Roy Jenkins

by John Campbell

  They all proceeded to defend Britain’s worldwide role with an attachment to imperial commitments worthy of a conclave of Joseph Chamberlain, Kitchener of Khartoum and George Nathaniel Curzon . . . I quickly learned that a Chancellor should never see together a group of spending ministers with a common interest, and is unwise to see them even singly except on his own territory and with the initiative firmly in his own hands. I never made these simple mistakes again.19

  The battle to get his package through the Cabinet occupied an unprecedented eight meetings in twelve days between 4 and 15 January 1968, some thirty-two hours in total. These were still the days of real Cabinet government. Jenkins faced different combinations of ministers opposing him on each front – he made careful lists of who voted which way on which item; but he refused to do deals, taking the view that his proposals had a balance and philosophical unity which would unravel if once he started to give ground, and he ultimately got everything he wanted by very narrow majorities on each issue, with just one unimportant resignation – Lord Longford (Lord Privy Seal), who was high-mindedly unable to accept the postponement of ROSLA. Tony Crosland tried to argue that the cuts were too severe and wanted to do more by increased taxation, which would be ‘politically acceptable in the present climate’; he gained some support, but Jenkins successfully insisted that ‘it would be disastrous if the Government’s measures were thought to be too timid’. He himself would have preferred still deeper cuts and was still looking at other possibilities: delaying the switch to decimal currency (due in 1971) or the development of Stansted airport.20 Both the principal Cabinet diarists, Dick Crossman and Barbara Castle, admired (almost despite themselves) the lucid and persuasive way in which he argued each part of his package. ‘On the whole I feel much happier than I ever thought I would be,’ Mrs Castle wrote when it was all over. ‘Roy has shown many of the right instincts and we are certainly a long way from the crude sell-out of 1931. The package is a sophisticated combination of principle and expediency, and that is what politics is about.’21, fn2 Crossman particularly admired the way Jenkins defeated Brown and Healey over the defence cuts. ‘He did far better than the Prime Minister in fencing with Denis, undermining him first on the economic side and above all on the political side . . . Denis was no match for Roy.’22

  Reluctantly converted by economic necessity, Wilson gave steady but generally passive support, while leaving most of the running to Jenkins. To Lee Kuan Yew he conceded a nine-month delay from March to December 1971; but when President Johnson threatened to break off defence cooperation if Britain withdrew precipitately, he stood firm, insisting that Britain too had to consult its national interest. ‘Believe me, Lyndon,’ he wrote to the President on 15 January, ‘the decisions we are having to take now have been the most difficult and the heaviest of any that I, and I think all of my colleagues, can remember in our public life’; but they were unavoidable, to allow Britain to find her ‘new place on the world stage’.23 Jenkins himself could not have put it better. Cruelly caricatured at the time as Johnson’s poodle, Wilson actually stood up to American pressure pretty well, notably by refusing to send British troops to Vietnam, but also in relation to East of Suez generally.

  The narrowest margin was over the F-111, the American fighter-bomber that was supposed to fill the gap left by the cancellation of the TSR-2 in 1964. It only made strategic sense in the context of a continued presence in the Far East; and as part of that withdrawal Jenkins was determined that it should go. But to the old imperialists it was a symbol of the intention to retain some world role. Healey dug in to defend it, supported by Brown, Callaghan and the whole rightward-leaning half the Cabinet, leaving Jenkins to find support largely from the left. ‘It was part of the skill of Harold Wilson in making me Chancellor,’ he wrote, ‘that I was now going to have to fall back on the support of him and his Cabinet “tail” in order to defeat a substantial part of the old Labour right.’24 ‘Once again,’ Barbara Castle wrote, ‘I had to admire Roy’s courteous but steely inflexibility. Arguing quietly but firmly, he pitted intellectual reasoning against emotion.’25 Despite his frequent claims to the contrary, Wilson always counted heads in Cabinet. On this issue, after several hours of often heated debate on 12 January, the Cabinet divided 12:11 in favour of cancellation. But in view of the closeness of the result, Healey asked for it to be reconsidered; and in the interval he succeeded in persuading Longford to change his vote, which he thought would be enough to swing the decision his way. But when the Cabinet reassembled later the same day he found that Jenkins too had been busy and had ‘turned’ two ministers – Gordon Walker and Cledwyn Hughes (Wales) – now making a 13:10 majority for cancellation. Game, set and match to Jenkins. Wilson had expected Healey to resign if he lost;26 but he was persuaded to stay on. ‘Denis behaved with enormous dignity and courage in the face of a shattering blow, quite as great for him as devaluation was for Jim Callaghan,’ Tony Benn recorded. ‘I must say my opinion of Roy rose,’ he conceded grudgingly. ‘I don’t regard him as having any principles, but today in argument, getting all that he wanted from his colleagues, he was very impressive.’27

