Austerity Britain

by David Kynaston

  ‘We’re absolutely hopelessly inefficient,’ he concluded. ‘The whole thing is muddling through.’

  It was a justifiably damning charge-sheet. Admittedly nationalisation in 1948 had given the railway industry (like the coal industry) a near-impossible brief of combining public service with commercial efficiency, but the fundamental problem was crippling underinvestment, in freight as well as passenger services, reflecting the failure of politicians and mandarins to face up to the need for an extensive modernisation programme. The contrast with France was especially painful. There the gifted engineer Louis Armand was instructed by his government in 1946 to make the French railway system the best in Europe; he received the resources and political backing to do so, and by the early 1950s was delivering. It was a similar story on Britain’s roads, where after the early abandonment of the ten-year national road plan announced in 1946 there was only nugatory investment in what was – long after the creation of Germany’s Autobahns – a pitifully inadequate, slow-moving and bottlenecked network. Moreover, blighting the prospects of both road and rail, there was in these years no systematic appraisal by the Treasury of the long-term demand that the British transport system was likely to have to meet.

  As for telecommunications (still run by the Post Office), the picture was if anything even more dismal than that painted by Henriques. By 1948 less than 10 per cent of the population had a telephone, while by 1950 demand was so far exceeding supply that the waiting time for installation was reckoned to be anything up to 18 months. Moreover, for those lucky enough to have one, there were for private users the joys of a party line and for businessmen (and others) the trying, export-order-threatening experience of, in Correlli Barnett’s exasperated words, ‘waiting and waiting for their turn to have urgent long-distance calls put through inadequate cabling’ by telephone operators ‘shoving jacks into the switchboards of ageing manual exchanges’.1It could hardly have been a more felicitous formula for telegrams and anger.

  In the area of training and education, it had traditionally been the apprenticeship system that sought to ensure a well-trained workforce, but by the 1950s, even though that system was working reasonably if not brilliantly well on its own terms, the fact was that almost three-quarters of teenagers entering the world of work were doing so in jobs without any craft or career training available. Nor was the formal education system meeting the gap. At secondary level the technical schools, supposed to be one leg of a three-legged stool that also comprised grammars and secondary moderns, never began to get a proper head of steam behind them, not least because the requirements of industry were low down the priorities at the Ministry of Education. Meanwhile, wartime plans to develop a network of so-called county colleges, providing compulsory part-time vocational education for school leavers up to the age of 18, never got off the ground, with voluntary day-release – inevitably less focused and sustained – being substituted instead.

  Higher education, in terms of providing the requisite scientists, engineers and others for a modern economy, was not much better. In 1945 the Percy Report advocated that local technical colleges (though only ‘a limited number’ of them) should be sufficiently upgraded, in status as well as educational content, that their courses would be comparable to university degree courses. They were in effect to be the forerunners of the latter-day polytechnics. It was a bold proposal that soon encountered significant opposition from the Advisory Council for Science Policy, comprising eminent scientists from university departments, the research councils and industry. ‘We do not believe that the type of man we need can receive the right kind of education in a technical college,’ that body insisted. ‘For that, we are convinced we must rely on the universities.’ Investment in these technical colleges proved spasmodic up to the mid-1950s, with the numbers increasing but still fewer than 40,000 attending them.

  In the universities themselves, there was a certain amount of opening up, with numbers increasing from some 50,000 at the end of the war to some 80,000 by the early 1950s, along with greater financial provision for children from poor, working-class families. But as one historian has fairly put it, ‘their traditional curricula remained largely unchallenged and unchanged’, notwithstanding the establishment in 1950 of the more science-oriented Keele University (originally called North Staffordshire University College). Crucially, ‘they adapted only slowly to the technological needs of the post-war economy’.2.

  In the area of incentives, Herbert Morrison’s candid private assessment in July 1949 of the current high-taxation regime was that ‘the incentive to effort for workers as well as professional and technical people and employers is seriously affected by this burden’. With the standard rate of income tax standing at 9s (45 per cent), and around 12 million people paying some form of income tax (compared with four million before the war), he was understandably concerned about the political as well as the economic implications.

  Generally, among economists and economic-policy advisers, there existed a broad consensus that overly high taxation acted as a significant deterrent to efficiency and productivity. ‘In these days most wage earners know enough about their income tax to realise how much of their overtime pay goes in income tax, and there is no doubt that this discourages extra effort,’ noted Paul Chambers in 1948 – a view having particular authority because he was the architect of the recently introduced Pay As You Earn (PAYE) system. For Robert Hall, head of the Cabinet’s economic section, the crucial thing was to get some hard information about how taxation and incentives actually played out in practice. Not that Hall did not have his own views. ‘What I really want,’ he reflected in 1950, ‘is an authoritative and impartial statement, to which everyone in the country will have to pay attention, to the effect that there are features in the present system which in the long run are very likely to damage our industrial efficiency, and that the price of removing these features is fairly small, whereas the price of keeping them may in the long run be fairly heavy.’

