Читать книгу Harold Wilson - Peter Hennessy, Ben Pimlott - Страница 16

8

THREE WISE MEN

Wilson began 1949 buoyantly. He was now well settled into the routines of his job, his north London home and his expanded family life. His ‘bonfires’ were much in the headlines. The economy was apparently thriving. Although he noted that German and Japanese competition was becoming the biggest problem in many sections of British industry, he was able to claim that the previous year’s export figures put Britain in balance with the rest of the world, it is a tremendous recovery in a single year,’ he declared.¹ On 10 May, he set out for Canada on a three-week tour, taking with him his PPS, Barbara Castle, and a retinue of officials. To mark the event, the journalist Honor Balfour, who had known him as an eager collector of Liberal Club subs at Oxford, drew a pen portrait for the Birmingham Gazette. The President was, she wrote:

a nice, quiet, plump, good-humoured fellow, who has not yet quite got used to being the person of importance that he is. In repose, his manner, his greying temples and his formal clothes give him an appearance of middle age. But once he begins to speak, he cannot restrain his liveliness nor his interest in a subject or a person, and his blue eyes twinkle as he chuckles at his own jokes.²

His trip to Canada, however, did not cause much merriment among cotton manufacturers. During the tour, he delivered a speech which castigated the British industry for having ‘failed to modernize in the years before the war, because it catered for a sheltered home market behind a curtain of cartels and price-fixing organizations’.³ Raymond Streat and the British manufacturers were outraged, believing – not for the first, or last, time – that the President was playing to the political gallery. Wilson flew back to England early in June and made a broadcast in which he stressed that increased exports to North America must be ‘Britain’s No. I priority this year and in years ahead’.⁴ Well he might, for he had returned to a London and Whitehall where the balance of payments and the state of the currency were fast becoming the dominant concern.

The 1949 devaluation crisis was the second of an almost regular series of financial emergencies in the post-war period. Its importance for the economic policies of the Labour Government is hard to exaggerate. ‘There might be room for disagreement as to the need, the purpose, the wisdom or even the significance of the devaluation,’ concludes Sir Alec Cairncross in the most authoritative assessment of the crisis. ‘But it was unmistakably a turning-point. So rare and startling an event as a fall of 30 per cent in the parity of sterling, the currency in which well over a quarter of the world’s commerce was conducted, could not fail to exercise a powerful influence on international transactions of all kinds.’⁵ Devaluation dealt the administration a near knock-out blow, ending the sense of direction the Crippsian era had briefly given it, and leaving it floundering in its remaining two years of office.⁶ For Wilson, it was a baptism of fire, shaping his whole future.

Although devaluation had first been considered as a possible option as early as 1945, little was heard of it until after the suspension of convertibility. It began to be talked about again in Whitehall at the beginning of 1948.⁷ For the time being, however, the Treasury itself continued to downgrade it as a possibility. The reappearance of a deficit in 1949, after the surplus year of 1948, gave the theoretical possibility an immediate relevance. A combination of factors had rapidly turned an improving position into a precarious one. In particular, the relaxation of controls at the end of 1948, over which Wilson had presided, and an increase in home demand, began to affect the balance of payments; at the same time, a recession in the United States made it harder for British exporters to earn vital dollars. As a result, sterling came under ominous attack once more.⁸

At this point, the professional economists employed by the Government began to agitate for a change in the parity. In March, Robert Hall of the Economic Section got to work on Cripps, and at about the same time Cairncross, in the Board of Trade, tried to persuade Wilson. Neither made any headway.⁹ As senior officials remained as hostile to the idea of devaluation as their political masters, this was scarcely surprising. Cairncross hoped that Wilson, as a former colleague and fellow economist, might listen: instead, he found the President as resistant as Hall found the Chancellor. During the key months of March to July, in which pressure on the pound sharpened, Cairncross – though the economist-in-residence at the Board – was not directly consulted by Wilson at all. When Cairncross took the initiative, the President responded to approaches by assuring him that ‘everything he was urging had been taken in.’ Cairncross formed a different impression. He concluded that Wilson had closed his mind on the issue. That the President was actively opposed to devaluation is shown by his report in late June to the Cabinet Economic Committee on his Canadian visit, in which he stressed the opposition of the Ottawa Government to a change in the parity, referring to ‘the unfortunate and fairly general – though erroneous – expectation of devaluation’. Wilson told his colleagues that in Canada he had ‘repeated the Chancellor’s recent clear statement on the subject’.¹⁰

