John Barnes, Historian

© John Barnes

Political Change in Modern Britain

1 November 2002

Lecture 4 ~ Towards a Socialist Commonwealth?

There are a number of different interpretations of the postwar Attlee governments. In Postwar British Politics in Perspective (Table 7.1) Jim Johnston offers an interesting taxonomy, which (slightly amended) I have set out below, but it does not seem altogether accurate as an account of the debater around the actions of the Attlee Government.

Accounting for the postwar political landscape

Emphasis upon war Emphasis upon Attlee Govt.

Source: Johnston

I) Early analyses of the Attlee governments emphasised the experience of war as the principal variable in explaining social, economic and political change and they were seen as the fortunate beneficiaries of these changes. In the light of the conclusions drawn about the post-war settlement, these accounts seem dated.

II) But the argument that even a Conservative government would therefore have been forced to follow broadly similar policies and legislate along the same lines led directly to a second school of thought, which argued not that working class demands were met, but that Attlee's Government betrayed the radical socialist agenda on which it was elected.

Anderson argues, for example that it "thought only of bettering the condition of the working-class within a social order taken as given and an imperial heritage it strove to preserve, by reliance on American protection.... Socialism had never been on the agenda of the Attlee administration. Its goals were social concessions from a capitalism whose strengths it accepted as besides contestation." [Anderson in New Left Review 161 (1987)]

Miliband was an early and very influential critic, but Coates and Howell offer analyses along the same lines. Howell is arguably the most scholarly of the three but Coates is worth study since he offers some cogent analysis of the reasons for the "failure" of social democracy and is particularly strong on the tensions between socialism and parliamentarianism.

III) More right-wing historians like Beloff, and, above all, Barnett also share the view that the war years generated the Keynesian welfare state and the latter has launched a savage assault on the Attlee Government for sacrificing the regeneration of the British economy to the pursuit of the "new Jerusalem". The issues raised by Barnett are best dealt with separately and will be the subject of the next lecture.

IV) In contrast to the stress laid on continuity by these three approaches, Morgan is inclined to emphasise Labour's distinctive approach, which went well beyond Beveridge in the field of social welfare and had, as a major feature, measures of nationalisation that would not have been undertaken by a Conservative government. Morgan also stresses the success of the Government in the face of major economic problems. He accepts the broad periodisation (offered by Dalton originally) that this is a government of two halves, in the first of which Labour drove through most of its legislative programme and made an abortive effort at planning the economy. There followed a more introspective period in which the Government retreated into a drive for self sufficiency and inaugurated "the long reign of the Keynesians" [Morgan p.364] Henry Pelling is more critical of the outcome, but equally emphatic about the constraints faced by Attlee and his colleagues and Jim Tomlinson has recently suggested that an "iron quadrilateral" hemmed in the Labour Government.

V) Although it can be argued that the conception of Attlee's government to which both Morgan and Pelling subscribe, envisages it as having "a clear vision of the socialist society it was aiming to create" [Laybourn p.110], Morgan in fact argues that its success was at the price of evading the dilemmas implicit in any attempt to impose "realism" on the idealist's drive towards socialism. In marked contrast the American political scientist, Samuel Beer, had seen the leadership of the government as a members of a political generation unified in their commitment to socialist ideals and public ownership as the major expression of those ideals. More recently Martin Francis, while recognising that there are diverse currents in the party's socialism, takes ideology more seriously as a driving force than Morgan. Like Beer, he believes that there was substantial identity of purpose within the party and he emphasises the ethical nature of that purpose. However, the cast of the Government's mind is backward looking and he is clear that a reappraisal of socialism in the light of the Government's experience was inevitable.

VI) Finally, Johnston seeks to emphasise the dialectical nature of change and offers criticism of earlier accounts, which he regards as laying too much stress on agency. Building on findings from Tiratsoo and Tomlinson, he believes that the Government's freedom for manoeuvre was much more tightly constrained than has hitherto been allowed. It is not just that key groups were opposed to Labour's purpose, but there were distinct limits to the popular support for measures other than the welfare state policies essential if the state was to retain legitimacy. But there were political constraints also imposed by the British political tradition.