  The upshot was the Royal Commission on the Taxation of Incomes and Profits, which commissioned a report, Incentives in Industry, by Geoffrey Thomas of The Social Survey, involving 1,203 interviews in early 1952 with a range of male manual workers across the country. The findings confounded the conventional wisdom. Not only, in the summarising words of the Treasury, did ‘few productive workers’ have ‘any detailed knowledge of the way they were affected by income tax’, but there was ‘no evidence of productive effort being inhibited by the income tax structure within its present limits’. Startlingly, Thomas reckoned that of the eight million or so manual workers about whom it was reasonable to generalise on the basis of his sample, only a sixteenth or so of them, if offered fiscal incentives, ‘might increase their speed of work to improve their standard of living’ – and that ‘the amount of the increase is undetermined’. Furthermore, when his interviewees were asked to name the main ways in which output could be increased, ‘monetary incentives to production did not occur spontaneously to more than 6% of the men’.3.

  There was thus only very weak evidence that – whatever the public-bar mutterings about tax – the availability or otherwise of fiscal incentives significantly affected real-life behaviour in most workplaces. Whether it was a different matter for the more vociferous grumblers in the saloon bar remained uncertain.

  The Labour government, with its inherently divided instincts on the subject, did not prove an effective champion of competition. Although it did (under American pressure) push through anti-monopoly legislation in 1948, this lacked an adequately coercive dimension, while over the next three years the newly established Monopolies Commission managed to produce a grand total of two reports on specific industries: dental goods and, bizarrely enough, cast-iron rainwater goods used in building. Indeed, if anything the business environment was over the long run becoming less competitive: it is plausibly estimated that whereas in the mid-1930s cartel agreements (usually managed by trade associations) were affecting some 25–30 per cent of gross manufacturing
output, by the mid-1950s the equivalent level of collusion was at around 50–60 per cent.

  Predictably, it was the businessmen themselves (largely through the Federation of British Industries) who were mainly responsible for emaciating the legislation. Indeed, such was their attachment to cosy price agreements that they also managed to deter ministers from introducing measures that would threaten resale-price maintenance. Collusion was seemingly everywhere – for example in the ice-cream industry, increasingly a carve-up between Lyons and Wall’s, though the urban myth that kiosks on Brighton beach sold only Lyons ice cream because of a territorial ‘fix’ was untrue, at least in the sense that it was the local councillors and not the companies that did the fixing. Certainly it was a stitch-up in Steel City. ‘Selling was a gentleman’s existence, with Sheffield operating as a big cartel,’ Gordon Polson of Firth Vickers recalled in the early 1990s about the steel industry 40 years earlier. ‘Orders were reported first to the respective trade and association committee, and at the end of the day they would tell you what prices to quote. The price-fixing was incredible.’4.

  The preference for an easy life was understandable – there were still plenty of government controls in place; imperial and Commonwealth markets provided an apparently welcoming, uncritical home for British goods, and the import threat was no more than a cloud on the distant horizon – but such an approach was no sort of preparation should the weather change.

  Finally, on the question of restrictive practices, one turns again to Ferdynand Zweig, who when he began his study of five sectors of industry in the late 1940s was under the impression that such practices ‘were increasing, because of the strengthened bargaining power of the Unions’. (Typically, he conducted some 400 interviews in the course of his inquiry.) ‘But fortunately the reverse is true,’ Zweig went on. ‘War economy, with its admitted need for more production and the national interest awakened and strengthened in all sections of the population, delivered a blow to many restrictive practices . . . And many restrictive practices abolished or temporarily suspended during the war are still in abeyance.’

  That seemed straightforward and optimistic enough. However, he explained, the reality was more complicated. Not only in this respect did the war deal ‘not as severe a blow as might have been expected’, but ‘there is a group of restrictive practices which has been spreading since the war’ – practices that included ‘the embargo on overtime, “working to rule”, withdrawal from Joint Committees deliberating on important and pressing issues, etc.’ Unions found such restrictive practices to be an effective substitute for a strike, ‘which is a costly affair, full of risks and too conspicuous, and up to now in most cases outlawed’. There was, Zweig emphasised, a similar lack of appetite for confrontation on the part of many employers, who were willing to acquiesce in piecework bans, overtime restrictions or closed-shop arrangements. ‘“Peace in industry is worthwhile paying for” they often say,’ he noted, while not denying that it was a rational attitude. After all: ‘Practically the whole field of industrial relations is covered by agreements, rules and practices accepted by both sides, and the industrial code is growing constantly. Many employers feel that these rules and regulations are restricting the field of free enterprise, but they cannot find any alternative to this, but industrial chaos.’ In short, ‘each industry has a system of industrial jurisprudence, and the boss’s word is no longer law’.

