
Health Act - Modernised treatment to be humane.
o
1962 plans
were unveiled for 90 new hospitals to be built within the next 10 years
· Education
1957-1964
o
Pledged
that 6000 new schools would be built
o
1963
Robbins report suggested need for more universities, so 7 new universities were
established
o
Allowed
local authorities to set up comprehensive schools if they so choose
o
10
Technical colleges (for further study) were set up
Consensus?
ü The Conservatives adhered to many of Labour’s
policies; they continued to fund and improve the NHS, they were committed to
the mixed economy and full employment and they managed the economy using
Keynesian style economics.
ü No changes made to Nye Bevans NHS
ü Welfare state expenditure continued to grow in
real terms. 19.3% of GDP was spent on it in 1964, up from 16.1% in 1951
ü The term Butskellism (a mixture of the names of
Tory Chancellor R.A. Butler and Labour party leader Hugh Gaitskell) was coined
to describe the almost identical economic policies of the two parties.
´ The Conservatives were criticised for their use
of ‘stop-go’ economic policies, inflation begins to be a problem
´ 1959 Chancellor, Treasury minister and
Financial Secretary all resigned because they believed the government was
spending too much; believed inflation a bigger threat then unemployment and
wanted spending cuts, tax rises and end of subsidies.
´ The Conservatives also reversed nationalisation
of steel and iron, with the support of the people.
’13 Golden Years’ or ‘13 wasted years’?
Golden
|
Wasted
|
· Housing was perhaps
the most remarkable achievement - 6000 new schools, 11 new universities and
existing ones were expanded
· Leading member of
UN and NATO by 1964
· Britain was developing
closer ties to the USA. Involved in the Test Ban Treaty Talks, 1963.
· 1950s: Nearly 3%
growth per annum
· 1951-1964 – Britain’s economy grew
40%
· Consumer spending
rose by 45%
· Families ate better
and had more consumer and luxury goods
· NHS – its work was
improved by the Mental Health Act of 1959
· Inflation was
around 3/4% for most of the 13 years, unemployment was below 2%
· Subsidies to help
modernise and support British farming
· Wages rose by 72%
· Significant
improvement in wages and the standard of living for all. By 1964 91% owned a
TV, Car ownership had quadrupled to 8 million by 1964.
|
·
Britain’s
economic rivals sent more young people to university.
·
Failure
to tackle inflation for fear of increasing unemployment. Inflation 3/4%
·
Humiliation
at Suez and the failure to find a place in the world
·
Economic
growth was fairly low in Britain (2.4% compared with 5.6% in Italy and 5.1%
in Germany)
·
Productivity
was the lowest in Western Europe.
·
Share of
world exports in manufactured goods fell from 25.5% in 1951 to 13.9% by 1964.
·
The
economy – ‘Stop, Go’ hampered growth -The policy only worked in the short
term and contributed to a build-up of inflationary pressure and ‘stagflation’
·
Stop Go
prevented investments and caused the balance of payments to be imbalanced
(too many imports).
·
1964:
Labour inherited a balance of payments deficit of £750 million.
·
British
application to join the EEC vetoed.
·
Lack of
investment in manufacturing. Germany and Japan did better in these years.
·
Debate
over grammar and comprehensive schools and the 11plus. Not resolved. Became
more problematic after 1970.
|
End of Conservative dominance
· Conservative popularity had declined by 1962
· Increased consumer spending had led to
inflation and a balance of payments deficit
· People had become more opposed to the
‘establishment’
· Failure to gain entry to the EEC in 1963
· Night of the long knives makes Macmillan seem
ruthless
· Profumo
affair - Conservative
Secretary of State for War John Profumo discovered to have had an affair with
Christine Keller, who had also been sleeping with a soviet naval attache (and
suspected spy). Profumo had denied the affair in Parliament, and when the truth
was exposed the Conservatives image was badly damaged and Macmillan’s
self-confidence was shattered.
Harold Wilson 1970-1974
When Harold Wilson
became prime minister of a Labour government in 1964 he was keen to continue
the consensus and lead Britain into an era of social and scientific process.
Harold Wilson was
appeared the polar opposite of the establishment. He was state-school educated,
had a normal Yorkshire accent and appeared calm and reassuring (was often
pictured smoking a pipe.) He was a big believer in scientific progress.
Remember for white heat and devaluation.
Key departments
created:
· Department
of Economic Affairs
o
Run by
George Brown, unreliable and a notorious drunk
o
Put
together the ‘National Plan’ in September 1965, a hugely ambitious plan to
expand the economy, but with no real ideas on how to raise production or
exports
o
The
Treasury resented competing with the DEA and the two department would no
cooperate
· Ministry
of Technology
o
Wilson
talked about the ‘white heat of technology transforming Britain’
o
Ministry
run by maverick MP Tony Wedgewood
o
Stifled by
lack of funds (due to economic problems) and cautiousness of the party
o
Supported
high profile projects such as Concorde (1968) and nuclear energy
o
Encouraged
British markets to compete in world trade
Other policies/achievements:
· New universities and polytechnics built
· Open University created
· Many liberal reforms; 1965 Race relations Act, 1967
Abortion Act and Family Planning Act, gay sex made legal, death penalty
abolished 1969, 1970 Equal Pay Act
· By the end of the 60’s Britain had a small
balance of payments surplus
Problems faced:
· Previous government had left the country with
an £800 million balance of payments deficit - twice what Labour had predicted
it would be
· Wilson was eventually forced to devalue the
pound in 1967 from $2.80 to $2.40, losing him huge credibility.