Historians of this school are on strong ground in emphasising the constraints imposed on the Labour party by their own political assumptions. Both Johnston and Tomlinson fruitfully develop this analysis. The latter identifies, in particular, the assumption that Britain remained a great power, that the parliamentary road to socialism was the one to pursue, that parliament was sovereign, that planning should be a co-operative enterprise with both sides of industry involved and that collective bargaining should be free.

There are some marked resemblances between these accounts and the more analytical "marxisant" accounts already identified. Johnston doubts Labour's radical purpose, and grounds his scepticism in part on the Government's reluctance to reconstruct the state. But he emphasises also on the Labour party's rooted belief in evolutionary change. In this respect his account has much in common with that offered by Coates, who attributes the Labour party's failure to transform a capitalist society into a socialist commonwealth to its reluctance to espouse class politics and in its commitment to Parliamentarianism and gradualism.

VII) Keith Laybourn in a brief review argues that the empirical evidence does not substantiate fully either of the two interpretations on which he focuses.

The quasi-marxists make some good points, particularly in relation to the level of compensation paid to those whose industries were nationalised and the nature of management recruited to run the nationalised industries. But their scepticism about the industries chosen for nationalisation and expressed belief that, if they were chosen in a search for efficiency, they could not also be serving some socialist purpose seems far-fetched. They have even greater difficulty in explaining away the drive to nationalise iron and steel. If this industry was the subject of major disputes in Cabinet, those disputes centred less on the objective and more on the timing of such a move. Despite the major economic crisis that has just led to the reconstruction of the Government, the Cabinet chose to go ahead with the nationalisation of what was widely seen as a successful industry and it pushed through changes to the veto powers of the House of Lords in order to ensure that the bill would reach the statute book.

Where these critics have a major point - the failure of the Labour Government to develop policies for the private sector - it is worth noting that this was a failure identified by Socialist critics at the time eg. by Rogow & Shore. Helen Mercer has documented the resistance of British industry, particularly after the crises of 1947 had destroyed the command the Government had until then exercised over public opinion. Cripps had seen his role at the Board of Trade as the creation of "orderly conditions by which private enterprise can make the most effective contribution to the country's economic welfare" and had set out to gain private industry's confidence. Wherever nationalisation was not on the agenda, consolidation became the order of the day and almost insensibly the concept of a mixed economy emerged. That did not prevent his successor from experimenting with development councils or envisaging the use of price controls as a means to drive industrial efficiency. But more radical ideas like extending public ownership to wholesalers did not find favour and there was no wholesale attempt to change the way in which trade associations played a key part in the operation of controls. Development Councils were neutered. The FBI fighting for its own existence as well as self government in industry made it clear that the smooth progress of production would be disrupted and it was no idle threat. They took Wilson's first order under the Act to court and although the Government won, the terms of the judgement were such that Wilson concluded that amending legislation would be needed to enable the policy to be taken further. It is perhaps worth noting that the concern of the FBI was less the question of ownership than the power to manage and that it was the notion of bringing the trade unions into that arcane sphere that alarmed them. It could be argued (and was) that the managerial revolution had reduced the need for public ownership, but it made the FBI determined to retain the pattern of self-government in industry that had been achieved in the 1930s. The Government's attempt to be rid of restrictive practices, price rings and rigged markets found flawed expression in the 1948 Monopolies and Restrictive Practices Act and attempts to actively involve the workforce in the drive for efficiency also failed. The advisory councils in shipbuilding and the motor industry were no more than talking shops. Attempts to revive the wartime Joint Production Committees faltered in the face of managerial resistance. The Government was reduced to seeking the application of science to industry through the NRDC, an attempt to influence standards through increased grants to the Brtish Standards Institutiion, the creation of the British Institute of Management in 1946 and the Productivity Efficiency Service (which evolved from the wartime MAP) and the setting up of the Anglo-American Council on Productivity. Much of this was useful, but it was no substitute for the well-designed modernisation policy that many Socialists had looked for during the war.

