A History of Modern Britain

by Andrew Marr

  By now the complex nature of the choice facing him was apparent. Devaluation and the future of socialism; Britain’s relationship with America and attitude to the Vietnam War; and whether we could and should be in the European Community, were all completely interlinked. Had Britain broken with America during the most testing time in its Vietnamese agony, the story of the Atlantic alliance would have taken a very different turn. We would probably have entered the EEC much earlier and, again probably, have played a role closer to that of France in the following decades, less linked in nuclear defence or intelligence terms to Washington. What this would have meant for the British economy’s failing experiment in continental corporatism, and for the stability of the anti-Communist world, is impossible to say. Further, because many Commonwealth countries held their reserves in sterling in London, devaluing the pound would have been a one-off and unilateral cut in the wealth of friendly and often poor countries. Deciding about the value of the pound was also a choice about Britain’s place in the world.

  Oddly, the thing that would do most to destroy Harold Wilson’s reputation on the left was also the policy for which Britain has most cause to remember him gratefully. We have seen some of the pressure he was under to commit British troops to Vietnam. The Australians had committed a battalion, President Johnston constantly reminded him; perhaps the Black Watch might be sent, or at the very least a military band? American hints had been mingled with those American threats about the pound; and Britain’s economic position was, as we have seen, weak enough. Whitehall mandarins and some of his own advisers thought he should have committed at least some troops, but though Wilson may have been tempted and though British special forces had been considered, he held back from doing so. He tried to buy the Americans off with words of support and stabs at a diplomatic solution, hoping to use his connections in Moscow and suggesting some intervention directly with the North Vietnamese. He managed to placate nobody. The initiatives infuriated Washington, while the anti-war marchers at home simply heard his supportive words for Johnson.

  Wilson was berated in the streets as a murderer. His Secretary of State for Defence who had quickly realized the scale of risk that Vietnam posed and helped keep Britain clear, was rewarded on university campuses with cries of ‘Hitler Healey’. When the trade union leader Frank Cousins, briefly in the government himself, asked Wilson why he wasn’t taking a firmer stand against American war-making, Wilson furiously replied, ‘Because we can’t kick our creditors in the balls.’ One of Wilson’s later biographers made the case for the defence with steely eloquence. Losing all Washington’s friendship and financial support would have been devastating: ‘Few considered the implications for domestic social, housing, education, arts and science policies, including the probable effect on student grants. Few, indeed of those who attacked the prime minister and his colleagues simultaneously for helping the Americans abroad and not doing more to help the poor at home, ever came to terms with the bleakness of the choice.’ Yet, the same writer went on, it was over Vietnam that ‘the party of conscience seemed to lose touch with its soul’ and over Vietnam too that many who had pinned their trust in Wilson decided his principles were ‘a shattered crystal, beyond hope of repair’. Here, for once, he was doing the right thing, or the best thing, and it was over this that he was most denounced. Who said politics was fair?

  Even Wilson’s close supporters were at times disgusted by his twisting to keep the options open. Tony Benn, a few weeks before Wilson went to the country to try to increase his majority early in 1966, had recorded: ‘My opinion of Harold was lower tonight than it has ever been before. He really is a manipulator who thinks that he can get out of everything by fixing somebody or something. Although his reputation is now riding high, I’m sure he will come a cropper one day when one of his fixes just doesn’t come off.’ At almost exactly the same time, Crossman summed up Labour’s wider problem: ‘The main trouble is that we haven’t delivered the goods; the builders are not building the houses; the cost of living is still rising; the incomes policy isn’t working; we haven’t held back inflation; we haven’t got production moving. We are going to the country now because we are facing every kind of difficulty and we anticipate that things are bound to get worse…’

  Wilson then had his successful re-election in March, when Labour’s tiny majority of three was replaced by one of ninety-seven seats. This ought to have ushered in his golden years. His dominance of the Commons had helped finish off Alec Douglas-Home, who was replaced by Edward Heath. The age of the grammar-school boys was truly established. Wilson, whatever his failures of vision, had fought a near-faultless campaign and won a mandate which obliged the British Establishment to accept that Labour truly was entitled to rule. He had shown himself a self-confident showman abroad, in Moscow and Washington, and had pursued frantic diplomacy over the Rhodesian crisis. Now, surely, his time had arrived. Yet there was plenty in the record of that first Wilson administration to give pause for thought – the dithering and manoeuvring over devaluation; the mutual suspicions about screwy little deals already dividing the cabinet; Wilson’s own habits of duplicity, notably over deflation and his attitude to British membership of the EEC.

