A History of Modern Britain

by Andrew Marr

  What finally finished off the Heath government was the short war between Israel and Egypt in October 1973, the Yom Kippur War. Israel’s swift and decisive victory was a humiliation for the Arab world and it struck back, using oil. OPEC, the organization of the oil-producing countries dominated by the Saudis, had seen the price of oil rising on world markets for some time. They decided to cut supplies to the West each month until Israel handed back its territorial gains and allowed the Palestinians their own state. There would be a total embargo on Israel’s most passionate supporters, the United States and the Netherlands. And those countries which were allowed oil would pay steadily more for it. In fact, prices rose fourfold. It was a global economic shock, shovelling further inflation into the industrialized world, but in Britain it arrived with special force. The miners put in yet another huge pay claim, which would have added half as much again to many pay-packets. Despite an appeal by its leader, the moderate Joe Gormley, the NUM executive rejected a 13 per cent pay increase and voted to ballot for another national strike. These were the days, just, before North Sea oil and gas were being produced commercially. Britain could survive high oil prices, even shortages, for a while. The country could hold out against a coal strike, for a while. But both together added up to what the Chancellor, Barber, called the greatest economic crisis since the war. It certainly compared to that of 1947. Coal stocks had not been built up in preparation. Now a whole series of panic measures were introduced.

  Plans were made for petrol rationing and coupons printed and distributed. The national speed limit was cut by 20 miles per hour to 50 miles per hour to save fuel. Then in January 1974 came the announcement of a three-day working week. Ministers solemnly urged citizens to share baths and brush their teeth in the dark. Television, by now the nation’s sucky-sweet, was ended at 10.30 p.m. each evening. It is remembered as the darkest day (literally) in the story of mid-seventies Britain, and it was an embarrassing time in many ways. Yet it also gave millions an enjoyable frisson, the feeling of taking a holiday from everyday life. The writer Robert Elms recalls that though ‘this proud nation had been reduced to a shabby shambles, somewhere between a strife-torn South American dictatorship and a gloomy Soviet satellite, Bolivia meets Bulgaria, a banana republic with a banana shortage…The reality of course is that almost everybody absolutely loved it. They took to the three-day week with glee. They took terrible liberties.’

  Heath and his ministers struggled to try to find a solution to the miners’ claim, though the climate was hardly helped when Mick McGahey, the legendary Scottish Communist mineworkers’ leader, asked by Heath what he really wanted, answered ‘to bring down the government’. Much messing about with intermediaries and many mixed messages, not least from the government’s own Pay Board, ensured that no effective compromise could be found. When the miners voted, 81 per cent were for striking, including those in some of the most traditionally moderate areas in the country. In February 1974 Heath asked the Queen to dissolve Parliament and went to the country on the election platform he had prepared two years earlier: ‘Who governs?’ The country’s answer, perhaps taking the question more literally than Heath had hoped, was ‘Not you, mate.’

  Harold Wilson had expected the Tories to win again, and began the campaign in a depressed mood. A year earlier in Opposition he had prepared his own answer to inflation and the unions, the so-called Social Compact, or Social Contract. Agreed jointly between the union leaders and the Labour shadow cabinet, it was essentially a return to the politics of the forties, with price controls, a complex system of food subsidies, direct redistribution of wealth, controls on housing and investment and the end of the Tory union laws. In return for this Attlee-age manifesto from the politicians, the unions gave vague promises of voluntary pay restraint. It was a one-way deal but it was in Wilson’s interests to pretend that he could find practical agreements where Heath could not. It was in the unions’ interests to pretend they were signing up to a new era, if that would help expel the Tories and destroy their legislation. Outside observers saw it more plainly as a recipe for inflation which also offered the TUC a privileged place in government in return for very little.