As far as the economists were concerned, the Chancellor’s clarity was the major hurdle. Having expressed himself clearly, Cripps regarded the issue as a matter of honour as much as of economics. It was, however, honour tied to ideology: the Chancellor, according to Cairncross, ‘did not accept that a change in the exchange rate would have effects on the balance of payments that no amount of planning and administrative action could ever achieve’.¹¹ For more traditional reasons – though Hall succeeded in getting Sir Edward Bridges, Permanent Secretary at the Treasury, to inquire into the possibility of devaluation – most permanent officials at the Treasury and the Bank of England backed him up. The professional economists regarded such attitudes as the product of ignorance: hence they had hopes of Wilson, who understood the issues in a way that Cripps did not. Wilson’s refusal to take the role of a pro-devaluationist Trojan horse in the Cabinet, therefore, was a source of bitterness and anger.

Wilson, however, was no longer a professional economist or an adviser, and had ceased to think like one. He was a minister. The run-up to a possible devaluation is always tougher for ministers than for advisers, and for senior ministers than junior ones. Civil servants and professional advisers have the luxury of arguing the pros and cons in private. Politicians are less fortunate. Until the moment of decision it is impossible for a minister, especially a Cabinet minister, publicly to express the shadow of a doubt that the existing parity will be maintained virtually in perpetuity; even to do so privately runs the risk of a leak which may immediately affect sterling holdings. At the same time, public pronouncements need to be delivered with an appearance of conviction, which in turn makes an eventual climb-down the more painful and humiliating. Cripps, widely respected for his integrity and ideals, was the minister in 1949 most clearly caught in this trap; but Wilson was caught in it as well. Both the Chancellor and the President had little choice but to continue to deny in public that devaluation was about to take place. For both, the difficulty was more agonizing than for others, out of the immediate firing line, when it eventually did.

During the early summer, the pressure on sterling continued to be heavy. American demands for devaluation, and rumours that it would happen despite the denials, encouraged the drain on reserves, the rate of which almost doubled in the second quarter. On 18 June (five days before Wilson’s Canadian report) Bridges summed up Treasury opinion when he informed ministers that ‘most of us, with differing degrees of emphasis, are opposed to devaluation now,’ which did not exclude the possibility of a forced or voluntary devaluation later. The alternative was seen as immediate cuts in public expenditure – in particular food subsidies – together with an increase in Bank Rate, higher interest rates generally and limits on bank credit. Though Cripps remained immovable, the opinions of officials, and other politicians, began to shift.¹² By the end of June, Morrison and Bevin were probably supporters of devaluation, and Douglas Jay, Economic Secretary to the Treasury, had been half-persuaded. Yet it was still not considered to be an imminent possibility. Gaitskell wrote a few weeks later that when discussions on the crisis began at the end of June, ‘devaluation was mentioned but not taken seriously as something to be contemplated fairly soon’.¹³ When the US Treasury Secretary, John Snyder, arrived on 7 July, the subject was not even mentioned, and the same day the Chancellor told Parliament that ‘the Government have not the slightest intention of devaluing the pound.’¹⁴

On 19 July, Sir Stafford Cripps – whose health had been poor – departed for a stay at a clinic in Zurich, with pressure on sterling still increasing and the matter remaining unresolved. No individual was appointed to deputize in his absence. Instead, the three men dubbed by Dalton the ‘young economist ministers’ – Hugh Gaitskell (Fuel and Power), Douglas Jay (Economic Secretary to the Treasury) and Wilson – were put in joint charge of economic policy, under the notional direction of the Prime Minister (who knew nothing about economics). In retrospect, it was an extraordinary decision: to place the fate of the nation at a time of emergency in the hands of three ministers, none of whom had even been in Parliament as much as four years. All had more experience of Whitehall as temporary civil servants than as ministers.

