Britain’s post-war Consensus
In Britain the outcome of the war was an occasion for relief and self-congratulation. While it was recognised that the war could not have been won without American help, there was a justifiable pride in the courage and unity of the British people, and in the resilience of Britain’s institutions. The concentration of effort and resources on winning the war had been achieved, as one participant wrote later, with ‘a spirit of social cohesion and a perception of fairness which could hardly have been bettered’.33 When Winston Churchill displaced Neville Chamberlain as Prime Minister in 1940, he invited senior Labour politicians to join the war cabinet, including Clement Attlee as Deputy Prime Minister and Ernest Bevin, head of the Transport and General Workers Union, as Minister of Labour. There was close co-operation between government, employers and trade unions throughout the war, and in planning for post-war reconstruction. The Beveridge report on social insurance, published in 1942, and the 1944 White Paper on employment policy reflected a broad agreement across the political spectrum on the priorities which should guide post-war governments: to maintain full employment and to prevent a repetition of the social hardships of the inter-war years.
Much of this consensus survived Labour’s victory in the 1945 general election. Although the election campaign was acrimonious – Churchill claimed that the socialist state which Labour wanted to introduce could not be run without a Gestapo, while Aneurin Bevan, a Labour left-winger, insisted that the election represented ‘a struggle for power between Big Business and the people’34 – the gap between the parties was less wide than the rhetoric suggested. Labour’s landslide victory did not mark the conversion of Britain to socialism.35 By presenting a manifesto which combined social reform with an extension of government control over the economy, the Labour Party convinced the voters that it was more likely than the Conservatives to ensure that the unemployment and stagnation of the 1930s did not return. Labour, under the cautious leadership of Clement Attlee, was offering a set of measures that built on the wartime consensus and added to it a number of social programmes, including the creation of a National Health Service, that were widely agreed to be necessary. Attlee and most of his closest colleagues favoured a mixed economy in which the role of government would be powerful but not overwhelming. There was also an assumption that the partnership between government, employers and unions which had been established during the war would continue.
The most pressing economic problem was the financial legacy of the war. The war had been paid for by borrowing, mainly from sterling area countries, and by the sale of overseas investments, supplemented by aid from the US under the Lend-Lease programme. With the abrupt termination of this programme at the end of the war, Britain was faced with an alarming gap between its foreign exchange outgoings, including debt repayments and overseas military expenditure, and its income from exports.36 A new American loan was negotiated at the end of 1945, but strict conditions were attached to it, including a requirement that the pound should be made freely convertible into dollars in 1947; there was also pressure from the Americans to dismantle the imperial preference system and open up the British market to imports.
Britain’s balance of payments remained fragile throughout Labour’s period in office, necessitating a strenuous effort to hold back domestic consumption in favour of exports. Because of this financial weakness, Britain’s economic situation after the war was not as favourable as it seemed compared to Germany and France. Although Britain had sustained less physical damage, the two Continental countries did not have a large foreign debt to service, nor did they have the international obligations which stemmed from Britain’s shared responsibility with the US and the Soviet Union for supervising the transition from war to peace. The Labour government had the difficult task of correcting the balance of payments while at the same time pursuing its social objectives and fulfilling its overseas commitments. Despite severe setbacks, including the abandonment of sterling convertibility in 1947 and the devaluation of the pound in 1949, the balancing act was successful. By the time Labour left office in 1951, Britain’s overseas finances had been strengthened, full employment had been maintained, and a substantial social programme had been carried through.
Some historians have argued that the Attlee government devoted too much attention and resources to social welfare at the expense of what should have been a much higher priority – the modernisation of industry.37 But Attlee and his colleagues were well aware of the need for higher productivity. The problem was not that their priorities were wrong or that too much money was spent in other areas, but that their industrial policies were not well conceived. In its election manifesto Labour had committed itself to planning and an extension of the public sector through nationalisation. How the plan was to be formulated, and what machinery would be set up to implement it, was left vague. Most of the wartime controls – over imports, over access to foreign exchange, over the allocation of raw materials – were still in place, and they were used by the government to support the export drive. But no new planning instruments were introduced. The proposed National Investment Board, which was to ‘determine social priorities and promote better timing in private investment’, was not set up, perhaps because the government thought that, by nationalising some of the most capital-intensive industries, it would have sufficient control over investment.38 In principle the extension of public ownership enabled the government to plan at least part of the economy. But there was no link between nationalisation and planning. The impetus behind nationalisation was partly ideological. For left-wingers like Aneurin Bevan it was a way of ensuring that ‘effective social and economic power passes from one order of society to another’.39 But most ministers saw public ownership as a way of solving particular problems in particular sectors, not as a step towards a socialist economy. Three of the industries which were taken over, gas, electricity and the railways, had been subject to government regulation before the war. The regulatory arrangements had not worked well, and public ownership could be defended as a more effective means of ensuring that these ‘natural monopolies’ were managed effectively in the public interest.40 The most ideologically motivated nationalisation was that of steel, but even this could be presented as a way of dealing with the structural weaknesses in the industry which had not been tackled in the 1930s.
No serious consideration was given to extending public ownership beyond steel to other manufacturing industries, and the drive for higher productivity in the private sector took the form of exhortation and persuasion. The most active propagandist was Stafford Cripps, who served first as President of the Board of Trade and later as Chancellor of the Exchequer. He created a production efficiency service within the Board of Trade, supported the establishment of the British Institute of Management, and with Marshall Plan funds helped to set up the Anglo-American Council on Productivity, which sent teams of managers and workers to the US to study American manufacturing methods. Cripps also established working parties in a number of industries soon after the war, through which employers and unions could identify obstacles to higher productivity and work out plans for removing them. The government intended to convert these bodies into development councils with statutory powers, and legislation for this purpose was passed in 1947. But employers were unenthusiastic, fearing that the councils would cut across the work of existing trade associations. Only a few were were set up, and, apart from the Cotton Board (an existing organisation which was reconstituted as a development council), they were in minor industries.41
An important strand in the productivity drive was the promotion of greater co-operation between trade unions and employers. But the government did not contemplate any major change in the institutions of collective bargaining, still less a wholesale reform of the labour relations system. The only initiative which might have altered relationships at the shop floor level was an attempt in 1947 to relaunch the factory-based joint production committees, which had had some success during the war. However, many employers saw the committees as a step towards workers’ control, while the unions were anxious to ensure that they did not trespass into the field of wages and conditions, which should be left to the established channels of collective bargaining.42 Some union leaders were also concerned that joint production committees might be used as a vehicle for Communist shop stewards to increase their influence. Although the TUC and the major unions were fully supportive of the productivity drive, they were wary of any moves which might restrict their