· By the end of the 60’s unemployment had risen -
unemployment was at 900,000 by 1964.
· Union unrest had increased –during the 60’s 3.6
million days were lost to strikes - yet Labour relied on Trade union funding
and so were unable to resist union demand - Barbara Castles ‘In place of
Strife’ White paper never implemented.
· Recession and inflation caused by Stop Go
policies – failure to properly solve the underlying problems of the British
economy.
Consensus?
ü Wilsons ambitious plans to invest in technology
show enthusiasm for consensus
´ Consensus policies of full employment and
cooperation with the trade unions under strain
´ Economic problems undermining governments
ability to continue investing in the welfare state - NHS charges abolished in
1965, then reinstated in 1969 at higher rates than ever because of economic
troubles
Edward Heath 1964-1970
After the
Conservative victory in 1974 Prime Minister Edward Heath made the first attempt
to break with consensus.
Edward Heath was in
some respects a precursor to Margaret Thatcher - He is most remember for his U-turn on policy and the three day work week.
Seldon Man: Outlined his ideas, promising fewer government controls, a tough
approach to trade unions and no support for failing industries
Key
achievements/policies:
· On coming into power the Conservatives cut
taxes and spending, and ended Wilson’s income policy, determining that wages
should be set by the market. (Less Keynesian more Free Market approach)
· 1971 Industrial Relations Act ; limited
trade union power, very unpopular with the TUC
· U-turn in 1971/1972 - government increase
intervention and spending
· 1973 Britain finally joined the EEC (precursor
to the EU)
The U-turn
· The budget of 1971 saw cuts in income tax and
government spending.
· However, economic policy was in tatters by the
end of 1971 as inflation soared and production fell due to, in part, lack of
government intervention.
· Unemployment had also risen to 1 million by
1972
· Heath, losing his nerve, conducted a U-turn in
government policy and returned to increasing government controls in prices and
incomes and interference in industrial relations.
· £2.5 billion was pumped into the economy in
increased pensions, benefits and tax reductions (known as the Barber boom)
· This brought down the unemployment level to 550
000 by 1974, however it indicated the Selsdon Man had been completely abandoned
Problems faced:
· Unemployment
had reach 1 million by 1972
· 1973
Oil Crisis badly affects the
British economy
· Miner’s
strike in 1974 forced Heath to
implement a three day work week (and eventually give in to the strikers
demands)
· After the miners’ strike Heath called an
election with the slogan ‘Who governs
Britain?’ He lost.
Consensus?
´ Selsdon man shows the first major shift away
from consensus policies – with an attempt to break away from cooperation with
trade unions and full employment.
·
However
Selsdon man was abandoned, the government pumped £2.5 billion pounds into the economy
´ Relations with the Trade Unions in tatters -
Industrial Relation Act, 1972 Strike, 1974 Strike
Wilson and Callaghan
1974-1979
From 1947-1979 the
post war consensus was under huge strain and the Labour party faced significant
barriers to upholding consensus policies.
Labour held a slim
majority of 3 seats and were forced to rely on the Liberal party (was known as
the Lib-Lab pact)
In 1976 Wilson
resigned, and was replaced by Jim Callaghan. They are remembered for the IMF loan, and the ‘Winter of Discontent’.
The Economic problems:
· 1973
Oil Crisis - After oil prices
rose by 70% in 1973 there was a dramatic surge in inflation, with the inflation
rate over 20%.
· Britain was dubbed ‘the sick man of Europe’
· In 1975
Chancellor Heady abandoned commitment to full employment (a key consensus
policy) and embraced monetarism in order to limit inflation and balance the
budget
· Pound devalued, reaching a record low against the dollar in June 1976
· 1976
IMF loan - Britain was forced
to take out a £4billion loan from the IMF to cope with the economic crisis; In
return for the loan Britain made huge cuts to public expenditure and the budget
deficit - there were proposals for a cut of around 20 per cent in the budget deficit.
After the IMF loan
Britain’s economy improved, interest rates were soon cut and the pound
appreciated (went up in value).
The Trade Union Problems:
· Labour repealed the Industrial Relations Act and
replaced it with the ‘Social Contract’ – a voluntary prices and wages control
agreement.
· This failed as trade union members wanted pay
increases.
· Industrial
unrest culminated in the ‘Winter of Discontent’ in 1978-79; After a wage freeze (a condition of the IMF
loan) public service workers went on strike; rubbish went uncollected, staff
walked out of children’s hospital and corpses were left unburied.
· The British tabloids exaggerated and
sensationalised the strike, causing public opinion to turn decisively against
trade unions and against the Labour party, who failed to stand up to the
unions.
Consensus?
´
Economic problems and huge cuts to public expenditure made consensus
policies of economic growth, full employment and a welfare state almost
impossible to maintain
´
IMF crisis reinforced a change in policy
orientation away from full employment and social welfare towards the control of
inflation and expenditure
´ Callaghan and
Chancellor Heady ditched Keynesian
economics
´ Unemployment rose to 1.6million in 1978
´ In a speech Callaghan said ‘We used to think
you could spend your way out of a recession and increase employment by cutting
taxes and boosting government spending .... That option no longer exists’
´
Also
said Britain must ‘pay its way’ in
the world
In the landmark
election of 1979, Margaret Thatcher was elected, which marked a decisive end
the post was consensus. From 1974-1979 consensus was ultimately abandoned due
to the economic troubles faced by Britain.
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