Devaluation was a trauma that disorientated the Government, broke the Chancellor’s spirit, and impressed itself on Wilson as an experience never to be repeated. What today can be regarded as a largely technical adjustment, was then seen – especially by those who fought against it – as a national humiliation and an irreparable defeat. Cripps had wished to postpone it, if it had to come, until after an election. Coming, as it did, close to the end of a Parliament, it left the Government ideologically ragged, and almost without arguments. So far from ending the quarrels between ministers, it deepened and extended them. The dispute now shifted from the question of whether to devalue, to what measures should accompany devaluation, especially in relation to government expenditure.
There were three main points of view. Some ministers were against major cuts, regarding external difficulties as largely unrelated to domestic policies; or else they saw devaluation as an alternative to deflation, rendering deflation superfluous. Others, and virtually all officials, considered that without deflation, devaluation would not work. Finally, a number of key ministers recognized the need for economies, but suspected Treasury advisers of deflationary instincts that were excessive, or in conflict with the Government’s socialist aims.
Doubts about Treasury advice were an important theme throughout the debate, even among politicians who were fundamentally in agreement with it. There has, indeed, seldom been a time when ministers have been more suspicious of their civil servants. In July, Cripps had told a meeting of the Cabinet’s Economic Policy Committee, after officials had been asked to leave the room, ‘that he did not trust his own officials and advisers. They were all really, by reason of their training and their belief in a “free economy”, much more in agreement with the Americans than with British ministers.’ Both Jay and Gaitskell complained of a strong civil service campaign for public expenditure cuts to accompany devaluation. ‘They say there is still very heavy pressure from all official quarters “to have something else” as well as devaluation,’ Dalton noted at the end of July. ‘What they all want is a slash in public expenditure on social services.’
This demand was the crux: attitudes to it, for and against, shifted and then hardened in the weeks before and after devaluation on 18 September. Not for the first or last time, the Treasury regarded social services spending less indulgently than did Labour ministers. Despite Cripps’s reservations about Treasury officials before devaluation, he supported their demand for draconian cuts once devaluation had occurred. Little was agreed, however, until after devaluation, and it was not until mid-October that Cripps at last circulated a paper proposing cuts of £280 million. This figure was a result of political horse-trading over a paper by Robert Hall recommending cuts of £300 million, which was discussed by the Economic Policy Committee on 5 October. Both Jay and Wilson expressed suspicions of the Treasury’s attempts to impose what they regarded as anti-socialist economies.
Thus a novel line-up briefly existed among the ‘economist’ ministers, with Jay, Dalton and Wilson questioning the masochistic approach of Cripps, who this time had the support of Gaitskell. The President of the Board of Trade seemed now to be distancing himself from the sick Chancellor, and seeking to build bridges to Jay and Dalton. Earlier in the summer, Wilson had been reluctant to oppose Cripps outright, and had followed the Treasury line closely. Now he became a sharp critic of the civil service, and of its alleged control over the Chancellor. After a key meeting of the Economic Policy Committee, Dalton accompanied Wilson back to the Board. ‘[Wilson] said that his man Cairncross, a good Socialist, hadn’t been at the meeting where [Hall’s] paper had been drafted,’ Dalton noted. ‘He said that Jay should still be vetting papers from the officials as in the summer. Since Cripps’s return, this procedure has lapsed! I said the young Socialist economists must continue to work together and pull their full weight. He said, “The trouble is that Stafford isn’t an economist”.’
There was, however, another non-economist minister who was beginning to exercise a rival magnetism: Aneurin Bevan, the Minister of Health. Though a traditional ally of Cripps, Bevan now moved into the arena in order to defend the National Health Service from a proposed shilling charge for medical prescriptions, and to protect the housing programme. Cripps was determined to get his measures through. Bevan declared himself equally determined to stop him.
On 12 October, the Cabinet came close to an open breach. Bevan and Cripps clashed fiercely at the Economic Policy Committee. ‘Each hints at resignation’, Dalton noted, ‘if the other succeeds in preventing him getting his way.’ The key issue was how much action should be taken to make room for exports, and meet inflation. Gaitskell, fearing another dollar crisis in the spring, sided with the Chancellor’s firm line. ‘If this morning’s clash came to a break’, he told Dalton, ‘he would be with Cripps against Bevan, and so he thinks would be the country and most of the Party.’ Dalton, Gaitskell’s friend and patron, noted that he thought ‘Plowden has been working on Hugh.’51 Gaitskell wrote in his own diary: ‘The Minister of Health in particular launched forth in a diatribe and [was] backed, as I thought rather dishonestly, by Hugh Dalton.’52
While the Minister of Fuel and Power moved in behind Cripps, the President of the Board of Trade moved away from him, and backed Bevan.53 If Wilson had sought to curry favour with the Treasury in the summer (Jay’s accusation), he did so no more. He now positioned himself squarely alongside those who regarded official recommendations as too severe. ‘Harold Wilson, who must know better, put in a paper on timber saying that we ought to keep on the housing programme and be ready to spend dollars if we run short,’ grumbled Robert Hall at the end of September.54
There were other resignation threats: from Bevin and the Defence Minister, A. V. Alexander, if the cuts were allowed to fall on defence. Bevan continued to denounce any interference in the Health Service. In the end, a compromise was reached: Wilson subsequently claimed that he was responsible for bringing it about, acting as go-between. Cripps was able to get through most of his cuts, though they constituted, as Eden put it in the Commons on 26 October, ‘the maximum that can be agreed without Cabinet resignations’.55 Bevan was persuaded to accept a small prescription charge in principle, while successfully resisting charges for hospital patients, and for false teeth and spectacles. Open conflict was avoided. But the stage was now set for a much more serious and damaging split eighteen months later. As in 1949, the 1951 struggle involved Aneurin Bevan in opposition to an iron-willed Chancellor, on the issue of cuts in social services spending, and prescription charges in particular. In 1949, however, Cripps – sick, tired but still respected, by Bevan as much as anyone – remained in office. By 1951 he was out of the Government and dying. It was to be a critical difference.
“I think we’ve got 20 years of power ahead of us,’ Patrick Gordon Walker wrote recklessly in his diary in the euphoric summer of 1945.56 Before the end of the Parliament that dream had evaporated, and Labour leaders believed they were facing defeat. Though the Government had lost no by-elections, Labour lagged behind the Conservatives in Gallup polls throughout 1949 and until the actual month of the election in February 1950.57 For Wilson, concern at the prospect of losing office was compounded by the possibility of losing his seat, for the arithmetic at Huyton, in such conditions, did not look promising. Nevertheless, he pressed for an early election. He was overruled. A meeting of the full Cabinet on 13 October decided to postpone the date – only himself, Cripps and Bevan dissenting, with Wilson keenest on a quick test of public opinion.58 This was probably a lucky reverse, because the extra months’ grace gave time for the beneficial short-term effects of devaluation to become apparent.
In the meantime, Wilson took further steps to establish his own political personality. Symbolically, he shaved the moustache he had grown to make himself look older. He now looked old enough at thirty-three, he told a Liverpool reporter. He also made speeches which, while not departing from the Government’s official line, underlined the importance he attached to physical planning and controls. In the debate following the election announcement, Winston Churchill, as Leader of the Opposition, made a combative speech in which he likened devaluation to a draught on the life-blood of the earning masses, and listed the measures needed to reduce expenditure, increase incentives and relax controls. Wilson, replying for the Government, stressed that