No doubt the decision to impose this responsibility concentrated their minds. The day before the Chancellor’s departure, Gaitskell – who up to this point had been undecided – and Jay, who had been moving in a pro-devaluation direction, decided jointly on the need for a change in the parity.¹⁵ ‘On 18 July, I came to a firm conclusion about what ought to be done,’ Jay recalls, I had to argue it with Gaitskell and Wilson. I saw Gaitskell first, and found he’d come to the same conclusion. I thought that it would be a formality meeting Wilson and getting his agreement.’¹⁶ It wasn’t. Wilson, according to Jay, at first objected. How firm Wilson’s attitude was at the outset we do not know, but it seems to have contained some flexibility. By the end of the meeting, the two Wykehamist economists had, as they thought, won him over. Eventually, they ‘extracted from him an undertaking that he’d come round to our view – though he seemed to be taking refuge in ambiguity’.¹⁷ Perhaps, outnumbered two to one, he merely reserved judgement. In any case, the ambiguity was the basis for, at best, a serious misunderstanding, at worst – as Jay came to think – an unpardonable double-cross.

Jay believed that Wilson had agreed to support the Jay–Gaitskell view and recommend it to Attlee and Morrison at a meeting later the same week. In reality, whatever he had agreed, his attitude remained unsettled. On 25 July the three ministers met the Prime Minister, together with Morrison, Bridges and Sir Henry Wilson Smith (another Treasury official). The Wykehamists imagined that the young economist ministers – themselves and Wilson – would present a united front on devaluation, which it would be difficult even for so powerful a gathering to resist. According to Jay, Gaitskell began by expounding the arguments in favour of devaluation. ‘Hugh stated the case very clearly and made a great impression.’ They then received an unexpected shock: Wilson proceeded to expound the arguments against. ‘Astonished at this, Gaitskell arranged to see Wilson a second time and again thought he had agreed,’ Jay records. But, once again, when they met Attlee and Morrison, Wilson seemed to back-track, making ambiguous statements.¹⁸

Events, however, were undercutting the anti-devaluationists fast. On 26 July a note on the economic situation was submitted to the Prime Minister by the three most senior Treasury officials, arguing in favour of devaluation together with cuts in public expenditure and higher interest rates; this seems to have weighed with Attlee.¹⁹ Gaitskell and Jay saw Dalton, who had acquired the status of a Cabinet elder statesman (he was also both an ex-Chancellor and an economist) and succeeded in talking him round. Dalton saw the Prime Minister, who said that he had changed his view.²⁰ At a crucial joint ministerial and official meeting on 29 July, before a meeting of the Cabinet, the decision to devalue was taken in principle, Wilson accepting what by this time had become the majority verdict. ‘Wilson changed sides three times within eight days, and ended up facing both ways,’ Jay claims.²¹

Meanwhile, Wilson – hitherto the most reluctant of the three – had volunteered to act as messenger, to carry the news of the recommendation to the ailing Chancellor of the Exchequer in Zurich. He explained that he was taking a family holiday in the South of France and would also be attending a meeting of GATT at Annecy, close to the Swiss border. He could easily pass through Switzerland and make Cripps an apparently casual visit, in order to secure his agreement.²² This offer was accepted (though Jay believes there were reservations among the older men at what appeared an obvious device to enable Wilson to talk to the Chancellor alone).²³ Attlee instructed that a minute from himself to Cripps be drafted in London first, and then conveyed to Zurich by Wilson’s private secretary, Max Brown. Cabinet on 29 July gave the Prime Minister authority to take what steps he thought necessary.²⁴

A few days later, the message to Cripps was dispatched. Brown’s recollection is that in one sense, at least, the trip was a ploy. ‘Wilson was ostensibly on a motoring tour, but it was a cover – arranged for this purpose,’ he remembers.²⁵ Wilson told Lady Cripps through the British consul in Zurich that he was coming, and then accompanied by his family drove to Zurich, met Brown who was already there with the precious and highly secret letter, picked it up and took it to Cripps in the clinic.²⁶ Brown recalls handing over the letter ‘in the outskirts of Zurich’.²⁷

