Roy Jenkins

by John Campbell

  The next day he flew to Bonn for an emergency meeting of the Group of Ten finance ministers. This, he wrote years later, was ‘one of the most chaotic and ill-organised monetary conferences ever to have plagued the Western world’, thanks largely to the ‘pedagogic verbal diarrhoea’ of the German chairman, who must have talked ‘for a good twelve of the fifty hours we were in Bonn’.110 He was further frustrated by his European opposite numbers holding long meetings among themselves from which he and the Americans were excluded, which powerfully confirmed his conviction that Britain needed to be inside the EEC. Moreover the conference proved abortive, since the Germans stubbornly refused to revalue and the French – following a characteristic démarche by General de Gaulle – ultimately decided not to devalue after all, leaving sterling no less (but for the moment no more) exposed than it was before. After getting to bed at 4 a.m. Jenkins had to fly back to London after only two hours’ sleep to make a statement to the House of Commons announcing the latest measures. Writing his speech all the way – ‘the last page came out of the typewriter as we taxied in at London Airport’111 – he was whisked to Westminster with a mortorcycle escort in seventeen minutes flat, just in time to get to his feet at 4 p.m. and managed once again to turn a tricky assignment into a remarkable parliamentary success. Three days later, after a weekend at East Hendred to recover, he further affirmed his authority by demolishing Ted Heath in the Chamber (‘Roy did brilliantly,’ Barbara Castle enthused) and then, at the party meeting upstairs, even managed to get Labour MPs of left and right eating out of his hand.112

  Sterling then stabilised for ten days; but at the beginning of December there was another extraordinary scare when the City was swept by rumours that both Jenkins and Wilson had resigned, which caused another crazy run on the pound. At one point Jenkins was handed a message in Cabinet that the Bank had lost $100 million in forty minutes, before the markets rallied. But this turned out to be the darkest hour before the dawn. A couple of days later the November trade figures showed exports hitting a record £561 million and the deficit down to just £17 million – the lowest since July 1967. Sterling was not out of the woods yet – more encouraging figures in January 1969 were followed by a setback in February – but at least the balance of payments was now moving in the right direction. Alec Cairncross left the Treasury at the end of this traumatic year confident that devaluation was working.113

  This was the background to Jenkins’ second budget in April 1969. Many years later he wrote in his book The Chancellors – apropos Philip Snowden – that ‘the difficulties inherent in a second budget after a considerable triumph with the first . . . are at least as great as those of writing a successful second novel’.114 His problem was that he wanted to convey the message that the economy was on the right track, but could not yet risk easing the pressure on consumption. Once again the Treasury papers chart the process of narrowing the options. At the early meetings of the budget committee in the New Year the discussion leaned towards a neutral budget; but as the improvement in the trade figures still seemed fragile the consensus moved towards another round of belt-tightening. The budget judgement was ‘more delicate than last year’, when there was no question that very big measures were needed.115 At the end of January Jenkins confessed that ‘his difficulty in considering individual measures was that he was not yet clear about what was to be the main theme and purpose of the Budget’. He had some sympathy with Harold Lever’s argument that more deflation would only damage confidence, with no economic effect.116 He was still against increasing income tax or surtax, but still wanted to find new ways of taxing the better-off. He could not repeat his ‘Special Charge’; a wealth tax was impractical; and he could not increase the differential against unearned income in what was to be billed as a ‘savings budget’. He was still keen to tax convenience foods and pet food, also perhaps hairdressing and antiques, and (leading by example?) to increase the tax on wine. But there were awkward arguments against all of these. John Harris warned that ‘we would pay an exceedingly high political price’ for taxing convenience foods.117 By early March Jenkins was looking to take another £200–250 million, but his officials were pressing for decisions: ‘We have now reached the stage where the Chancellor must be told the deadlines for decisions on all candidates for his budget.’118 In the end he took another £340 million, partly from some of the things discussed (potato crisps, wine, petrol, bingo and betting shops), but also from a 2½ per cent rise in Corporation Tax and another hike in SET, while simultaneously finding the money to raise the basic state pension by ten shillings (to £5) and raise personal allowances again to take 1.1 million more people out of tax altogether.fn12

