by Andy Beckett
Williams thought at the time that Wilson ‘was off his trolley’. But afterwards she had changed her mind: ‘There was a real attempt to try to undo him of a non-constitutional kind.’ Since the mid-seventies, such allegations have generated a whole sub-genre of British political literature, running from credible investigations to lurid speculations. Wilson made possible its central text. In April 1976, he agreed to see two BBC reporters, Barrie Penrose and Roger Courtiour, who had been probing the alleged involvement of South African intelligence in the Jeremy Thorpe scandal, which was beginning to unravel publicly. Wilson had accused the South Africans of smearing Thorpe, a well-known opponent of apartheid. Yet what he told Penrose and Courtiour was even more sensational. Wilson claimed that right-wing members of MI5, the British counter-espionage service, had been working with the South Africans and with American intelligence to smear him and his close allies as well as Soviet agents. Marcia Williams, whom Wilson had controversially made Lady Falkender in 1974, saw the reporters too and repeated the allegations. Penrose and Courtiour turned their material into a series of articles for the Observer in 1977 and then a book the following year, The Pencourt File. Such was its intention to cause a sensation, its title paid homage to ‘Woodstein’, the collective name for the American reporters Bob Woodward and Carl Bernstein, who had uncovered Watergate. Also in 1977, Wilson told a Royal Commission investigating illicit behaviour by the press (a commission he himself had set up as prime minister) that he and his family and close allies had suffered a series of unexplained burglaries in the weeks before his resignation and since. His enemies in the security services, he implied, were working in tandem with the right-wing press.
The impact of all this was less than Wilson and Penrose and Courtiour might have hoped. For one thing, Wilson served up his allegations in a dense, indigestible stew of self-justifications and strange riddles. ‘I see myself as the big fat spider in the corner of the room,’ he infamously told the reporters at one point in their taped conversations. ‘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.’
Wilson was widely considered to be in poor health. He was well known for his love of jokes, metaphors and concocted dramas, for his rhetorical halls of mirrors. He had also spent much of his time as Labour leader fending off plots against him by colleagues. He had an energetic sense of paranoia. As a young overseas trade negotiator for the Attlee government, he had even learned on trips to Moscow to search rooms for suspicious small objects. Three decades on, his claims about MI5 and the rest were not hard to dismiss as the embarrassing ramblings of a diminished old man. During 1977, Wilson made the task easier still by retracting his allegations – telling The Times the statements attributed to him in The Pencourt File were ‘cock and bull written by two journalists … with so little sense of humour that they cannot distinguish between disclosure and a joke’ – and then making the allegations again. Finally, in 1978, Wilson stopped making the allegations altogether. Between then and his death seventeen years later, he never mentioned the topic in public again.
Yet since the seventies his claims have gained, not lost, credibility. For one thing, there is the long history in Britain of smear campaigns against left-wing politicians, involving members of the secret services, right-wing newspapers and allegations of Soviet connections, and sometimes a combination of all three: from the ‘Zinoviev Letter’ of 1924, the infamous forgery that helped drive the first Labour government from power, to ‘Kinnock’s Kremlin Connection’, the 1992 Sunday Times story, later exposed as groundless, that sought to damage the Labour leader in the run-up to that year’s general election. During the seventies, articles did appear in right-wing tabloids and Private Eye suggesting that Wilson had Soviet links. Private Eye in particular received packages of unsolicited documents from unknown sources that purported to show that the Labour leader was a traitor. In August 1975, Wilson held a meeting with the head of MI5, Sir Michael Hanley, to ask him about the rumour and its possible origin in the intelligence services. Wilson’s biographer Ben Pimlott quotes ‘a former adviser’ of the prime minister ‘who remembers speaking to Wilson immediately after the secret service chief had left’. The adviser says: ‘Hanley admitted that there was a small group [in MI5] behaving oddly or out of turn … But [he] said they were getting back under control.’
