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.