Although this is clearly a story of relative failure, it is difficult to see in it any wholesale abandonment of Socialist values and that - although the reverse is often said - is even more true of the Government's use of physical controls. Obviously these were of most effect when there was scarcity, but the widely accepted picture of a gradual move towards the relaxation and elimination of controls in the course of the Labour Government is simply false. This may be described as The Whitehall view of history where the wish was father to the thought and the historian who has lent respectability to that view, Alec Cairncross, was himself the economic adviser to the Board of Trade. As such he ought to have known better. It is, of course, perfectly true that much was at fault in the Government's first efforts to plan the economy, not least the refusal to subordinate the Treasury to the economic planners. It is equally true that some Socialist advisers of the Government like James Meade welcomed the defeat of the "Gosplanners" and saw no need for the Government to adhere to Soviet style plans. In 1947 when the incoming Chancellor, Stafford Cripps, took the newly inaugurated Central Economic Planning Staff with him to the Treasury, that body resumed its central role in the conduct of economic policy and Keynesian management of the economy became central to his approach to the job. But the notion of planning was not abandoned and the role of cheap money was maintained. In fact the shift to tighter budgetary policy was accompanied by more effective planning of investment by the tightened use of controls, not financial mechanisms. In this sense the Investment Programmes Committee's Report, in Dalton's hyperbolic phrase, marked "a real start to central planning". Tomlinson also shows that . More to the point, Cripp's successor was Hugh Gaitskell, who had no wish to abandon physical controls and who, as Burnham shows, was reluctant to participate in the European Payments Union, GATT or indeed the Schuman plan lest the Government lose control of its economic policy. Too much has been made of Wilson's "bonfire of controls" and too little of the evidence deployed by Tomlinson, Scott Kelly and Neil Rollings that the younger ministers in the Government were those most engaged in discussion of a Full Employment bill in 1950 to extend controls and that the bill was delayed only because of the onset of the Korean War. They were at one with Morrison, who had inaugurated the process, and Aneurin Bevan. Neither he nor Gaitskell wanted to plan the economy in detail, but both wanted to see a planned economy. The kind of controls that Gaitskell wanted were extensive, but largely negative, the power to control prices, ration essential consumer goods, allocate material, control building, control imports and determine the proportion output sold at home or exported. Bevan and Douglas Jay were unlikely allies in seeking more positive powers as well.

If we examine the record of the Labour Government in detail, it seems perfectly clear that its socialism was compound of four broad traditions, Marxism being the least significant. Subscription to the idea of class war was limited, but the view that the roots of capitalist power was to be found in ownership of the means of production ran deep, although there were ethical and utilitarian beliefs that also pointed to public ownership as the major focus of policy. However, the British conception of socialism owed more to Darwin than to Marx. Fabianism was evolutionary, and in large measure empirical, reformist and technocratic. Planning was a late addition, in part inspired by the example of the Soviet Union, but owing something to both the National and wartime Governments and the reflections of PEP. The ethical tradition owed something both to nonconformism and Christian socialism. It had taken on board the anti commercialism of Ruskin and Morris and its case against the injustices and suffering that it believed capitalism engendered was informed by moral outrage. At thi stage, however, as both Beer and Francis make clear, these different tendencies were not embodied in factions. There was a broadly shared agenda and agreement about what was entailed by socialism. Labour Believes in Britain, the 1949 policy statement, which formed the basis of the 1950 manifesto, had been shaped by the party's policy committee under the tutelage of Herbert Morrison, and approved with remarkably little dissent by Conference in the autumn of 1949. A socialist society, it stated, would be grounded on four basic principles:

a)      a commitment to the pursuit of equality, both equality of opportunity and equality of income and property;

b)      the placing of economic power in the hands of the nation by public ownership and centralised planning;

c)      a desire to release the productive energiesa of the nation that had lain dormant under the inefficiency and waste of capitalism; and

d)      a commitment to and desire to extend democarcy.