  Despite their history of mutual suspicion, the Prime Minister and his new Chancellor stood shoulder-to-shoulder throughout this key battle, forging the basis of a surprisingly good working relationship over the next two and a half years. Both in their memoirs paid tribute to the other’s staunchness. ‘My greatest asset,’ Wilson wrote, ‘was the firmness and determination of the Chancellor in the presentation of his balanced package.’28 But when it came to presenting it to the House, Wilson was determined to do it himself. ‘With this build-up of Roy,’ he told Crossman, ‘I can’t possibly afford not to make the Statement myself.’29 But he did it very badly, rattling through it without conviction; whereas Jenkins did the television broadcast that evening and did it well, admitting (as Wilson could never do) that devaluation had been a defeat, but showing how it could be ‘a springboard to real economic success in the future’, while subtly underlining his own victory for realism. ‘We are recognising that we are no longer a superpower . . . There is no greater recipe for disaster than a persistent refusal to face unwelcome facts.’30 The division of responsibility demonstrated the shift of power between them: ‘Six months ago,’ wrote Ian Trethowan in The Times, ‘who could imagine the Prime Minister not going on the box himself, however bad the news?’31 ‘It is now openly hinted that he may be on the way out,’ Barbara Castle recorded;32 and Benn wrote that ‘All the papers are now effectively calling for Roy Jenkins to take over.’33

  Jenkins’ preoccupation, however, was the budget. He did consider bringing it forward but was persuaded, wrongly as he later admitted, to leave it for another two months (though 19 March was still several weeks earlier than normal). From the moment he started thinking about the budget he knew it would have to be an extremely severe one. The Treasury’s initial view was that he would need to raise £400–600 million by extra taxation. But Jenkins saw ‘some psychological advantage’ in going even higher, and he was keen to do as much as possible in his first budget so that he did not have to keep coming back for more.34 In the end he raised taxes in this budget by more than £900 million. But he rejected the initial advice of the Governor of the Bank of England, Sir Leslie O’Brien, who wanted sixpence on income tax.35 He preferred to raise as much as possible by indirect taxation, while mitigating the regressive effect of this by differentiating between earned and unearned income – a distinction first made by Asquith in 1908. Faithful to his own past, he also wanted to explore the possibility of some form of wealth tax. He wanted to tax betting more heavily; and he was keen to introduce a national lottery. Treasury papers and the diary of the chief economic adviser, Sir Alec Cairncross, show Jenkins gradually narrowing the options; after discussion with his officials he would often take papers away to East Hendred for the weekend and come back on Monday morning having made his decision.fn3 During February he was gradually persuaded – mainly by Harold Lever, the Financial Secr
etary and, unusually for a Labour minister, a wealthy man himself – that a wealth tax was impractical and would be counterproductive, and settled instead for a one-off ‘special charge’ on unearned incomes over £3,000 a year, following the precedent of Stafford Cripps in 1948. He was also reluctantly persuaded against increasing betting duty as steeply as he would have liked. He did get Cabinet approval for a national lottery: a Private Members’ Bill to establish one had already passed its Second Reading and Jenkins proposed to incorporate it in the Finance Bill. But this was unexpectedly defeated on a free vote by ‘a combination of Labour puritanism and Conservative opportunism’ and was not revived for another twenty-five years.36