  At the centre of all the difficulties the government faced was the dilemma of devaluation. The Chancellor, Jim Callaghan, remained under almost intolerable pressure, as he had been from the day when he took office. At times he seemed close to giving way under the strain. Jenkins recalled a cabinet in July 1966 when Callaghan, later famous for being imperturbable, suddenly started talking away from the agenda about the appalling pressures on sterling. He suggested to the startled ministers around him ‘both that the objective situation was desperate and that his own nerve had cracked. Wilson hushed him up and brought the meeting to an end rather like a policeman trying to get a blanket around a nude streaker.’ Indeed, Wilson regarded any talk of devaluation, public or private, as indecent. Once he, Brown and Callaghan had decided against it immediately after the 1964 election, it was known as ‘the unmentionable’. From then on a complicated three-way dance had been going on in private. Brown turned in favour of devaluation as one way to revive his hopes for expansion and the DEA. Callaghan dithered, but wanted any devaluation to be accompanied by the shock of deflation too. Wilson, against both devaluation and deflation, played the two of them off against each other, always worried that if Brown and Callaghan agreed, he would be scuppered. By July 1966 he was telling Barbara Castle in the Commons tea-room that Brown and Callaghan were plotting to get rid of him: ‘You know what the game is – devalue and get into Europe. We’ve got to scotch it.’ This, however, was classic Wilson: Castle was an anti-European, so his words were calculated to flatter her. But at the same time the Prime Minister was telling pro-Europeans in the press that he intended to lead Britain into Europe himself. As the press magnate Cecil King related in his diary months earlier, Callaghan was confidently predicting that Britain would enter Europe: ‘the pledges were only given to keep Barbara Castle and her kind quiet…Apparently Wilson thinks that after a successful election he will be able to eat any number of words with impunity.’

  Europe had sliced the party horizontally, cutting through the vertical divisions of left and right. Generally the party’s activists and left-wing MPs believed that the Common Market was a ‘bankers’ ramp’, a capitalist plot whose rules would prevent true socialism in Britain. The strongest view that Wilson himself had about it all was that he strongly didn’t have a view. He had been against on the grounds that Europe would be ‘anti-planning’, which seems a little odd. But as he moved camp, he told Barbara Castle, according to her diaries, that ‘The decision is purely a marginal one. I have always said so. I have never been a fanatic for Europe.’ And later, when she accused him of presiding over a messy, middle-of-the-road muddle about conditions for entry, he complacently replied: ‘I’m at my best in a messy, middle-of-the-road muddle.’ He did not holiday abroad and had a strong sentimental attachment to the Commonwealth and th
e provincial reassurance of traditional British life. Unlike Jenkins or Heath he had no friends in continental politics. When the referendum finally came in 1975, both Wilson’s wife and his political secretary Marcia Falkender voted against staying in, which probably hints at Wilson’s private instincts.