Public Ownership and Socialism

The Government was committed to a major programme of nationalisation. When it was complete, coal, cable and wireless, gas, electricity, the Bank of England, civil aviation, inland road transport, the railways and iron and steel would be in public ownership. Speaking to the 1945 party conference Morrison had claimed that "the real fight between the Labour Party and its Conservative opponents will be as regards economic and industrial policy, the future of British industry.... You cannot get a quart of socialist prosperity out of a miserable pint capitalist pot."[1] Public ownership continued to be central to Labour's ideology, although it no longer carried the sole burden of delivery. Planning, as Shinwell pointed out when replying to the debate on Mikardo's resolution at the 1944 conference, offered another way forward, to be seen complementary rather than an alternative to nationalisation. Nevertheless Mikardo had pressed his case in an attempt to secure "the transfer to public ownership of the land, large-scale building, heavy industry, and all forms of baking, transport, fuel and power". Let Us Face the Future, although more detailed than any previous manifesto, did not go so far. Like the 1937 Immediate Programme it promised nationalisation in four main fields - finance, transport, coal and power. Again like the previous programme, it included an ambiguous reference to Land. However, it went further than the 1937 programme in its inclusion of iron and steel amongst the industries to be nationalised. Even so there was some disappointment on the left with the nationalisation proposals and it is possible to discern a reduced emphasis on the ethical side of socialism. Miliband is quite wrong to suggest, however, that the programme did not mark an advance on the 1937 statement. Even the change of tone was in all probability an attempt to persuade an electorate, less convinced about the virtues of socialism than the Labour party, that efficiency and modernisation were best pursued through public ownership. Certainly the Labour Government was to persist in pursuing nationalisation - although not without some doubters- even when the country was faced with a sterling crisis in 1947, and the nationalisation of iron and steel was accomplished in the face of stiff resistance from the industry and from the Conservative opposition.

At first there were no such problems. Morrison, who had been the minister responsible for working out the plans for the London Passenger Transport Board, Labour's model for nationalisation, took a keen interest in the programme and chaired the Ministerial Committee on the Socialisation of Industries. The relevant departmental ministers frequently consulted him about their plans. However the very first measure to be passed was the nationalisation of the Bank of England. Dalton moved the second reading on 29 October holding in his hand a copy of the Labour manifesto and claimed an unchallengeable mandate for what was proposed in the bill. The Bank was to be run day by day by the Governor and deputy Governor, who would serve a five-year term and a Court of Directors, sixteen in number, one quarter of whom would retire each year. At the heart of the bill were provisions for the Treasury to "give such directions to the Bank as, after consultation with the Governor.... they think necessary in the public interest" and also for the Bank to make recommendations and, if necessary, give directions to the commercial banks. In the event the power to direct has never been used.

Dalton was emphatic that power needed to pass from the City to the Treasury. His view that the Act secured such a transfer was as mistaken as the judgement that the Act had changed nothing. Since the party had already decided that the joint stock banks would not be touched, the power to issue directives to them was a useful addition to the Chancellor's armoury, strongly opposed by the Governor. Dalton, however, was convinced that the banks were not a major source of industrial finance, and the evidence suggests that, although they did to some extent resist government policy in regard to the direction of investment, Dalton's scepticism was well justified. He had concluded that their nationalisation was unnecessary on economic grounds. Morrison and others supported him in the well-founded fear that it would be an electorally suicidal move. People did not want to bank with the state. Once the Act was through, Dalton made no move to change the Governor nor did he reshape the Court. He had no wish to undermine confidence and that explains the decision to pay full compensation, a policy that was followed in subsequent nationalisations.

The nationalisation of the coal industry followed. It had been intended that this should precede nationalisation of the Bank, but the bill proved more difficult to draw up. Shinwell indeed created a myth that the party had no worked out plans for this measure, but that was far from the truth. The Government advanced a strong case for nationalising the coal industry. It argued that the quantity and price of coal were a vital national interest given the industry's role in supplying others. This required a thoroughgoing modernisation of the industry, which could not be secured under private ownership. It was also a necessary preliminary to the reform of human relations within the industry, which had long been in a poor way. It drew much of the evidence for these propositions from the conclusions of the Reid Committee. Although Reid had not regarded nationalisation as essential, he had argued that the industry needed to be run on a national basis with a powerful central authority to drive through the mechanisation programme and the investment needed. The government argued that without public ownership and state control, it would be impossible to put the Reid Report into effect.

