Institutional Power and Reshaping the Future: The Battle for the Soul and Future of British Government, 1964-1969 (HT26)
More perhaps than any of its peers in Western Europe or across the Atlantic, the British government has a peculiar obsession with finance. It can be seen in the Prime Minister’s official title; First Lord of the Treasury. The Chancellor, the red-box-bearing harbinger of fiscal armageddon, is the Second Lord. The Lord Chief Justices of England previously functioned as interim Chancellors in the absence of one, and in the 18th and early 19th centuries many Prime Ministers – although the term did not formally exist until 1905 – combined the role of First Lord with that of the Chancellery.
So much of English (later British) policy was born out of the financial apparatus of government, which could make or unmake a ministry through steady growth or sudden calamity respectively. Thomas Cromwell, Robert Walpole, William Pitt the Younger, Benjamin Disraeli, William Gladstone and Stanley Baldwin all led the government whilst also leading the Treasury, but the Chancellery evolved out of an appendage of the Prime Ministership over the 1800s, and increasingly asserted its own autonomy. As the Prime Ministership became an increasingly international, party-political and expansive role, the Treasury’s autonomy grew greater, taking over the financial role once implied in the PM’s First Lord title.
As this pecuniary power grew, the Treasury was increasingly accused of asserting an ‘orthodoxy’ over the government, blocking reformist economic and fiscal policy in favour of small-c conservatism, emphasising stability for investors and the financial markets. Ramsay MacDonald’s 1931 government was illustrative of this: he, and his chancellor Phillip Snowden, refused to engage in either deficit spending on public works, or the tax and poverty relief measures recommended by J.M Keynes. Though Keynes’ General Theory would not be written for another five years, he was a serious voice within British economic circles after the end of the First World War and saw such policies implemented in European peer states like Sweden. Instead, the now-national government stuck to a deflationary course to protect the value of the pound, limit the growth of the deficit and safeguard the balance of trade, on the advice of the Treasury.
However, retrospective reflection on the flaws of the Labour government’s response to the Great Recession did not just diagnose a failure to spend; it created a cultural bugbear within the Labour movement, that of the stifling effect of the Treasury - courtesy of an Oxbridge educated civil service - on the radical measures that many saw necessary to correct the glaring inequalities and injustices in the UK in the 1930s and 1940s. In a nation that still battled slums and smog, elements of the left maintained that the administration of government was dominated by an entitled worldview unerringly committed to limiting the growth of government spending, the growth of the state and any exceptional tax demands from transient party political administrations.
This distrust of No.11 Downing Street led Atlee’s Labour government to create a separate Department for Economic Affairs (DEA), amidst repeated budget crunches, as the expansive plan of nationalisations and a welfare state envisaged in Let Us Face the Future (the Labour Manifesto) confronted the costs of post-war Reconstruction, colonial security crises in the Middle East and Asia, the burden of a nuclear programme, and strict American loans whose conditions regarding convertibility threatened the credibility and stability of the Sterling Area.
Stafford Cripps, one of the Labour left’s champions, was the first Minister for Economic Affairs. Unfortunately, the Chancellor, Hugh Dalton, made ill-judged comments to a journalist exposing the budget as he walked from the Treasury to Parliament. In an era of far greater Parliamentary scrutiny, he was sacked. The office of Minister for Economic Affairs, after two months of frenetic activity, subsided for another three years. As Cripps attempted to square the increasingly difficult circle of Cold War defence spending, the implementation of the Beveridge Report, and post-WW2 reconstruction, he did so within the confines of the Treasury. Whilst the Treasury made no serious attempts to block or impede the Labour government’s efforts, the attempts at economic planning pioneered in the Department of Economic Affairs failed to gain traction following the office’s suspension.
As Cripps’ long-term health problems began flaring up again, causing him to step down from office, the post-1945 government reached the end of its tether, with several MPs being pulled out of hospital for crunch votes after the 1950 general election delivered Labour back into office on a scratch majority of two. In this uncertain situation, the office of Minister for Economic Affairs was revived under Hugh Gaitskell, the champion of the Labour right. However, without Cripps’ energy and intellect driving the project, and burdened more heavily by the power of the Treasury, the Minister for Economic Affairs was reduced to a similar role to that of the Chief Secretary to the Treasury. As a non-Cabinet post, it avoided upsetting the delicate factional balance in the Cabinet, but still allowed the PM to appoint an ally to the office to try to check the power of the Treasury, and groom their own candidate for No.11 should the Chancellor fall.
The experiment lasted less than a year, the office being folded back into the Treasury after Gaitskell was appointed to the latter role once Cripps’ long-running battle with stomach ulcers became too great to surmount. Its demise epitomised the dilemma of the Attlee government. Arriving in office atop a wave of popular support with the mandate of sweeping reform, a chance for effective economic reform was squandered. Nationalisation was seen as a means to an end, and heavy taxation was necessary to fund both the nascent welfare state and decaying corpse of the Empire. A government whose manifesto boldly proclaimed, ‘Let Us Face the Future,’ ended in ignominy, with Aneurin Bevan, Harold Wilson and the lesser known John Freeman resigning from the Cabinet over the implementation of prescription charges for glasses and dental care to fund a rearmament programme.
The failure of the first DEA demonstrated the sheer inertial power of the status quo, and the challenges of attempting to reorganise state power via bureaucratic rearrangements, without prolonged effort and will, to fundamentally change the governing consensus and culture. So, as the Labour Party spent the intervening thirteen years fighting both with the Conservatives and among themselves, the ideal of the DEA as a centre of industrial and economic planning, the utilisation of state power to fundamentally change the structural inequalities inherent in the economy and labour market, gained much purchase in the movement.