  It was a shrewdly balanced package, ‘so ingeniously disposed’, to Crossman’s relief, ‘that it won’t hurt too much and will only increase the cost of living by ½ per cent’. Tony Crosland congratulated Jenkins on ‘a good, fair and civilised Budget’ which ‘could well mean a real change in our political fortunes’ – though he added: ‘Needless to say there were bits I could have done without.’120 Once again Crossman thought Jenkins’ presentation of it to the Cabinet ‘masterly . . . each item beautifully prepared by Roy and beautifully rehearsed . . . It only marks the contrast with the flaccid, indecisive bungling of Harold’s central direction.’121

  Jenkins’ speech in the House was almost as long as the previous year and equally admired. ‘In style at least,’ the Daily Telegraph acknowledged, ‘Mr Jenkins’ 2½ hour effort yesterday was just about everything a good Budget speech should be: elegant as well as eloquent, good-humoured as well as having humourous touches, and well-planned.’ Both sides of the House particularly enjoyed his twitting of the moustachioed Tory showman Gerald Nabarro, who had run a loud campaign against an increase in road tax: Jenkins timed perfectly his announcement that any such increase had been ruled out the previous December. But the budget itself was much less well received than the previous year. The Times thought it ‘pusillanimous in its economic intentions and somewhat class-conscious in its detailed provisions’ and condemned ‘the niggling discrimination that mars so many of his choices of tax changes’. The Financial Times judged it, slightly more generously, ‘a holding operation against the national and international uncertainties of the autumn’. But the mass circulation papers characteristically rubbished ‘a dog’s dinner of a Budget, with dearer potato crisps thrown in’ (Daily Mail) and ‘a Budget that is going to creep up on you like a pickpocket for the next 12 months’ (Daily Express). Only the Sun (not yet owned by Rupert Murdoch and still Labour-supporting) was relieved that it was not more severe, giving the Chancellor credit for putting most of the burden in the right places.122 In his memoirs Jenkins pointed out that it was his much harsher but highly praised 1968 budget that actually proved inadequate, while that of 1969 was if anything more severe than necessary, since it led to the first surplus of revenue over total expenditure since 1936/7 and, within a few months, the longed-for turnaround in the balance of payments – thus illustrating the dictum, attributed to Iain Macleod, that the instant judgement on budgets is almost invariably wrong.123, fn13 But at the time – accustomed to praise for practically everything he did – Jenkins was depressed by the negative verdict.

  His depression deepened the next month when new fears of a French devaluation – sparked by General de Gaulle’s sudden resignation – set off a fresh wave of selling of the pound, which in turn necessitated a ‘sticky negotiation’ with the IMF for a further standby loan. In his memoirs Jenkins remembered Friday 16 May as ‘the nadir day of my whole Treasury experience’, when he felt for the first time that ‘I had used all the shots in my locker’. He vividly described how, returning from a visit to his constituency – alone, unusually – he settled down in the front first-class section of the 7.55 from Birmingham to Didcot for what he called ‘a hundred minutes of intensive ratiocination’. He concluded that unless there was a clear and unmistakable improvement in the trade figures for May and June, the strategy he had pursued since deva
luation would be seen to have failed. Far from replacing Wilson as Prime Minister, he would be ‘a used-up Chancellor’ – like Callaghan in 1967 – and would have to resign. If the pound was forced to float he could even see himself – like Snowden in 1931 – facing ‘the dilemma which . . . every non-doctrinaire Labour politician . . . most dreaded’: a conflict between the national and the party interest, which might destroy the Labour Party for a generation. At that time, he insisted, he saw no attractions in a coalition, which many on the left suspected him of wanting: he was still totally committed to Labour. ‘It was merely that I could begin to see, as an added complication in a web of gloom, the emergence of a case for it.’127