A whole raft of nationalisations followed - cable and wireless, civil aviation, gas, electricity, road transport, railways, the development value of land, and, above all, iron and steel -, but the list adopted for the following term was comparatively modest, water supply, cement, meat, sugar refining and the "mutualisation" of industrial assurance. In 1951 there was no list, simply a pledge to take over those concerns that were failing the nation. This waning enthusiasm is often attributed to a loss of ideological purity. In truth it had more to do with the unpopularity of nationalisation and a lack of interest shown by trade union leaders. Consolidation was the order of the day, although note how the author of consolidation opposed Industry and the State in 1957. Another major motive was probably the desire not to prejudice continued American military and economic assistance, but a third set of arguments, the desire to further efficiency rather than pursue democracy in industry was itself predicated on the desire to rebuild Britain's economic power and escape America's tutelage.[i] Given that Labour wished to present an empirical case for further public ownership lest it alienate the support won in 1945, the party had already dismissed Unilever, oil distribution, the motor industry and aircraft manufacture as possible candidates for the 1950 manifesto on the ground that they could not be proved to be inefficient, but it is worth observing that no Conservatives worth his salt could have accepted Labour's belief that modernisation and rationalisation were best accomplished by public ownership. Nor did Labour and the New Society in 1950 conceal its belief that public ownership was related to the achievement of social justice and the redistribution of power:

"Big business men.... Bankers and merchants directed the economic life of the nation.... The whole nation was imperilled by private control of the economy.... Therefore the public will must be supreme.... Public ownership is the most effective way of public control because it makes industry directly accountable to the people."

Another motive for nationalisation, little mentioned because of the decision to pay compensation, was the desire to redistribute wealth, but if that was receding in time, nevertheless as the Marxist turned moderate, John Strachey, argued, nationalisation "progressively dries up the source of unearned income". Incidentally Strachey also held that without public ownership, the redistribution of income would have amounted to no more than patching up the capitalist structure

Since the domestic programme of the Attlee Governments was a classic example of a programmatic party in office, with all the major nationalisation measures promised enacted, most of them in the first two sessions of the 1945 Parliament, it might be thought that the critics of the view advanced here were on difficult ground. It is interesting therefore to see how Howell, for example, tackles the problem. His initial observation, that the series of proposals developed by the party between the wars had been "advocated not only for their specific benefits but also as significant steps towards the realisation of a socialist commonwealth", is soon qualified by the reflection that the content of the "public ownership proposals had been determined to a considerable extent by the interests of influential trade unions. Accordingly a major justification for many of them had been one of relevance to the problems of a particular industry, rather than a contribution to the gradual replacement of capitalism." While there is a good deal of truth in the proposition that no nationalisation proposal found a place in the programme without the consent of the union principally concerned, his initial statement is in fact closer to the truth.

Nationalisation added almost 2.5 million workers to the public sector and gave the Government control over the basic industries of the country. By 1951 a fifth of the economy was in public hands. Not only did this give the Government microeconomic leverage through the role of the nationalised industries as purchasers of private sector outputs, but as suppliers of key inputs, the nationalised industries were at the heart of the Government's drive for increased output. A far higher proportion of the country's total investment was now in Government hands - by the 1960s it had reached 50% - but the pre-war dream of making use of public investment to generate full employment proved not to be needed during the postwar boom, just as well perhaps because it was to prove difficult in practice to make swift changes in what were by any standards mammoth projects.

Howell next suggests that many of the industries nationalised were in need of rationalisation, and that Government involvement in them would have been necessary, whichever party took power. However, while it is true that the Labour Government saw nationalisation as a way to increase the efficiency of the industries concerned, that does not in any way represent a retreat from its desire to replace capitalism. Almost by definition, Socialists saw the pursuit of private profit as something that was bound to be detrimental to the public interest. Public ownership was inherently superior as a form of economic organisation if public purposes were to be served. While a Conservative Government might have promoted rationalisation by government action, it would not have resorted to public ownership as a means to that end - the war years had shown that clearly enough. There was a deep ideological divide and its roots, so far as the Labour party was concerned lay in its belief that public ownership would not only alter the balance of power between the classes, but that ultimately it would transform human relationships.

