4th July 1966. ‘The Hot Potato and the Cold Fish’.
Harold Wilson had starred at Oxford in economics and famous for the quote: ‘The new Britain that is going to be forged in the white heat of this revolution’, rather than the oft quoted, ‘white heat of technology’.
In 1964 The Labour Party had come back into office after thirteen years in the wilderness and for the first time, leaders of the main parties had been born in the 20th century.
Keen to control the economy it was Today in 1966 that Wilson’s Government published its Prices and Incomes Bill.
Labour had been elected on ‘purposive planning’ and reflecting Wilson’s 1963 aim to be rid of restrictive practices, amateurism and privilege, to be succeeded with planning and technology.
However research supposedly demonstrated that Wilson’s plans for the economy were to be dropped in exchange for US help in defending the pound, and our promising to maintain sterling and Britain’s defence commitments east of Suez.(1)
The upshot was that after scarcely a week in office, a package of emergency measures had to be announced on 26th October including a 15% surcharge on a wide range of imports, illegal under international rules, and an export rebate scheme. The proposed cancellation of the expensive Concorde aircraft project was blocked by the French.
As early as November 1964 the situation was so desperate that Devaluation was mentioned, a situation only saved by Governor of the Bank of England, Lord Cromer, who succeeded acquiring US help in raising $3billion from central banks around the world resulting in deflation.
By July 1965, the government had reneged on promises on pensions and to abolish prescription charges. By September 1st the Cabinet agreed to compel advance notification of pay and price increases.
The Government’s task was exacerbated by the decision on the night of their narrow election victory to maintain the value of sterling at $2.80; bad for exports.
On 16th September the National Plan was published which in those days of powerful Trade-Unions had to approved in draft form not only by the Cabinet but by the Trades Union Congress and the National Employers’ Organisations, then in the process of forming itself into the Confederation of British Industry (CBI).
It appears that the employers were discovered in conclave at a country house near Sunningdale used as a staff college by Courtaulds. The irascible George Brown, Deputy Leader, rang the place and reprimanded Kearton (later Lord), head of Courtaulds for ‘hiding away…. in a conspiratorial manner’.
After being informed of the employers’ refusal to back the plan, Brown made an unresponsive visit to put his case, after which he departed in high dudgeon, saying he was going to see Wilson to call an election.
However the ebullient, and often tipsy Brown, and by sheer force of vehement argument he overcame the CBI’s reservations and a formula was agreed. Brown then got into chauffeur driven Austin Princess and headed back to London.
Unfortunately the car broke down and after frantic telephone calls from a local box for a taxi Brown commandeered a passing Mini saying he was on important government business and to drive to Whitehall.
He was half way up the stairs when he discovered that the Plan had been left in the car; a bemused driver returned it later. One couldn’t make it up!
Matters got worse and In July 1966, the Prime Minister had to announce, faced with runaway inflation, a six-month standstill on wages and dividends. Foreign holiday allowance was £50. Other crisis moves included prices to be frozen for 12 months and Higher-Purchase curbs.
After a second election in 1966, the next year saw Devaluation of Sterling and Sir Alec Cairncross of the Government Economic Service, confided to Cabinet Secretary, Sir Burke Trend, it was the moment when he was ‘far more scared by the situation…than I have been for nearly twenty years’.
The irony is that Wilson, who had beaten Brown to the top job, and whom he called ‘the little man’, was a brilliant economist but this didn’t serve him well in the short-term measures of governance.
(1) Research by civil-servant Clive Ponting (qv).
Much information in the public domain.
Head-line quote by Sunday Times. 17.3.1968 after Brown’s departure in a financial crisis.