  Yet in the late sixties British business saw the European Economic Community as an essential escape-route into a more modern and efficient world, words which triggered a response in Wilson. The press was overwhelmingly in favour. Some of his most effective colleagues, notably Jenkins, were vehemently pro. Whitehall opinion, though divided, was leaning that way too. Europe offered Wilson a new theme when he needed it. In 1967 he and the strongly pro-European George Brown gently perambulated their way around Rome, Strasbourg and Paris discussing possible British membership, though de Gaulle was still chilly. Brown spent much of the time insulting and clumsily chatting up secretaries. Soon afterwards Wilson formally announced a renewed British membership bid. De Gaulle, though dismissive in public, privately told the British ambassador in Paris that he envisaged a new kind of Europe, wider but also looser, and led by the strongest military powers, France and Britain, then Italy and Germany. It would allow for more national sovereignty. He implied that this complete reshaping of Europe should be cooked up between Paris and London, then publicly proposed by Britain, after which France would come in to support it. This was not only an early sketch of the kind of Europe that Britain would yearn for but a classic Gaullist swipe at the federal Europe being built from Brussels. It seemed an act of French disloyalty to their German and other continental allies. In London, unsure whether it was a devilish trap, officials urged Wilson to leak the idea to the Germans. The leaks infuriated almost everyone, de Gaulle most of all, and the idea died. Despite all this, and despite warnings that food prices would rise by up to a quarter as a result of British membership, talks went on. Shortly before Wilson finally lost power, the six member states concluded their own pre-British-entry deal which badly tilted the budget system and agricultural support against the UK and the other would-be joiners.

  61

  Devaluation and a Coup

  Events – dear boy – duly forced the devaluation option into centre stage. Decade by decade, government by government, the impact of energy policy on British politics is a constant theme. One could write a useful political history which did not move beyond the dilemmas posed by energy supply. We can follow it from the winter of 1947 when the frozen coal stocks blew Attlee off course, through the oil-related shock of Suez and the destruction of Eden, to Heath’s double confrontation with the miners, ending in his defeat in 1974, the rise of Scottish nationalism fuelled by North Sea oil, and then the epic coalfield confrontation between Margaret Thatcher and Arthur Scargill taking the story up to today’s arguments about global warming and gas dependency on Russia. The simple fact of a small and crowded island energy-dependent in an uncertain world has toppled prime ministers and brought violent confrontation to the streets.

  It had its effect on Harold Wilson too, when the Six-Day War of June 1967 between Israel and Egypt led to an oil embargo on Britain by Iraq and Kuwait because of an alleged pro-Israel line from London. (Nasser, who made the allegation, of course recalled the Suez plot.) This, combined with war in Nigeria, hit Britain’s finances, hoisted prices and produced more selling of sterling. If this was not enough, two months later there was a huge national dock strike, shutting first Liverpool and Hull and then, one by one, most of the rest of the major ports including London. The economic effect was dreadful, the trade figures a national shock. Wilson lashed out at the strikers. A year earlier he had been even more vituperative about striking seamen, suggesting they were being manipulated by communists or, as he called them ‘a tightly knit group of politically motivated men’ who had failed at the ballot box. Though that strike finished soon afterwards, Wilson’s words, reckoned ‘bonkers’ by some cabinet colleagues, drove a further wedge between him and the left.

  In the overheated atmosphere of July 1967 there was renewed talk of a plot to oust Wilson and replace him either with Callaghan or Brown. While the Prime Minister was away in Moscow, the pro-devaluers were talking. George Brown, characteristically, was threatening to resign and trying to persuade others to support him as leader; and characteristically failing. Others, including Benn, felt that if he did resign the whole government would fall. Equally characteristically since he had a weakness for grand hostesses, Roy Jenkins was at the home of Ann Fleming, who has featured earlier in this book. Wilson later told Barbara Castle that the plotting was directed by ‘Ministers who went a-whoring after society hostesses.’ Jenkins responded in his memoirs: ‘There was indeed a certain allegorical quality about the behaviour of all of us that weekend…Wilson kept up his adrenalin by going on an unnecessary trip to Moscow. George Brown went berserk at the Durham Miners’ Gala. And I went to stay with Mrs Fleming at Sevenhampton.’