Ten years later, a former assistant director of MI5, Peter Wright, alleged in his best-selling memoir Spycatcher, which came out in Britain after a protracted attempt by the then Conservative government to halt its publication, that he and some colleagues – and some officials in the CIA – believed during the seventies that Wilson was a Soviet agent. This school of thought found significance in Wilson’s many visits to Russia as a trade minister in the forties and as a rising Labour politician in the fifties; in his numerous friendships with foreign businessmen who unusually retained interests in both the East and the West, including Joseph Kagan, the manufacturer of his trademark raincoats; and, most dramatically of all, in Gaitskell’s early death, caused by the rare disease lupus, after which Wilson had succeeded to the Labour leadership.
Some of these matters had been of minor interest to MI5 for years. With the revelations in the fifties and sixties about Kim Philby and Guy Burgess and Donald Maclean, the realization that the Soviet Union employed Britons as agents was belatedly dawning. Then again, the idea that Wilson was a traitor too was quite a mental leap. For one thing, the theory insisted that Gaitskell had been assassinated by the KGB so that Wilson could become prime minister, even though medical opinion considered such a killing impossible, a general election was some way off when Gaitskell died, and Wilson was not at the time the leading contender for the Labour leadership. The theory also depended heavily on the word of Russian defectors, who had a record of exposing Soviet agents but also an incentive to exaggerate and invent. Finally, there was the problem of Wilson’s record in office, which, over issues from the state control of business to the war in Vietnam, was a perpetual disappointment to the Left. If Wilson was a Soviet agent, he was a very strange one.
Of course, the charge did not have to be true, or even very believable, to distract and damage Wilson and his administration, especially given the increasingly charged atmosphere of British politics in the mid-seventies. As his publisher Sir George Weidenfeld put it later, the Russian rumours ‘came and went but they were … repeated in clubs, in drawing-rooms, in country houses, and retold, embroidered …’ By Wilson’s last weeks in office, even Donoughue, with his cockily untamed haircut and streetwise insider’s air, was feeling slightly beleaguered. ‘I believe that my room is bugged. Certainly my phone is tapped,’ he wrote in his diary on 5 February. ‘[I] tried to resist the kind of paranoia which surrounds HW and Marcia. But the evidence is growing …’
With Wilson acting as an introverted, unusually passive prime minister, his talented lieutenants were left to deal with the many problems his government had inherited. And at this they proved less than expert.
The ejection of the Heath government had essentially solved 1974’s most immediate crises. The miners quickly went back to work, and the three-day week was ended in March. But new crises swiftly took their place.
In Ulster, a ‘power-sharing Executive’ involving all the peaceful Catholic and Protestant parties had been coaxed into being by Willie Whitelaw during 1973, allowing the province to govern itself once more, but on a less sectarian basis than before. The new administration had been sworn in on New Year’s Day 1974. It was a skilfully constructed, high-minded compromise – a last triumph of Heathite diplomacy, almost on the scale of the EEC entry negotiations. Yet the prospect of ‘power sharing’ in an Ulster which would have slightly closer ties to the Irish Republic but remain part of the United Kingdom did not appeal, at this stage in the province’s history at least, to more radical republicans or loyalists. Their
campaigns of violence continued, and in May the loyalists moved to overthrow the executive altogether. They formed a coalition, the Ulster Workers’ Council (UWC), and called on all Protestant employees to oppose the executive by going on strike. Thousands complied; those who did not faced barricades manned by loyalist paramilitaries, and even death threats. Within a fortnight, much of the economy and daily life of the province had been brought to a halt. Wilson denounced the UWC as ‘thugs and bullies’ but was forced to dissolve the executive, and any chance of an end to the Northern Ireland crisis in the foreseeable future was gone.