The letter informed the Chancellor that all concerned had now agreed that devaluation had become a necessary step to halt the dollar drain before reserves fell to a dangerous level, I handed the letter to Stafford,’ Wilson records in his memoirs. ‘He read it very carefully and, somewhat to my surprise, did not challenge its conclusion. He then sat down and wrote by hand a lengthy letter to Attlee …’²⁸ Cripps’s reply dwelt more on the timetable than on the issue itself. He argued that the announcement could best be made in a broadcast on 18 September, after his own and the Foreign Secretary’s impending visit to Washington.²⁹ Cripps’s letter was duly sealed, and carried by Brown to Dover, where it was handed back to Wilson, who took it straight to the Prime Minister in Downing Street.³⁰ Cripps’s request for a postponement until the Washington talks were over was agreed, following the Chancellor’s return to England in mid-August. The actual rate – devaluation to $2.80 – was decided by Bevin and Cripps in Washington six days before the announcement on 18 September. On this, the young economist ministers were not consulted: Wilson still did not know the rate two days after the decision, even though the Bank of Brazil had already managed to pick it up.³¹

Thus devaluation, which might theoretically have been carried through as a considered strategy (as some had suggested) earlier in the year, was eventually close to a forced move, not very different from the humiliating decision to suspend convertibility two years before. At the height of the crisis, Hugh Dalton commented, not without a touch of rueful satisfaction: ‘It reminds me awfully of 1947.’³² The most critical phase of the crisis was in the second half of July, when the pro-devaluation camp gathered strength in the Treasury and two key ministers, Gaitskell and Jay, joined it. Though Wilson was regarded as an uncertain ally, his hesitancy (if such it was) did not substantially alter the course of events. Given Cripps’s hostility to devaluation per se, and his refusal to contemplate devaluation before the Washington talks, it is hard to see how, even with greater enthusiasm from Wilson, the timetable could have been brought forward. Retrospectively, Wilson might be blamed for not listening to Cairncross earlier in the year, and for listening to his senior officials: but much the same could be said of Jay and Gaitskell, who only came down firmly on the ‘pro’ side eleven days before the issue was decided.

Yet something happened during those eleven days that was never repaired. Up to this time, Wilson, Gaitskell and Jay had worked harmoniously as part of the Crippsian team. After it, an edge of hostility affected their relations which seemed to rule out the possibility of mutual trust or sympathy. ‘That incident started the whole rift,’ Jay maintains.³³ Roy Jenkins, winner of a by-election in 1948, recalls the opinion which became the standard Gaitskellite version of the young economists’ behaviour in the crisis: ‘Gaitskell and Jay formed a solid front on devaluation and Wilson did a certain amount of finessing.’³⁴ The accusation against Wilson was stronger than that he took longer to convince on devaluation, or that he remained lukewarm. It was that he was unreliable and inconsistent, that the arguments in themselves did not matter to him, that he welched on an agreement, and – most damningly – that he was prepared to play politics with the nation’s future, in his own personal interests. We need to be careful here about witnesses: the main accuser is Jay, who later sided with Gaitskell against Wilson in Labour’s factional struggles. Though Cairncross is able to confirm Wilson’s resistance to pro-devaluationist arguments, that is not the real issue. Nevertheless, Jay’s charge – that Wilson by his behaviour revealed himself to be untrustworthy – had so many echoes in later situations that it needs to be considered carefully.

How much was conscious betrayal, and how much a genuine misunderstanding? How far were Gaitskell and Jay merely impatient with Wilson for his lack of eagerness, once their own minds were made up? Only three men knew what actually happened and none, of course, could be objective. Still, there are fragments: sufficient to show that Wilson tried to gain credit for joining the ‘pro’ lobby earlier than he actually did; and that he remained the only one of the three ministers who favoured postponement of devaluation until after the Washington talks (which was also Cripps’s line). There is also evidence of mounting criticism of Wilson among pro-devaluationists, and of suspicion of his motives. But there is no corroboration from contemporary accounts of Jay’s accusation that Wilson changed his mind three times. On the contrary, Wilson appears – on the evidence of the diary accounts of Dalton, Gaitskell and Hall in particular – to have maintained a reasonably steady position.