  Wilson was still determined to resist devaluation. When he discovered briefing papers on the pros and cons had been prepared by civil servants, he brusquely ordered them to be collected up and burned. This was now a personal fight, corrupted by the rivalries and ambitions which plagued the cabinet. The left-wing devaluers hoped to turn Labour at last into a proper socialist government. They preferred to keep Wilson as leader but would have ditched him if necessary. The pro-European devaluers would have liked to replace Wilson with Roy Jenkins. The ironies are multiple: as the arguments raged, some on the left toyed with leaving Labour and setting up a new left-wing party based on the trade unions to be called the Social Democratic Party. One of them was the young Neil Kinnock, who would later as leader unleash a ferocious war on another ‘party within the party’. The title SDP would later be taken not by the left but by Jenkins and many of the pro-Europeans who followed him. Meanwhile the devaluation crisis turned into an ungainly and undignified dance as George, Harold and Jim, with Roy and the rest joined hands, lurched away from each other, formed new sets and jigged towards humiliation. At moments, Callaghan seemed to think devaluation might be such a national catastrophe that it would force Wilson out, and let him in. Brown wanted it for strategic reasons and hoped against the odds it might usher him in as leader. Jenkins may not have been actively plotting, but was much enjoying his stellar reputation in the press and as a leading pro-European. Wilson was determined to fend off devaluation to protect his own position.

  Eventually, on the morning of 3 November 1967, the senior economic adviser at the Treasury, Sir Alec Cairncross, told Callaghan at a private meeting that the dance was over. Nothing more could be done, the music had stopped. No further foreign borrowing was available. He would have to devalue. Both knew that Callaghan would have to resign. Though his biographer called this ‘the most shattering moment Callaghan was ever to experience in sixty years of public life’ he seems to have taken it calmly and set about preparing yet another round of cuts, the deflation without which devaluation would be pointless. This caused cabinet arguments and threats of more resignations. Wilson, after yet another last-minute attempt to borrow more to see Britain through, eventually accepted that the pound was impossible to defend even with American support. In a 6 p.m. broadcast on 18 November Wilson announced that the pound was being devalued by 14 per cent and that defence cuts, restrictions on hire purchase, or credit, and higher interest rates would follow too. Callaghan, as Chancellor, felt utterly humiliated. He wanted to leave the government entirely but was persuaded to take the Home Office instead. Wilson, who had after all just torn up what he had for so long insisted was essential to his strategy, seemed curiously chirpy. Normally an astute reader of the mood, he made an awesomely bad mistake in his broadcast by perkily informing the nation that ‘the pound in your pocket’ had not been devalued. In terms of its immediate purchasing power in the local shop this was of course true but the suggestion that the pound’s international fall in value could be safely ignored was ludicrous and instantly understood to be ludicrous. Wilson was also devalued, p
ossibly by more than 14 per cent.

  Roy Jenkins now became Chancellor in Callaghan’s place. Under him the Treasury finally regained complete authority. Wilson tried to get his friend and ally Barbara Castle in to run the DEA but Jenkins was having none of that. From then on Labour would become as much a party of Treasury orthodoxy as the Conservatives. After being one of the most energetic Home Secretaries of the twentieth century, Jenkins himself spent a remarkable couple of years as one of its more successful Chancellors. Though he never made it to Number Ten, in terms of personal influence, there is almost a case for renaming the Wilson years the Jenkins years. His 1968 budget increased taxes by twice as much as any previous budget ever, including the wartime ones, and he returned to the attack later in the year, and again in 1969. The last of these, Jenkins pointed out, led to the only excess of revenue over government spending in the period between Baldwin and Thatcher, ‘a massive turn-round in the balance of payments and a vast consequent replenishment of our gold and dollar reserves and overseas borrowing capacity’. He was, however, lucky as well as tough, as he generously acknowledged in his memoirs. It turned out that the Inland Revenue and Customs & Excise had dramatically undercounted the value of British exports. With the draconian budgets designed to make the best use of devaluation the mood altered. At last, it seemed, that that elusive ‘grip’ had been discovered. The trade figures improved. After so long, could it be that Labour had begun to discover a way to run the economy after all? As we will see, the answer was no, and Jenkins, along with Callaghan and most of the rest of the cabinet, must take the blame. For the other great issue was trade union militancy and in particular the rise in strikes. Grip regained on the nation’s finances would be grip lost on its industrial climate.