Nowhere was this influence seen more clearly than on Harold Wilson. Wilson, a former advisor to Beveridge who had spent his time in the Second World War split between advising Beveridge and serving in the wartime Ministry of Fuel and Power, maintained a life-long love of statistics and planning that other ministers lacked. He returned to government as a Labour MP in 1945, holding a range of junior posts in the Ministry of Works and Trade before being appointed as President of the Board of Trade.
This role entailed control not just of trade (such as that the current Secretary of State possesses) but of a host of regulations and welfare measures that would later be parcelled away under successive Conservative leaders to dilute the power of the office. His tenure was marked by a ‘bonfire’ of rationing regulations, but also pushed for the nationalisation of private businesses which opposed the government’s doctrine and vigorous support of economic planning. He spent much of his tenure attempting to support this vision at home and abroad, before resigning in 1951 with Bevan. Despite his reputation for slipperiness and cunning, this belief in economic planning spanned Wilson’s entire career.
Therefore, when he led Labour to a four seat majority in 1964 as Prime Minister and set about forming his own cabinet and deciding upon his initiatives in government, economic planning played a major part. Whilst his government mainly focused on liberalising domestic reform, the strengthening of workers rights, welfare, education and healthcare services, and expanding access to housing, no government could afford to ignore the economy. Unlike Macmillan and Home’s traditionally conservative approach to the economy, emphasising stability above all else, Wilson’s government set out to reshape how Britain conducted and managed its economic affairs.
With James Callaghan in the Treasury as the representative of the unions’ interests, George Brown, the deputy leader of the Labour Party and sometime-leader of the Labour right, was made Secretary of State for Economic Affairs. Unlike in Attlee’s government, this was not an office subsidiary to the Treasury, but an independent and rival centre of policy-making authority that sought to establish the kind of long-term view to economic management which the Tories were critiqued for lacking. With an ethos of ‘if it ain’t broke, don’t fix it’, successive Conservative chancellors, unsurprisingly, did little to change the nature of the British economy or to invest in the skills, plant or infrastructure necessary for future competitivity, instead favouring small tax cuts and favourable grants to the voters before elections.
Brown’s leadership of the DEA offered great promise. As the democratically elected deputy leader he held significant influence within the party; and despite the claims of Douglas Jay that the job was nothing more than a token gesture to appease Brown’s own ambition, this status meant the office was greatly empowered. As First Secretary of State – a title occasionally employed by British governments which lacks any innate power, but signifies the position of the holder as the second-in-command of the government - Brown was nonetheless able to wield a good deal of influence. Promising young MPs Anthony Crossland and Bill Rogers served as Minister and Under-Secretary of State for the department respectively. With a leadership so smitten with economic planning and industrial policy, the prospects for the department appeared bright.
However, the department was fatally undermined from the first, due to the great flaw in its principal which blighted his entire career, his debilitating alcoholism - the same flaw which had prevented him securing the Labour leadership after Gaitskell’s death. The energetic Wilson, drawn to a thousand different initiatives and increasingly consumed with the flaws in Callaghan’s leadership of the Treasury and balancing the competing ‘big beasts’ of Labour politics at the time, could not dedicate the energy necessary to break the Treasury’s monopoly on fiscal power in the UK. The First Secretary’s stature in the party and government protected the Department from any direct attacks by the Treasury, or by an increasingly ‘treasury-brained’ Chancellor, Jim Callaghan, but without either the vision, the energy or the capacity to commit to fundamentally restructuring the relations of power within the government, the department was treading water.
Brown was moved to the post of Foreign Secretary after the 1966 election, with the former Colonial Secretary Michael Stewart holding the office for under a year before Peter Shore succeeded him for a further two years. Shore was a great historian of the Labour movement, and Stewart an experienced cabinet minister, but neither held the same presence in the government that Brown had commanded. The office endured a while longer but by 1969, after the 1967 devaluation of the pound and the appointment of the liberal, but conventional, Roy Jenkins as Chancellor, the office was dead.
The epitaph for the Department of Economic Affairs at first glance would appear to be a brief one. It only lasted for three years, failing to make a lasting imprint on the control of the Treasury over the government. Its main imprint onto British society and cultural life was not the inoculation of government direction into the economy. The ministry, the quiet resistance of the civil service, and the bumbling George Brown served as the inspiration for Yes Minister’s Department of Administrative Affairs, Sir Humphrey Appleby and Jim Hacker. Far from shattering the power of Britain’s economic elite and radically reshaping its ideas, the DEA had become a footnote in the reference pages of a quintessentially Thatcherite era, full of burdensome bureaucrats and incompetent politicians bereft of the vision of their leader.
We are now in an era where that old, Washington consensus, neoliberal system of economics – however it was contoured, softened and humanised — has fallen out of prominence. The public hunger for a muscular state capable of real change, and of giving a sense of direction to an increasingly uncertain world. The imperial hegemon of our era, the United States, is no longer a reliable nor beneficent overlord; at least 50% of the American public willingly and willfully return individuals hostile to the idea of trade and collaboration to the Presidency.
In this climate, the Labour Party has rediscovered its love for industrial policy, and the assertion of traditional government strength over the economy when its excesses or market failures materialise. The green industrial policy, staunchly supported by Ed Miliband and part of the economic mission of this government is the only vestige of its Keynesian tradition, and one that seeks to assert economic planning in pursuit of the myriad goals advanced by this government. Even Reform UK, and unsurprisingly the Green Party, have embraced the idea that the state should be conscious and concerned with, but not wholly beholden to, the whims of the market.
Wilson’s experiment has thus found new admirers. It exemplifies the tale of any government’s struggle to restructure the apparatus of the state, and the quiet power of bureaucratic inertia which can maliciously, unconsciously and quietly derail a government’s attempts to reshape the consensus or change British society - for good or for ill.
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