Making of Modern Britain Wilson Governments 1964 to 1970

03/05/2023 Labour Government 1964 to 1970 1

Harold Wilson’s Labour governments 1964 - 70

N C Gardner MA PGCE


Harold Wilson, Labour prime minister 1964 – 1970; 1974 - 76


Key Dates

• 1964 Labour wins the election in October and Harold Wilson becomes prime minister. The IMF loaned the UK £1 billion.

• 1965 Race Relations Act.

• 1966 The election gives Labour an increased majority in Parliament.


Harold Wilson’s Labour Party won by a small majority of just four seats in the

General Election of October 1964.


October 1964: the new Labour government

• In October 1964, Labour won the election beating the Conservatives and Harold Wilson was appointed prime minister.

• The Conservatives after thirteen years in power had run out of steam.

• Scandals had tainted the Tory reputation for integrity in 1963 – 64.


James Callaghan, Chancellor of the Exchequer 1964 – 67; Home Secretary 1967 – 70. Callaghan succeeded Wilson as Labour leader and prime minister in 1976.


Unemployment had reached over 800,000 in 1963

• Another significant factor why the Conservatives lost the October 1964 election was that unemployment had reached over 300,000 in 1963.

• The failure of Britain’s application for membership of the European Economic Community (EEC) in 1963 was another factor in the Conservative defeat.


James Callaghan, Labour’s Chancellor of the Exchequer 1964 – 67, faced a serious

balance of payments crisis.


Balance of payments in crisis in October 1964

• The balance of payments were in crisis in October 1964. The Treasury forecast for the year’s deficit was £800 million.

• The Treasury briefs given to the new Chancellor of the Exchequer, James Callaghan, also pointed out that the deficit was deteriorating so that when the Conservatives left office it was running at a rate of £1,000 million a year.


The balance of payments deficit was worse than expected

• The balance of payments deficit was worse than anything Wilson or Callaghan had expected, even though Labour had sharply attacked Conservative economic policy during the run-up to the election.

• Harold Wilson said when asked what his greatest shock was on coming to power: ‘It was to discover that everything we’d said about our opponents was true.’


Reading books such as ‘Britain since 1945’ by David Childs

will be required at Advanced

Level. Essentially the key passages for homework and exams.


The office of Prime Minister

• If any single person occupies a position of supreme governing power, it is the prime minister.

• And increasingly since the 1960s, the onset of the television age, the British Prime Minister has occupied a position which has become more and more presidential in style and presentation.

• Many political scientists noted a marked presidential style during the premierships of Thatcher and Blair.


The office of Prime Minister

• The Prime Minister is the principal adviser to the crown and thus also the principal inheritor of its powers.

• The Prime Minister is usually leader of the majority party as well as head of government.

• Above all, the Prime Minister appoints the other members of the governmental team.


The responsibilities of the Prime Minister

• The Prime Minister may at any time call upon any government member to resign, or may move the person to a new post.

• The Prime Minister must have an eye not only for the effectiveness of his/her administration and its inner harmony, but also and above all to its ability to attract and hold the support of his/her party and the public.


Prime Minister Blair with President George W Bush and their respective wives


Limitations upon the Prime Minister

• To hold the support of the party and the public, a Prime Minister cannot pass over the other leading figures in the party.

• There are always some leading party figures that a Prime Minister must include in the Cabinet because of the party and public support they command, and not only, if at all, because of their administrative ability.


A Prime Minister has the freedom to decide

• A Prime Minister has the freedom to decide which particular post should go to each of his/her senior colleagues.

• In general, a Prime Minister is free to build as he/she wishes so long as the administration as a whole is reasonably representative of the principal political forces within the party.


The Prime Minister’s special status• The Prime Minister’s special status continues

throughout his/her tenure of office.

• One cannot ignore the importance of the prime minister’s position as chairman of various committees and his/her power to draw up the agenda.

• Subject to Cabinet ratification, he/she may make important decisions on his/her own and, by announcing them publicly in his/her capacity as chief spokesperson for the government, make the ratification more likely.


The Prime Minister is the party leader

• The prime minister draws his/her strength from the twin sources of party and public support.

• As party leader he/she becomes both a focus for party loyalty and the chief party spokesperson with the final voice in the presentation of party policy and the formulation of the election platform.


The most important national leader

• Because he/she is a party leader, he/she normally becomes prime minister and thus the most important national leader.

• He/she is the automatic spokesperson for the nation in international and domestic affairs, the person to whom people instinctively turn in times of crisis or upon formal state occasions for an authoritative expression of policy and opinion.