Socialist purpose is also evident in welfare policies, but even more so in the Government's approach to taxation. In 1946 Hugh Dalton had promised "a lot of equalising" and while he cut the rate of income tax to 9 shillings in the £, he also increased surtax on all incomes over £2,500. On incomes over £20,000 the rate went up from 9s/6d to 10s/6d. On high incomes therefore tax was paid at 19s/6d in the £. Thus Rogow and Shore could conclude that the Government had in effect imposed a ceiling on post tax incomes of little more than £6,000. Although it is fair to observe that the steep gradient of wartime income tax was eased, the direct tax system was much more progressive than it had been in 1938. Another redistributive measure was the way in which Dalton took between 2 and 3 million out of income tax altogether by raising the exemption limits and this partially offset two more regressive moves. The first, despite the absence of any tax on food, utility clothing and furniture, housing and fuel and some later concessions on kitchen fittings and crockery, was the retention of the wartime purchase tax and the second increased reliance on indirect taxation. However, it is important to note that the effects of the postwar emphasis on spending taxes were greatly ameliorated by subsidies on food and other essentials. A married man with two children in 1949 would have to achieve 103% of average earnings before paying any income tax and 187% before paying at the standard rate. However, it is necessary to add that Labour remained committed to the highly regressive National Insurance system. Nevertheless Carter's calculations that everybody below the taxable £500 income per annum in 1948/9 gained is clear evidence of the success the Government had in achieving vertical redistribution, those on £135 or less having their incomes raised by 57%, those between £135 and £250 by 29% and those with £250-£500 by 13%.By the end of the '40s, it was generally agreed that the benefits of redistribution to the working class had been virtually exhausted.

Wealth offered a different challenge addressed by Dalton through a rationalisation of death duties in which some estates were exempted or paid a lower rate of duty while the rates rose on all estates over £!2,500, peaking at 75%. Cripps raised the highest rate of duty to 80%. However any process of redistribution would not only be slow (Cf. also the National Trust) but could be evaded. Hence the Government moved to the possibility of capital gains taxation and a capital levy. Neither were put in place although Cripps's Special Contribution levied in 1948 on investment income over £2,000 appeared to show that the latter, despite difficulties over valuation, would be a genuine possibility endorsed by a wide range of Socialists including Dalton, Foot, Crossman and Jenkins. Finally, profits were addressed by penalising distributed profits to the tune of 50% while holding the rate of tax at 10% on those retained.

Tomlinson has explored in some detail the severe economic constraints that Attlee's government faced in its pursuit of socialism. Britain faced an "economic Dunkirk at the end of the war. The rebuilding of the international accounts and the expansion of exports and investment necessary to that end dominated the economic agenda. In the light of the harsh economic realities, the completion of the nationalisation agenda and the building of the welfare state (even allowing for the fact that much of it was already in place) are no mean achievement. But more to the point, the Labour Government was hemmed in by an iron quadrilateral, in large part of its own making, which constrained the options that they could pursue. First and foremost was the near universal assumption of great power status, reinforced by Cold War necessities. It is worth observing that there were some short term economic benefits to the situation, particularly in the ease with which Britain rebuilt her balance of payments and was able to squeeze dollar imports in a dollar-starved world, but longer term Britain paid a heavy price for her absorption with Empire and Commonwealth markets. The second constraint was the commitment to the norms of parliamentary democracy and the doctrine of Parliamentary sovereignty. Coates has sketched some of the tensions inherent in the notion of parliamentary socialism, but Tomlinson's concern is the way in which this got in the way of economic planning. Bridges had noted also that they were acting without labour controls and Tomlinson's quadrilateral has two further elements, tripartism and a commitment to free collective bargaining. The marked belief in tripartism inbuilt into the Government's own sense of purpose, heavily qualified though it was by an emphasis on the autonomy of the State, was inhibiting in the Government's dealings with both sides of industry and was exploited by those who wished to resist its socialist purposes. Even more serious was the Government's inability to create a wages policy as a planning instrument. Bereft of both that and manpower controls, the Government's capacity to control the economy was gravely weakened.

Finally, although I would not identify as a constraint in quite the same way as the other four, the commitment to the Morrisonian public corporation could be thought something of a weakness, although during these years there was little support forthcoming from any of the available alternatives. (In particular workers control, favoured in "marxist" historiography, had little support at the time and was opposed by some of the major unions. Cf. Currie's account.) There were obvious tensions between ministerial desires to run these industries efficiently and the need to subordinate them to the wider concerns of running the economy and these were not successfully resolved during the lifetime of the Attlee Governments.

Although the Government deserves credit for delivering a substantial rate of growth and by 1950 a favourable balance of payments, it had not been able to do much about the rigidity of Britain's industrial structure, its low productivity and neglect of long-term capital investment. But the blame for this is not to be laid solely at the Government's door. Not only were its industrial partners resistant to productivity drives, but Britain's parlous economic situation impelled her into soft markets.