  But what was the alternative? The three-day week was not, it later turned out, quite the economic disaster it seemed. Industry had maintained almost all production – which shows how inefficient five-day working must have been – and relatively few jobs had been lost. But politics is half symbol, and Heath’s authority had gone. In the election campaign a public fed up of chaos and desperately looking for good news clutched at the Social Contract. Wilson was able to appear as the calm bringer of reason and order. This time, he was lucky as well. A slew of bad economic figures arrived during the campaign. Enoch Powell, Heath’s ancient nemesis, suddenly announced that he was quitting the Conservatives over their failure to offer the public a referendum on Europe, and called on everyone to vote Labour. A mistake by the Pay Board suggested that the miners were in fact relatively lower paid than had been recognized. And a surge in Liberal support, which took them from single-figure support to the backing of a quarter of those voting, turned out to help Labour more than the Tories. All this helped produce a late surge in Wilson’s favour. By the end of the campaign he had recovered some his old chirpiness and bounce. Having decided that Heath should not rule, however, the country seemed unsure that Wilson should either. Though Labour had won the most seats, 301 against the Conservatives’ 297, no party had an overall majority. Heath hung on, trying to do a deal with the Liberal leader Jeremy Thorpe, who had 14 MPs, but eventually conceded defeat. Rather fatter, greyer and more personally conservative than he had been ten years earlier, Harold Wilson was back.

  So Mick McGahey and friends had brought down the Heath government, with a little help from the oil-toting Saudi Royal Family, the Liberals and Enoch Powell. A more bizarre coalition of interests is hard to imagine. Edward Heath’s three and three-quarter years in Number Ten will be remembered for the three-day week, a rare moment when politics actually shakes everyday life out of its routine; and for taking Britain into Europe. But other important changes happened on his watch, too. The school-leaving age was at last raised to sixteen. To cope with international currency mayhem caused by that Nixon decision to suspend convertibility, the old imperial sterling area finally went in 1972. The Pill was made freely available on the National Health Service. Local government was radically reorganized, with no fewer than 800 English councils disappearing and huge new authorities, much disliked, being created in their place. Heath defended this on the basis that the old Victorian system could not cope with ‘the growth of car ownership and of suburbia, which were undermining the distinction between town and country’. Many others saw it as dreary big-is-better dogma. There was more of that when responsibility for NHS hospitals was taken away from hundreds of local boards and passed to new regional and area health authorities, at the suggestion of a new cult then just emerging – management consultants.

  Political cynicism had been provoked in the fifties and sixties by the behaviour of the cliques who ran the country. By the seventies it was driven more by a sense of alienation. To many older Britons these were years of out-of-control change. Much of the loathing of Heath on the right of politics came from British membership of the Common Market which seemed the ultimate emblem of this rage for bigger and untraditional systems. Decimalization was almost as big a change to daily life. Though the original decision had been taken in 1965 during the first Wilson government, the disappearance in 1971 of a coinage going back to Anglo-Saxon times was widely blamed on Heath. Away flew the florins and half-crowns, halfpennies, farthings and sixpences, away went all the intricate triple-column mathematics of pounds, shillings and pence; and in came an unfamiliar if more rational decimal currency. Where would this end? Negotiators in Europe specifically fought to maintain the British pint measures in beer and milk, and the mile continued to keep the kilometre at bay. But in the seventies, the familiar seemed everywhere in retreat.

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  Wilson

  At least Wilson was familiar. His February election victory meant he was governing without a Commons majority. He was trying to do so at a time when the economy was still shaking with the effect of the oil price shock, with inflation raging, unemployment rising and the pound under almost constant pressure. Further, the fragile and implausible Social Contract now had to be tested. Almost the first thing Labour did was to settle with the miners for double what Heath had thought possible. The chances of the new government enjoying easy popularity were nil, though at least an Opposition so internally divided between bruised Conservatives, Liberals, Nationalists and Northern Irish Unionists was unlikely to combine often to defeat it.