The supreme example of the Prime Minister

as national leader, Winston

Churchill, the saviour of his country and of

Western civilisation.


The Prime Minister is news

• Above all, as national and party leader, the prime minister is news and, more than any other politician, will benefit from that tendency to personalise ideas.

• For many the prime minister is the party, is the government and, at times, may become the personification of the political nation, as Churchill symbolized and articulated the national resolve to continue the war in 1940 and after.


Devaluation of the pound

• Devaluation of the pound was discussed by Wilson and Callaghan in 1964.

• Devaluation would reduce the value of the pound in relation to other currencies and therefore make British exports cheaper and boost the national economy.

• However, the Bank of England was opposed to devaluation and therefore it did not take place in 1964 and not until 1967.


Economic difficulties 1964 - 67

• There was little chance of the new Labour government devaluing the pound anyway. Wilson announced he opposed devaluation and Callaghan (the Chancellor of the Exchequer) acquiesced. The Deputy Prime Minister, George Brown also ruled out devaluation.

• All three, Wilson, Brown, and Callaghan agreed that the pound would be defended to the very end and also agreed that there would be no discussion of it inside government.


An essential book to refer to for ‘The Making of Modern

Britain’ is by Andrew Marr. A key

ingredient for passing the exams with high grades.


Import surcharges and tax increases• The Labour government led by Harold Wilson

responded to the balance of payments crisis with an import surcharge and tax increases, rather than spending cuts, and thus fell out both with the City of London and with international investors.

• Economic modernization was pursued through the establishment of the Department of Economic Affairs (DEA), which was to be responsible for long-term planning while the Treasury ‘managed’ the economy.


The dominant politician of the Sixties, Harold Wilson, with the dominant pop group and cultural trend-setters of the Sixties, The

Beatles.


Import surcharges and tax increases, 1964

• Callaghan, Chancellor of the Exchequer, believed that the import surcharges would go sufficiently far towards closing the deficit so that he would not need to restrain the domestic economy.

• However, Britain was accused of breaking the rules of the General Agreement on Tariffs and Trade (GATT).


Callaghan’s first budget, November 1964

• In British politics, new Chancellors of the Exchequer normally introduce budgets (financial statements) in the House of Commons soon after taking office.

• Callaghan, as the new Chancellor of the new Labour government, introduced his budget in November 1964 and it carried out Labour’s manifesto promises to raise pensions and abolish NHS prescription charges.


James Callaghan, Labour’s Chancellor of the Exchequer 1964 – 67. From 1976 to 1979, Callaghan

served as Prime Minister but his government was defeated by the Conservatives at the 1979 election.


Corporation and Capital Gains Tax

• To pay for the raising of pensions and the abolition of NHS prescription charges, Callaghan raised the standard rate of income tax, and increased duty on petrol.

• However, the following year, 1965, Callaghan introduced corporation and capital gains tax. The taxes were unpopular in the City and Callaghan did not say how they would work, or what rates he intended.


Callaghan’s corporation and capital gains tax, 1965

• The City and overseas bankers reacted as anyone would who knew that something nasty was going to happen, but did not know exactly what it was or how nasty it would be. They panicked. Sterling continued to leave the country and pressure mounted for the Government to raise the Bank Rate (the official interest rate).


The City. London is the world’s main financial centre, along with New York.


Sterling weak, 1965

• When sterling is weak, but the Prime Minister says he will preserve its value, it is taken universally as a sign that the Bank Rate (the minimum lending rate) is to be raised, so that London’s higher interest rates will attract money back to the City.

• Instead of raising the Bank Rate, Wilson contacted President Johnson of the United States and asked for a loan to help Britain until the weak sterling crisis passed.


Reaction from London’s financial markets, 1965

• Wilson and Callaghan delayed raising the Bank Rate and reserves fell another £20 million, and shares also slid.

• The Bank Rate was eventually raised but the move failed: the Bank of England reported ‘massive and growing’ sales of sterling.

• However, soon after the pound was saved by a $3 million loan arranged by eleven central banks.


Troubled labour relations

• Trade unions during the 1960s and 1970s were sometimes seriously at odds with management. Management often failed to foresee trouble and had no means of settling it simply and quickly when it arose.

• Union leaders took advantage of this state of affairs to compel the meeting of greater and greater demands.


Trade Unions in New Labour Britain 1997 to 2010 and since continue to defend the rights of workers.


The Labour Government and the Trade Unions

• The Labour Government of 1964 – 70 claimed to be able to speak the worker’s language, and the Labour Party itself was mainly financed by the unions.