The outlook for his government on the British mainland was almost as challenging. For one thing, Wilson did not have a parliamentary majority; he would have to call another general election to try to win one. And then there was Europe: in Opposition, as one of his opportunistic anti-Heath manoeuvres, Wilson had promised a referendum on Britain’s Common Market membership when Labour got back into power. Now he would have to hold it, in a country that was not used to such votes and leading a party that was fiercely divided, as were the Conservatives, over the EEC issue. During 1974 and 1975, much of the government’s attention was taken up by these ballots. Wilson, with the last glimmers of his electioneering brilliance, won both of them: the October 1974 election narrowly, leaving him with a disappointing and almost certainly temporary majority of three; the June 1975 referendum comfortably, with 67 per cent of Britons backing the European policy that he had finally settled on, that the country should stay in the EEC.
In the meantime, arguably the most fundamental domestic issue of all was left neglected: the economy. After returning to office in February 1974, Wilson had appointed Denis Healey as chancellor. ‘I knew bugger all about economics,’ Healey told me cheerfully when we met at his house in Sussex. ‘I didn’t understand it. It was very much secondary to me compared to foreign affairs – that was my passion. I had been defence secretary, but being chancellor is much harder. In defence, you control completely the million service people and the suppliers of arms and equipment, whereas in the Treasury you control nothing except your civil servants. Jim [Callaghan] said to me, “It’s a bloody job, you know, Denis. You must leave it within two or three years.”’ In the event, Healey was chancellor for over five.
After political prominence as a student at Oxford, a sharp-elbowed rise through the Labour Party during the forties and fifties, and an unusually long and influential stint as defence secretary in the sixties, Healey did not lack confidence or ability. His politics had matured from a melodramatic left-wing socialism – ‘the upper classes in every country are selfish, depraved, dissolute and decadent,’ he had told the 1945 party conference, a handsome zealot still wearing his army uniform – to a much more pragmatic Labour tribalism. But he retained a bullying certainty and a relish for battle. He addressed opponents and other people he wished to dominate in his big, rich voice: slowly, unyieldingly, slightly mockingly, as if speaking to a small child. ‘As chancellor I soon learned that economics is just a branch of social science,’ he told me. ‘The way people behave economically either as buyers or sellers or producers changes almost from year to year, from season to season. I was able to learn it all for myself.’ How quickly had he got on top of his new role? ‘Quite fast, really,’ said Healey. ‘Three months, I would say.’
In reality, the task proved less straightforward. The combination of his inexperience, the scale of the economic problems handed on by the Conservatives, the almost immediate need to win another general election, some hugely over-optimistic Treasury predictions about the economy and the government’s finances, and the inability of most of the Labour Party, much of the Treasury and, to an extent, Healey himself to absorb the implications of the oil crisis and what it meant for a country with Britain’s particular weaknesses – all this meant that 1974 and much of 1975 passed, very damagingly, without a major economic-policy rethink. ‘For eighteen crucial months,’ writes the historian Keith Middlemas in Power, Competition and the State, Volume Three: The End of the Postwar Era, ‘the reserves of 1945–74 were dissipated.’
First-hand accounts of life at the Treasury in the mid-seventies contain, beneath their protective layers of mandarin understatement and irony, surprisingly bald confessions that disastrous things went on. ‘We planned for too high a level of public expenditure,’ writes Joel Barnett, then the department’s chief secretary, ‘in the expectation of levels of growth that, in the event, never materialized.’ Sir Leo Pliatzky, a Treasury permanent secretary then and a civil-service veteran, writes that ‘The first year or so of the new administration was … in some ways a period of collective madness. Public expenditure … rose by no less than 12.2 per cent … [in] a year in which GDP showed a small absolute decline.’ In 1974, he notes, inflation reached a corrosive 16 per cent. In August 1975, it reached a peak of 26.9 per cent, approaching the sort of level for which struggling Third World economies were notorious. In the meantime, unemployment almost doubled. ‘Stagflation’ had arrived in Britain. ‘The Treasury, as well as Wilson’s ministerial team, seemed paralysed in the face of it,’ records Peter Hennessy in his civil-service history, Whitehall. ‘The lunch tables were very gloomy in 1974 with … talk about “the decline of the west” … [And] it was not just the Treasury that endured a crisis of confidence in the mid-1970s; it was the Civil Service as a whole.’