  The key choice turned on what to do about Selective Employment Tax – a controversial and not very effective tax on service industries, designed to favour manufacturing, introduced by Callaghan in 1965 on the advice of Nicky Kaldor, one of the two Hungarian economists (Thomas Balogh was the other) who famously advised the Wilson government. Jenkins initially resisted Kaldor’s wish to raise it, since ‘the only people I have met who have a word to say in favour of SET are in this room’.37 Eventually, however, it came to seem the least bad option. Two weeks before the budget, given that he had determined not to raise income tax, he had a choice between raising SET, raising petrol duty or extending purchase tax to biscuits, crisps and pet food. Over the weekend of 9–10 March he chose the first two, reckoning that the third would be too unpopular (and risked the budget as a whole being dubbed ‘the Pedigree Chum or even the potato crisp Budget’).38 The final package, however, was still extremely tough. He warned the Cabinet on 7 March that ‘a second devaluation would occur within three months if the budget didn’t restore confidence in sterling’. This, Crossman wrote, was ‘the big stick with which he decided to beat the Cabinet into accepting a tremendous budget’.39 In all he raised £923 million in new taxation, an unprecedented figure, largely from every Chancellor’s traditional sources: drink and cigarettes (though he excluded beer); purchase tax; petrol duty (up 4d a gallon); road tax (up from £17.10s to £25); and a 50 per cent rise in SET. In addition his one-off ‘Special Charge’ on personal incomes (on top of income tax and surtax), beginning at two shillings in the pound between £3,000 and £4,000 p.a. and rising to nine shillings in the pound over £8,000 p.a. raised another £100 million. One mitigation was that he increased family allowances, finding the money by cutting child tax allowances. He also decided not to tighten hire-purchase restrictions, as had been widely expected, in order to keep something in reserve in case it was needed later in the year.

  Once again the old Bevanites were impressed by Jenkins’ unexpected radicalism when he unveiled his proposals to the Cabinet on Monday 18 March. ‘It was genuinely based on socialist principle,’ Crossman wrote, ‘fair in the fullest sense by really helping people at the bottom of the scale and by really taxing the wealthy.’40 Even Barbara Castle could not withhold her ‘sneaking admiration’ for the ‘Special Charge’: ‘No punch-pulling here . . . I must say he has a greater grasp of principle than Jim ever had.’ Callaghan in fact – ‘who can’t be relishing Roy’s success’ – was the one minister to strike a sour note, complaining that Jenkins was only aiming to hit the same economic targets that he had been aiming at before devaluation, so devaluation had been unnecessary. Jenkins told him firmly that without devaluation they would have been unrealisable.41

  Before this, however, he had nearly been thrown off course by a sudden sterling crisis over the weekend. One result of Britain’s devaluation was that the speculators turned their attention to the dollar, which was vulnerable because of the escalating cost of the Vietnam war, triggering a rush to buy gold which in turn led to further heavy selling of the pound. ‘As was invariably the case in the 1960s,’ Jenkins recalled, ‘whatever currency the gale was directed against, the side-winds were devastating for sterling.’42 By Thursday 14 March Britain was haemorrhaging hundreds of millions of pounds a day from the reserves and a second devaluation was looking horribly likely when the Americans, late that evening, threw out a lifeline by requesting the closure of the London gold market, which provided cover for closing the foreign exchange market as well by declaring Friday a bank holiday. But this required an Order in Council to be proclaimed by a quorum of four Privy Councillors in the presence of the Queen. Unable to locate George Brown – though he may not have tried very hard – Wilson roped in Peter Shore to make up the numbers (the Queen’s private secretary made the fourth) and they all trooped off to the Palace at half past midnight. By the time they got back to Downing Street, Brown had heard what was afoot and was complaining furiously that he had not been consulted. Unluckily the House was sitting all night on Barbara Castle’s Transport Bill, which enabled Brown to round up half the Cabinet to go across to Number Ten and support his complaint: Jenkins had to explain to them what he and Wilson had done and why there was no time to consult. Most accepted that there was no alternative, but Tony Crosland and Michael Stewart were still unhappy and Brown refused to accept Wilson’s version of events and walked out, slamming the door.43 The next day he resigned, not for the first time. This time, however, Wilson accepted his resignation, bringing a sad end to a remarkable career. Then Crossman came on the phone saying that the House was in ferment and would not be satisfied until the Chancellor came and explained what was happening. So at 3.20 a.m. Jenkins was obliged to go over and make an exceptionally tricky statement: one false word might have pushed sterling over the brink. ‘I had never,’ he wrote later, ‘previously understood the full force of the expression “walking on eggshells”.’44 But he rose to the occasion, calmly making it clear that the crisis on this occasion originated in America, not in Britain, that the banks would reopen for normal business on Saturday – in fact they had to keep them closed on Saturday as well – and that he would be presenting his budget on Tuesday as planned. Mrs Castle, sitting beside him on the front bench, vividly described the release of tension:

  Roy handled every supplementary very skilfully, with Harold patting him on the back with an exuberance of bonhomie every time he sat down. I noticed for the first time that Roy has a funny little habit of fingering his buttock every time he stands up and I was relieved to know that I am not the only one who feels the strain on these kind of occasions. But he certainly came out on top.