• A Prices and Incomes Board was set up in 1966 with the power to regulate pay settlements. Unions and management alike were invited to sign a Declaration of Intent, the intent in question being that they would keep down respectively price rises and wage demands.


‘This island is made of coal and surrounded by fish’

• ‘This island’, Nye Bevan (Labour’s Health Minister 1945 – 50) once said, ‘is made of coal and surrounded by fish; it would take an organizing genius to engineer a shortage of either.’

• During the Sixties, coal was back in the middle of the industrial and political argument, and its fortunes, and the relations of the coal industry with the providers of other fuels and with the Government, were providing countless symbols of Britain’s economic sickness and her hopes for a cure.


The two sides of industry:

management versus unions, Capital versus

Labour.


The coal industry and its issues• The coal industry had long been running down;

it was the crudest as well as the most cruel of all ways of firing the homes and factories of Britain, and the decision had been taken at the beginning of the Sixties to reduce, and ultimately to end, Britain’s reliance on it.

• Oil was providing more and more of Britain’s fuel needs, and whatever the instabilities of the Middle East, nobody seriously contemplated the possibilities of supplies drying up, or even being seriously interrupted.


A coal mine in Yorkshire


Coal and other sources of power in the Sixties

• Coal, on the other hand, was becoming increasingly expensive to provide, as more and more seams were worked out and the political dangers of pit-closing meant that more and more hopelessly uneconomic mines were kept in operation.

• The Wilson government nerved itself to work out a future run-down for the coal industry that rested on the provision of increasing quantities of cheap power not only from oil, but from nuclear reactors and from natural gas, discovered in large quantities beneath the North Sea at the start of the Sixties.


British miners in a coal mine in Wales.


‘In Place of Strife’ 1969

• Wages were the only area where the Wilson Government felt it could take effective measures counter-inflationary measures. This in turn implied the need for some action to deal with trade union powers, a need made more urgent by the rash of ‘unofficial’ strikes that had followed the increasing decentralisation of wage bargaining from industry-wide to plant level during the Sixties.


Shirley Williams, Wilson, Barbara Castle


Barbara Castle’s ‘In Place of Strife’

• Barbara Castle, Employment Secretary, drew up a White Paper entitled ‘In Place of Strife’ (January 1969) envisaged sweeping changes in the relationship between unions and the state.

• Some of these were anathema to the unions: for example, the Secretary of State would have the power to order a 28-day ‘conciliation pause’ before a strike could commence.


The Labour party and the trade unions• Although the Labour Party is not wholly a trade union

party, many constituency members are very active in their unions, and loyal to basic trade union attitudes.

• The Parliamentary Labour Party – the Labour Members of Parliament – are sometimes cut off from the grassroots of the party, the constituency members.

• Under New Labour, the acceptance of market capitalism adopted by its leadership, Tony Blair, Gordon Brown and Peter Mandelson, was not always in accordance with constituency party members, who remained faithful to social democratic values.


The class struggle: workers versus management. Trade unions represent workers in an industry, whereas the police defend the interests of capitalist owners and managers.


Seamen’s strike, June 1966

• After the General Election in March 1966, Labour increased its majority from four seats to 98 seats and therefore the Government decided to take on the unions, the issue of unofficial strikes and the increasing wage demands which were contributing to the rise of inflation.

• The National Union of Seamen (NUS) began its strike in May 1966 for better wages and conditions. There is indeed often a conflict of interest between the workers and managers. Managers wish to keep wage costs low but to maximise profits with more faster paces of working.


Seamen’s strike, June 1966

• The NUS had always been one of the staunchest supporters of the Labour Party. The attack on them by the Labour Government led by Harold Wilson deeply hurt them. It caused much bitterness among seamen at the time and for long afterwards.

• The Wilson Government invoked the Emergency Powers Act since they were hard pressed on the economic front. Harold Wilson went on television and virtually declared war on the seamen.


‘The history of all hitherto existing society is the history of class struggles.’ Karl Marx. The class struggle continued after 1945 around the world

including in Britain.


Barbara Castle, Employment Secretary 1968 – 70, introduced the ‘In Place of Strife’

White Paper which recommended penal sanctions to enforce strike ballots and a

‘cooling-off’ period for unofficial strikes. However, Castle’s White Paper was

defeated by the Trades Union Congress (TUC).


Seamen’s strike, summer 1966• Wilson said on TV: “To accept the

seamen’s demand would breach the dykes. This would mean higher and higher living costs and we would be priced out of the export market.”

• The seamen and indeed other workers who took strike action in post-war Britain did not do so lightly, since strikes cause hardship to the worker and their families.