  Before getting off the train he wrote down the criteria that he judged would constitute success, and ‘so felt rather easier in my mind, as perhaps do those who have just completed writing a suicide note’.128 And within a few weeks the figures started to improve. First, Crosland’s statisticians at the Board of Trade discovered a substantial underestimate in the export figures going back several years, which was a bonus in itself and incidentally gave Jenkins another parliamentary triumph later in the year when Heath and Macleod, ‘with the almost incredible unwisdom which sometimes afflicts frustrated oppositions’, accused him of falsifying the correction.129 Then the May and June figures turned out better than he had dared hope – the monthly deficit down to £20 million – giving grounds for confidence that they really had turned the corner. There was still one last scare in August when the French did finally devalue without warning. Jenkins was on holiday, ironically in the south of France, where in the days before direct international dialling he was dependent on very poor telephone connections as the pound plunged again. He had to break his holiday and return to London (under cover of an emergency Cabinet called by Wilson to deal with the Northern Ireland situation, which had suddenly exploded); but this time the reserves took the strain, and within a couple of weeks the reality of recovery was confirmed. Jenkins, appropriately, had just opened the Export Services Exhibition at Earls Court on 8 September, where he had given a cautiously optimistic speech, when John Harris gave him the August figures. ‘“£40m minus?” he asked. “No, £40m, plus, came the answer.”’130 This, The Times reported when they were published a week later, ‘far exceeded the most optimistic guesses abroad and in the City . . . The figures were greeted in Whitehall yesterday as proof that an export-led expansion of the economy was finally under way.’131 Sterling immediately rose twenty-nine points. Jenkins’ ‘long dark arctic winter’ was finally seeing the spring. His ‘two years’ hard slog’ had almost achieved their purpose.

  Garland, Daily Telegraph, 16.9.69 (British Cartoon Archive, University of Kent)

  At that year’s Labour party conference – having once again flown overnight from Washington, but this time after a much easier meeting with the IMF – Jenkins could bask in the delegates’ relieved applause; but at the same time he warned that there could be no easing up on the need to build a strong competitive economy. He looked forward to a surplus of at least £450 million, maybe £500 million, over the coming year. But ‘the fact that a big surplus now appears to be building up is no reason for premature relaxation’. In other words, he hinted, there would be no pre-election distribution of goodies. ‘In the exuberance released by the Chancellor’s good news,’ The Times noted, ‘many delegates clearly did not immediately take in the significance of his statement that the surplus is not going to be spent (by him at any rate) on all those worthy causes that the Labour rank and file have so closely at heart.’132 Instead they actually cheered a social vision which some commentators thought had more in common with liberal Toryism than with Labour’s traditional understanding of socialism. ‘One of the central purposes of democratic socialism,’ he declared, ‘is to extend throughout the community the freedom of choice which was previously the prerogative of the few.’133 This was a vision of personal liberation consistent with the sort of social reforms he had advanced at the Home Office, and which he had recently defended in his ‘civilised society’ speech at Abingdon in July. But ‘choice’ was not a word much associated with socialism in the past; still less would it be heard on the lips of Labour activists over the next fifteen or twenty years. Uttered by a successful Chancellor widely seen as the next Prime Minister, however, it was a striking marker of the direction in which Jenkins might have tried to take the Labour party if the electoral cards had fallen differently over the next few years: ‘New Labour’ twenty-five years before Tony Blair. This was perhaps the high point of Jenkins’ career. Many years later he told a journalist that he still looked back on ‘sipping a dry martini in the bar of the Grand Hotel, Brighton . . . sleepless but with the journey [from Washington] and the speech behind me, as the most pleasurable moment of my often bumpy Chancellorship’.134