  The new Chancellor, Denis Healey, introduced an emergency Budget a few weeks after the election, followed by another in the autumn, during which he raised income tax to 83 per cent at the top rate, or 98 per cent for unearned income, a level so eyewateringly high it was used against Labour for a generation to come. In the spirit of the Social Contract Healey also increased help for the poorest, with higher pensions and housing and food subsidies. He was trying to deliver for the unions, as Wilson did in abolishing the Conservative employment legislation. For the time being Heath remained as Tory leader, despite some grumbling from the party. He was convinced that before long Wilson would have to call a second election and his chance for revenge would arrive. In October, however, the second election confirmed the earlier verdict, with Labour gaining eighteen seats and a precarious but quite workable overall majority of three.

  The fetid atmosphere of Wilson’s new government was like that of the mid-sixties, only more so. Marcia Williams still had him mesmerized. As one young Number Ten aide recalled, her dramatic and sometimes destructive power ‘was not only exercised through her bewitching domination of the prime minister himself. Once launched against any human obstacle or perceived personal enemy, her frenzied tirades were very impressive and virtually ungovernable.’ It was alleged that she would swear and curse like a trooper at Wilson, storm out of dinners and meetings, and threaten him with terrible revenge if he crossed her. Some sources claimed that in Opposition, she had locked all his personal papers in a garage and refused to let him see them. Desperate to write his account of the 1964-70 governments, Wilson had been forced to team up with her brother Tony, break into her garage, and steal them back, although only the three of them would know if this were true. Now, she gave him a new problem when a press furore broke about land deals. The brother, a geologist, had bought slag heaps and quarries and then moved into land speculation, falling in with dodgy Midlands businessmen. There was a forged letter purporting to come from Wilson. There was no evidence that Marcia knew of the deal, but the close connections between Marcia and her brother, and the Prime Minister, began a media frenzy which prefigured many of those directed at the Labour ministers of the nineties and early 2000s. Wilson stood by his inner circle while the attacks rose in intensity, eventually making Williams a peeress, Lady Falkender. This was described by one of Wilson’s biographers as ‘a magnificently arrogant gesture, contemptuous of almost everybody’ and the whole experience broke for ever his once-good relations with the press. The old rumours about links with Russian intelligence and affairs resurfaced and the mood of bitterness and paranoia inside Number Ten was as grim as anything in the equally harassed administrations of John Major and Tony Blair.

  In another way, however, Wilson had changed. He interfered far less and seemed less worried by the manoeuvrings of his ministers. He wasn’t planning to stay long. There are many separate records of his private comments about retiring at sixty, after another two years in power. If he had not privately decided finally that he would go in 1976, he certainly acted as if he had. The question of who would succeed him, Jenkins or Callaghan, Healey or even Benn, had become one about the direction of the Labour government, rather than a personal threat to Harold Wilson, so there was less rancour around the cabinet table. Wilson was visibly older and more tired. He seems likely to have known about the early stages of Alzheimer’s, which would wreak a devastating toll on him in retirement. He forgot facts, confused issues and repeated himself. For a man whose memory and wit had been so important, this must have been a grim burden. There is therefore no need to assume that dark forces, some nether world of MI5 plotters and right-wing extremists, finally removed him from power with threats of blackmail and dirty tricks.

  Wilson himself was as fascinated as ever by Security Service plotting and had Marcia Williams dig out files on Jeremy Thorpe’s lover, Norman Scott, to try to show that he was being framed by the South African secret service, BOSS. At other times he would suggest Israel’s Mossad were after him. In a famous interview given to two BBC reporters, Barry Penrose and Roger Courtiour, after his retirement, he claimed that right-wing officers in the Security Service had been plotting against him. Wilson’s state of mind is vividly evoked by his fantastical language to them: ‘I see myself as the big fat spider in the corner of the room. Sometimes I speak when I’m asleep. You should both listen. Occasionally when we meet I might tell you to go to Charing Cross Road and kick a blind man standing on the corner. That blind man may tell you something, lead you somewhere.’ The Cecil King plot of 1967 and later memoirs by a wild MI5 man show that Wilson’s fears were not completely groundless, but this sounds like the raving of a deluded old man.