Strikes are a product of capitalist society

• Industrial relations lawyers recognised then and now that conflict was an inevitable element in industrial relations. Conflict would always arise between employer and employee, since each is pursuing their economic freedom to increase their income.

• Conflict arises over the economic freedom and many other individual freedoms of workers.


As long as class society exists, industrial conflict will exist


Class struggle

• The working person has only one commodity to sell, that is her/his labour power and seeks to sell it for the highest price.

• If the price is not right, then the working person withholds her/his labour to obtain better terms.

• The class struggle was a fact in Britain after 1945 and continues in the present day.


Class struggle and affluence

• Consumption rose after 1955, hours of work declined also until the 1980s when the long-hours culture returned to Britain. Industry came to be owned by diverse groups, replacing the old type of individual owner.

• Many workers copied the lifestyles of the middle-classes. But economic recessions and public spending cuts from 1979 onwards revealed that a class structure remained in Britain.


Britain after 1945 remained a class society: upper, middle, and lower.


The TUC’s response to Barbara Castle’s White Paper

• In June 1969, the Trades Union Congress (TUC) held a special congress in Croydon and put forward their “Programme for Action”:

• To affirm that the trade union movement is unalterably opposed to the proposal that the Government should take powers to impose statutory financial penalties on the workpeople or on trade unions in connection either with industrial disputes or with the compulsory registration by trade unions of their rules.


The TUC response to Barbara Castle’s ‘In Place of Strife’ White Paper

• To affirm that some of the other proposals made by the Government for changes in the system of industrial relations and in the law relating to trade unions could in principle help to improve industrial relations and to promote trade union objectives.

• To empower the General Council to take further action which they propose for the purpose of assisting in the improvement of procedures and in the settlement of disputes; and to submit to the 1969 Annual Congress for formal approval appropriate changes in the relevant Rules of Congress.


Jack Jones, General Secretary of the Transport and General Workers’ Union (TGWU), 1969 – 1978. Jones

is addressing a rally of pensioners in Trafalgar Square, 1974. In 1977 an opinion poll stated that the majority of the public believed Jones was “the most powerful person in Britain.” Some historians

have found evidence that Jones passed Labour Party documents to the Soviet Union in return for cash.


Pressure on Barbara Castle to change the policy

• Some Labour MPs tried to get Barbara Castle, Employment Secretary, to soften her attitude. Her ‘In Place of Strife’ White Paper was trying to impose prison sentences to enforce strike ballots.

• However, Castle argued strongly that her White Paper was crucial and that the policy simply had to be carried out.

• Labour MPs were dispirited that Castle would not back down and all the pleading with her, threats of revolt, and fears of break-up of the Party, were of no avail.


The response of James Callaghan, Home Secretary

• James Callaghan, Home Secretary 1967 – 70, was a former trade unionist and spoke out on behalf of the trade unions. He said that the Cabinet could not ignore the fact that its major policies were likely to be defeated at the Labour Party and TUC Conferences in the autumn. If that happened the tension between the Government and the rest of the labour movement would increase and become unbearable.

• However, the Government intended to go ahead with a short Bill which incorporated some of the provisions of the White Paper.


The Trade Unions had founded the Labour Party in 1900 and remained a main source of party funding.


The Labour Government’s Bill, spring 1969

• The Labour Government’s Bill proposed:

• It would establish the statutory right of every worker to belong to a trade union.

• It would give the Government power to order an employer to recognise a trade union when this had been recommended by the Code of Industrial Relations (CIR).

• It would give the Government power to impose settlements in anti-union disputes under pain of fines, but only after first the TUC and second the CIR had failed to promote voluntary agreement.


The Labour Government’s Bill, 1969

• It would give the Government power to impose a 28-day conciliation pause in an unconstitutional dispute and to order that the status quo be restored and maintained. These powers would also be backed with financial penalties.

• It would remove the disqualifications from unemployment benefit from workers laid off in consequence of a dispute in which they were planning no direct part.


1969 Labour Party Conference

• The 1969 Labour Party Conference openly declared its opposition to anti-union legislation and to the Prices and Income Policy. Barbara Castle’s White Paper had caused great tension within the labour movement.

• In November 1969, Barbara Castle had said to the Institute of Directors that: “Real power now resides in the workshop and on the office floor.” She further said: “Workpeople have a veto they are increasingly prepared to use.”


The Trade Unions continued to defend working people and the welfare system.

Making of Modern Britain Wilson Governments 1964 to 1970

Documents

Transcript of Making of Modern Britain Wilson Governments 1964 to 1970