  Zweig’s survey leaves the reasonably clear impression that although restrictive practices were not necessarily spreading or intensifying, nevertheless they remained, from the point of view of encouraging a productive economy, a serious problem. Indeed, at about the same time another inquiry (overseen by the distinguished economist Roy Harrod) discovered that more than 60 per cent of its business respondents reckoned that prevailing restrictive practices were responsible for reducing productivity.5.

  In few places were these practices more rife than the national newspaper industry – where the union chapels exercised an iron and highly profitable rule, to the dismay of successive generations of timorous management, for whom the overriding concern was to ensure that their papers never failed to get out, at whatever long-term cost. Take the Financial Times. In September 1946 the editor, Hargreaves Parkinson, sent an urgent memo to the managing director that in a sense foreshadowed all that lay ahead. ‘Mathew [Francis Mathew, manager of the printing works] rung up after you had gone tonight,’ he began, and – after explaining how advantageous they felt it would be ‘for expediting the printing of the paper’ if the men took their half-hour for supper from 6.30 to 7.00 instead of 7.00 to 7.30 – he set out the state of play:

  The men have now been consulted and have intimated their willingness to make the cut at 6.30. They will do it for an extra payment each night of 8d, which Mathew says would mean a total of £2 a night, i.e. £10 a week. They can do it starting Friday night, if it is authorised Thursday.

  I recommend it strongly. It would be well worth the money and it may be indispensable if we are to get our eight-page issue out tomorrow night.

  The recipient of this message was Lord Moore (the future Lord Drogheda, chairman of the Royal Opera House and one of the classic great-and-good ‘fixer’ figures of the post-war era). Next day, he returned the memo with a laconic pencilled note: ‘I have said OK to Mathew.’

  The following July, a not yet upwardly mobile 16-year-old called Norman Tebbit went to the FT as a price-room hand. There, compelled to join the printing union NATSOPA, he was ‘outraged at the blatant unfairness of the rules which provided for the “fining” or even expulsion (and thus loss of job) of those with the temerity to “bring the union into disrepute” by such conduct as criticism of its officials’. Accordingly, ‘I swore then that I would break the power of the closed shop.’6. But more immediately, the question was whether, given the Labour government’s natural reluctance to jeopardise its social contract with organised labour, a future government of a different hue would have the resolve to attempt to put industrial relations on a more flexible and productive basis.

  There was an alternative model to follow. Near the end of September 1949 – as Aneurin Bevan cheered up Labour spirits by launching a barnstorming attack on Churchill as well as the ‘obscene plundering’ of stockbrokers and jobbers in Throgmorton Street’s unofficial market the Monday after devaluation – the Daily Mirror asserted that what really mattered in Britain’s painful economic position was not ‘the dreary political skirmishing’ in the House of Commons but a just-published report which found that output in the American steel industry was ‘anything from half as much again to nearly double the rate of ours’. Noting that ‘America succeeds because U.S. workers believe in the benefits of high output’, the paper concluded: ‘Only when every industry and every trade union has been converted to this purposeful way of thinking will we be in the frame of mind to conquer our difficulties.’ 7

  What is clear about these years, however, is that neither side of British industry was willing, when it came to it, to follow the American gospel of productivity, with its pervasive emphasis on new methods and new techniques of doing things.8. Thus the largely fruitless endeavours of the Anglo-American Council for Productivity, which between 1948 and 1953 produced a considerable body of work detailing the stark contrast between the productivities of the two economies but made barely a dent in deeply entrenched attitudes. In particular, the American push for the ‘3 Ss’ – standardisation, simplification, specialisation – met with much opposition on the part of managers, who were similarly unimpressed by American calls for greater professionalism and zeal, not to mention greater openness with the workforce. As for that workforce, as represented by their unions, there was little appetite for the American formula of attacking craft practices and putting enhanced mechanisation and productivity bargaining in their place.

  Importantly, this joint resistance to Americanisation was very much in line with British attitudes generally to their cousins across the herring pond. ‘What are your present
feelings about the Americans?’ Mass-Observation asked its panel in August 1950. The following replies (all from men) were broadly representative:

  Cordial detestation. (Schoolmaster)

  I like their generosity, but I dislike their wealthy condescension. (Forester)

  I do not like their habit of preening themselves and their way of life before the world and of giving advice to the rest of us in a somewhat sermonising manner. (Civil servant)

  I like them and consider them our absolute friends. They give me the feeling of being able to do anything if they put their mind to it. Nothing would be too big. (Clerk)

  Something like horror though that is much too strong a word. Their strident vitality makes me want to shrink into myself. (Vicar)

  As individuals charming. As a race ‘We are it’. (Sales organiser)

  I dislike their worship of Mammon and hugeness but one must admire their ability and success. (Retired civil servant)