  If righting the balance of payments was the great success of Jenkins’ Chancellorship, there were significant failures to set against it which between them dashed the government’s prospects of re-election, on which his succession to the premiership depended. First was the perennial, ever-contentious problem in the 1960s and 1970s of incomes policy. In 1966 Callaghan had imposed a complete statutory wage freeze. In his first budget Jenkins relaxed this to the extent of setting a 3½ per cent ceiling on pay rises for the next eighteen months. Both were of course bitterly resisted by the trade unions and did lasting damage to relations between the unions and ‘their’ government. Jenkins disliked statutory control as much as anyone, but saw it as essential to appease the bankers. ‘If we are not seen to deal strongly with wages,’ he told Barbara Castle just before the budget, ‘we can’t avoid a second devaluation, world monetary confusion and the destruction of this Government.’135, fn14

  As Secretary of State for Employment and Productivity, Mrs Castle had the prime responsibility for selling the policy to the unions: she bit the bullet and defended wage restraint on socialist grounds as a necessary component of a planned economy. From their different standpoints, she and Jenkins worked surprisingly well together, with considerable mutual respect – though she often felt that he let her carry the can for unpopular policies. (On the other hand, she had much better relations with the union leaders, so it made sense for her to take the lead.) But then the question of income control became complicated by the government’s even more unpopular attempt to reform trade union law on the lines of Barbara Castle’s famous White Paper entitled, in a cheeky echo of Nye Bevan, In Place of Strife. As a sweetener to try to push this through, Jenkins announced in his 1969 budget that the powers to control wages would not be renewed, but would be replaced by a voluntary ‘norm’ of 2½–4½ per cent rises. This might well have been unenforceable anyway; but by the time the government had thoroughly antagonised the unions by In Place of Strife and then backed down in the face of union opposition, it did not stand a chance. The resulting pay explosion – average earnings rose by 13 per cent between the last quarter of 1969 and the last quarter of 1970 – fuelled the rampant inflation of the early 1970s which undid most of Jenkins’ achievement in restoring the balance of payments. In economics, victory in one part of the battlefield is so often balanced by defeat in another.

  The government’s ignominious surrender to the unions over In Place of Strife probably contributed more than anything else to Labour’s defeat the following year. Jenkins’ performance in respect of this doomed policy – first backing it, then abandoning it – was, on his own admission, inglorious; in his defence, his attention was primarily focused on the repeated crises of sterling. The policy, championed by Barbara Castle with the full support of the Prime Minister, was designed to deal with the wave of unofficial strikes which was damaging industrial output (and hence exports). She saw it as a balanced package, which guaranteed union rights in return for outlawing unofficial strikes; but the unions – backed somewhat cynically by Jim Callaghan in a successful bid to rebuild his support with the party – saw the attempt to bring legal sanctions into industrial relations as an attack
on union privileges and fought it tooth and nail. Jenkins persuaded himself that legislation to curb strikes would make up for dropping the incomes policy, which was threatening to become counterproductive. ‘I thought . . . this was a good bargain,’ he wrote in his memoirs.137 But it was not, since the unions did not accept it. He would have done better to have heeded the advice of Andrew Graham (then a young adviser to Wilson, much later Master of Balliol) who warned that ‘while a policy to improve industrial relations may be complementary to an incomes policy, it cannot be a substitute for it . . . and to push ahead with it at the expense of incomes policy would, in my view, spell disaster’.138 It did: the government ended up with neither an incomes policy nor legislation on industrial relations. But having decided to back legislation, Jenkins committed himself to it as strongly as Castle and Wilson and even insisted on announcing it himself in his budget speech, with Mrs Castle giving the details the next day. This was his second mistake, since it made trade union reform look like an economic sop to please the IMF, which only heightened opposition on the left. It was ‘an odd political decision’, wrote the Guardian’s labour correspondent Peter Jenkins, ‘by a Minister who was beginning to get the reputation for “keeping his head below the parapet”’:

  Nobody was asking him to go to the lengths of mingling his blood publicly with Barbara Castle’s. He was exceeding by far the terms of their demarcation agreement . . . Chivalry to a lady colleague was verging on the quixotic. It was a political error for an ambitious man.139