  ‘Once more,’ she concluded gratefully, ‘we were a credible Government.’45

  But that was not the end of it. As the price of acceding to the American request to close the gold market, Britain still needed to secure yet another American credit to surmount the immediate crisis. Jenkins sent William Armstrong, Leslie O’Brien and Harold Lever to Washington to negotiate it. On Saturday he went through the traditional pre-budget ritual of posing for photographs with the family at East Hendred; but on the Sunday he had to break his weekend by going back to London for more crisis meetings to decide what to do if a sufficient loan was not forthcoming: should they float the pound, block the international sterling balances, or both? Not until late on Sunday night did Armstrong telephone that he had secured just over $4 billion – only two-thirds of what they had wanted, but it was enough. It was not the ideal preparation for Jenkins’ first budget; fortunately it had been pretty well finalised the previous week.

  Illingworth, Daily Mail, 26.2.68 (supplied by Llyfrgell Genedlaethol Cymru/National Library of Wales)

  On the Monday he disclosed its contents to the Cabinet, made another statement to the House about the financial crisis, saw the Queen for an hour and spent the rest of the day polishing his speech and writing (with David Dowler) his budget broadcast.fn4 Then on the Tuesday he woke ‘with a small dagger-like headache going down into one eyeball’ and spent two and a half hours alone rehearsing his speech, feeling like ‘a boxer told to relax before a prize fight on the result of which all the trainers and seconds had invested more money than they could afford’. He walked in the garden of Number Eleven for half an hour, then lunched with Harris, Dowler, Robert Armstrong, Tom
Bradley (still his PPS) and Jennifer, and ‘drank a fair amount . . . The wine seemed to do my headache more good than the fresh air had done.’ Finally he went over to the House, opened Gladstone’s famous dispatch box and ploughed through his speech from 3.45 to 6.15 p.m., now feeling like a Channel swimmer losing sight of Dover long before he could see Calais. ‘When I eventually sank back into my seat there was to my amazement and great relief a demonstration of unusual support from the Government benches. Nearly everyone stood up and waved their order papers.’47

  Jenkins had managed to pull off the rare feat of pleasing both the Labour back benches and the press. ‘He had just enough for the Left Wing,’ Cairncross noted, ‘but it was astonishing to hear them cheer a speech imposing over £900m in taxation, mostly indirect.’48 Barbara Castle likewise thought the budget’s ‘brilliance . . . proved by the fact that the most swingeing Budget in history left our people positively exultant’.49 Leslie Bonham Carter was in the gallery – as was Jennifer – and wrote gushingly but also shrewdly to tell ‘Darling Roy’ that he was ‘absolutely magnificent’:

  It seemed to me a near miracle that in spite of what you had to do the effect you achieved was yet one of exhilaration. The whole gallery behind me was a-buzz with praise – even from those who had been punched in their sensitive unearned incomes. I admired you today more than I can possibly say.50

  Cairncross was not the only observer who wondered if, in cheering the Chancellor, the Labour benches were not perhaps ‘cheering an alternative leader to H.W.’51

  But Jenkins – after staying to listen to Ted Heath grudgingly denouncing ‘a hard cold budget, without one glimmer of warmth’52 – had only about half an hour to enjoy his success before he had to go back to Number Eleven to record his budget broadcast, which went out at nine o’clock that evening. He spoke gravely, straight to camera, explaining the country’s critical economic situation in terms remarkably like those of the Conservative–Liberal coalition in rather different but equally dire circumstances in 2010. ‘This has been an extremely harsh budget,’ he began bluntly. ‘It had to be. I had no alternative. If we let the opportunity of devaluation slip through our fingers, we would just find ourselves quickly slithering back to the sort of economic crisis which has beset us on at least eight occasions since the war.’ Unlike his successor forty-two years later, he carefully avoided party point-scoring, pointing out that the record of economic failure had persisted under governments of both parties. Britain had been ‘living in a “fool’s paradise”’ for years, ‘importing too much, exporting too little and paying ourselves too much’, yet still enjoyed a lower standard of living than Germany and France. His budget – ‘the harshest budget for a long time’ – was designed to produce a 1 per cent cut in living standards in the coming year. But now, with a competitive exchange rate and by cutting the defence burden to what the country could afford, he asserted, Britain could in five years become again one of the most prosperous countries in Europe. ‘If we face the challenge we can end a long period of retreat . . . It’s up to all of us.’53