Healey himself was not given to crises of confidence. Yet even he was prepared to admit, albeit from the safety of his Sussex study three decades on, that his first two budgets as chancellor were flawed: ‘They weren’t deflationary enough.’ Not, of course, that this was entirely his fault. ‘I think it was partly that the figures were so unreliable,’ he continued with barely a pause. ‘I mean, incredibly so … If you look at the figures for the public sector borrowing requirement on which the whole of budgetary policy was based, they were billions out.’ Nor had he been well served by Treasury civil servants in general: ‘They tended to be anti-union, and they tended not to know much about the world. They didn’t know about foreign affairs at all. And they didn’t know much about the City …’
Many of Healey’s Cabinet colleagues also seemed unwilling or unable to deal with the harsh new world. Barbara Castle and Tony Crosland, inspiring and original figures in Wilson’s sixties governments, now seemed slightly world-weary, as if infected by the prime minister’s mid-seventies lassitude. On 7 March 1974, less than a week into her new job as secretary of state for social services, Castle wrote in her diary of her ‘own detached mood … [I] wonder all the time whether the game is worth that mass of paperwork’. Crosland’s wife Susan wrote in her biography of him of the ‘curious lack of exhilaration’ that accompanied Wilson’s re-election: ‘We knew Labour couldn’t achieve what the incoming 1964 Government had believed possible.’
In 1974, Crosland, now secretary of state for the environment, published ‘Socialism Now’, a long essay and sequel to his optimistic and influential 1956 book The Future of Socialism. The essay contained plenty of typically perceptive Crosland insights about how Britain had changed: the increasing importance of ‘consumer choice’ and of the service industries; the decreasing importance of social deference. But there were far fewer suggestions than in the Future of Socialism for how a Labour government might adapt itself. In places, the tone was close to defeatist. ‘Developments in Britain during the last decade have been acutely disappointing to a democratic socialist,’ Crosland wrote. ‘British society … has proved much harder to change than was supposed … Britain in the 1970s is conspicuous for its persistent and glaring class inequalities, which an appallingly weak economy makes it hard to tackle.’ The political journalist John Cole, who knew him well, sensed that between 1974 and 1976 Crosland was ‘thinking a lot about his next holiday’.
One of the few ministers who seemed energized by the difficulties of the mid-seventies was the secretary of state for industry, Tony Benn, although his proposed economic remedies would quickly prove too radical to be politically pract
ical. Benn’s blueprint for industry was a more left-wing version of the state-led economic planning that had been tried and partly abandoned as ineffective by the Wilson government in the sixties. This time, the state would take ‘direct control, through ownership, of a substantial and vital sector of the growth industries’, in the words of a party-policy document with which Benn was closely associated, ‘Labour’s Programme 1973’. There would be a powerful National Enterprise Board, and planning agreements between the government and major companies. Business would be compelled to improve its performance; at the same time, Britain would take a significant step towards the long-standing left-wing goal of ‘common ownership of the means of production’ famously expressed in Clause IV of Labour’s 1918 constitution.
Benn promoted his scheme by a combination of methods that would become his trademark: crusading public speeches, dogged advocacy in Cabinet, appeals to Labour Party members, provocative remarks to newspapers. But Wilson and most of his ministers considered the plan economically naive and politically counterproductive. During 1974 and 1975, it was steadily hollowed out by the Cabinet until it contained almost none of its original substance. Then Wilson demoted Benn to secretary of state for energy. Benn, loyal to the Labour Party and to the idea that he could best represent its left from inside the Cabinet, was humiliated but did not resign from the government. Westminster observers admired this demonstration of the old Wilson wiliness. ‘All he [Benn] could do was visit oil rigs,’ commented Neil Kinnock, then a left-wing MP and Benn ally. ‘It was a walkover for the Prime Minister.’