  75

  The Stairs Were on Fire

  If Roy Jenkins had in many ways been the most important minister during the mid-sixties, it was Denis Healey who dominated public perceptions of Labour in the mid-seventies. As a Chancellor of the Exchequer during the worst economic storm of post-war times, through both the Wilson and Callaghan governments, he rivalled each of them as a public icon. His scarlet face, huge eyebrows and rough tongue were endlessly caricatured and mimicked, above all by the TV impressionist Mike Yarwood, who invented ‘you silly billy’ as Healey’s catchphrase, one quickly taken up by the Chancellor himself. Healey was one of the most widely read, cultured, intelligent and self-certain politicians of modern times, whose early Communism, active war service and vast range of international contacts helped mulch and decorate his famous beyond-politics ‘hinterland’. But there was little poetry, relaxation or fun about the job he took up in 1974 and would hold, through near-farcical crises and grim headlines, for the next five years. He described the economy he had inherited from Heath and Barber as ‘like the Augean stables’. Much of his energy would be thrown into dealing with the newly unstable world economy, with floating currencies and inflation-shocked governments. In effect, after the great devaluation argument of the first Wilson administrations, this one was quietly devaluing all the time, as the pound sank against the dollar.

  Where were the levers of control? Healey was taxing and cutting as much as he dared but his only real hope was to control inflation by controlling wages. Wilson insisted that an incomes policy must be voluntary. After the torture and defeat of Heath there must be no going back to legal restraints. The unions, under the leadership of men who had risen as shop stewards in the great revolt of the fifties and sixties, the Spanish Civil War veteran Jack Jones, the wily and cynical Hugh Scanlon, and the grammar school boy and ex-Communist Len Murray, became increasingly worried that rampant inflation might destroy Labour and bring back the Tories. So for a while the Social Contract did deliver fewer strikes. From 1974 to 1975, the number of days lost to strikes halved, and then halved again the following year. Contrary to popular myth, the seventies were not all about mass meetings and walk-outs. After Heath had been beaten, the real trouble did not start again until 1978-9. But the other half of the Social Contract was meant to deliver lower wage settlements and that was an utter failure. Despite Labour delivering on its side of the bargain, by the early months of 1975 the going rate for increases was already 30 per cent, a third higher than inflation. By June inflation was up to 23 per cent, and wage settlements even further ahead. The unions suggested a new deal of a cash limit of
an extra £6 a week for most workers. The government did introduce an element of compulsion, but targeted employers who offered too much, not workers who demanded too much.

  Yet persuading people not to make deals about pay is extremely difficult. It cannot last long in a free society. There will always be special cases, and one special case inspires the next. Healey reckoned two-thirds of his time was spent trying to deal with the inflationary effects of free collective bargaining and the rest with the distortions caused by his own pay policy. As he reflected later: ‘Adopting a pay policy is rather like jumping out of a second-floor window: no one in his senses would do it unless the stairs were on fire. But in postwar Britain the stairs have always been on fire.’ By refusing to allow companies to pass on inflationary wage increases as higher prices, and by endless haggling with union leaders who were themselves alarmed about the fate of the country, Healey did manage to squeeze inflation downwards. He believed that if the unions had kept their promises it would have been down to single figures by the autumn of 1975.

  In all this, Healey was under constant pressure to show that he was delivering for socialism. He could not spend more. So he sent what signals he could by skewing the tax system dramatically against higher earners, concentrating any tax cuts on the worse off. Though notorious for warning that he would make the rich ‘howl with anguish’ and often misquoted as promising to squeeze the rich ‘until the pips squeak’, Healey argued that it was the only way of making the country fairer. He never accepted the Conservative argument that high taxes stopped people working harder and blamed Britain’s poor industrial performance instead on low investment in industry, poor training and bad management. A villain and bogeyman for many in the middle classes, Healey did at least suffer from his own policies: ‘As a result of my tax changes and my determination to prevent ministerial salaries from rising as fast as the pay norm, my own real take-home pay as Chancellor fell to only half what I had been earning as Defence Secretary, although I was working harder and longer.’