That the two Wykehamist ministers were angry with Wilson before the 29 July decision to devalue had been taken is clear from Dalton’s record, written at the end of the month. ‘Gaitskell and Jay both express distrust of Wilson,’ the ex-Chancellor noted. ‘They don’t know what he’s up to. They think he is currying favour with Bridges and Treasury officials.’³⁵ Dalton’s diary does not say how, but Robert Hall’s contains a clue: according to Hall, Wilson was not only claiming to be an ardent pro-devaluationist within forty-eight hours of Cripps’s departure, he was also boasting that he had been preaching the gospel of devaluation much earlier than the other economist ministers who were now, in effect, following his lead. On 21 July (after the initial meeting at which the three ministers had agreed, but before the meeting with the Prime Minister and Morrison, at which the double-cross allegedly occurred), Hall recorded that Wilson told him at a Royal Garden Party ‘very cordially that he was arranging a talk between himself, Gaitskell, Jay, Bridges, Wilson Smith, Cairncross and me. This was because Jay and Gaitskell had now come round … to a view he had long held.’ Hall was encouraged, and convinced, though he also noted that he had not spoken to the President of the Board of Trade for a year, I feel sure that he has known for a long time what was needed but would not take a line until he felt fairly sure he would not be alone,’ Hall recorded. ‘No doubt Cairncross has helped a lot.’ Eight days later, Hall’s opinion of Wilson seemed to have altered. His diary entry for 29 July does not mention the President in the context of devaluation – though this was the dominant concern of all economists. But it now described Wilson as rude, very conceited and ‘a great temporizer’.³⁶

That Wilson was varnishing the truth in his Garden Party talk with Hall appears to be confirmed by the account in Gaitskell’s diary, which does not, however, provide evidence of a volte face on the issue itself. According to Gaitskell, the Wykehamists also saw Wilson on 21 July (the day of the Garden Party) and explained their views to him. Wilson’s response was one of cautious agreement: ‘He had made it plain that he agreed in the main, though he was not so sure on timing. He favoured devaluation fairly soon but not before the Washington talks.’ As early as I July, Attlee and Morrison had apparently spoken in favour of devaluation at a meeting of the Economic Policy Committee. ‘Harold Wilson now says he also favoured it then’, Gaitskell noted, ‘but if so he certainly did not say so.’ If Hall reported the gist of his conversation with Wilson to Jay and Gaitskell, the Wykehamists would have been understandably annoyed that he was trying, misleadingly, to steal their thunder. But they would not have felt that he had gone back on their earlier agreement. On the contrary, by nailing his colours to the pro-devaluation mast, he was making it hard to do so.

‘Fairly soon but not before the Washington talks’, remained Wilson’s position. Gaitskell records that at a meeting of the three ministers with the Treasury (represented by Bridges, Wilson Smith and Hall) the following Monday, Z5 July, ‘it became clear that all were agreed that it must be done before the end of September, at latest. The Treasury favoured during the Washington talks and Harold supported them. Douglas wanted action at once and I was on the fence between – the great difficulty of early action being Stafford’s absence.’³⁷ This was on the day that, according to Jay, the great betrayal occurred.³⁸ Yet Gaitskell’s account of a meeting with Attlee later the same day reveals no substantial change in Wilson’s attitude. On the contrary, it confirms his consistency, though it also suggests an important, and perhaps hardening, difference between Wilson and Jay:

That evening HW, DJ and self saw the PM and explained our views. He accepted the fact that we have to devalue but saw great difficulty about doing it during August. The line-up was much as in the morning. HW at one extreme, DJ at the other and myself in the middle.³⁹

If we go back to Hall’s note of his conversation on 21 July, when Wilson was claiming to be the leading proponent of devaluation, we can see some shift of emphasis, which may account for Hall’s description of Wilson four days later as ‘a great temporizer’: at the meeting on the 29th, Wilson no longer seemed the most ardent pro-devaluationist of the three, as he had been keen to present himself eight days earlier. That Wilson supported the Treasury view on timing may help account for the complaint to Dalton of ‘currying favour with the Treasury’. But there is no hint in Gaitskell’s account that the Minister of Fuel and Power felt irritation with Wilson over his stance, or that Wilson had broken an agreement. The various diary accounts confirm Wilson’s own version, in his memoirs. ‘As the pound came under increasingly heavy attack’, Wilson recalls, ‘the argument began to change from whether we should devalue to when we would have to do so.’⁴⁰

Gaitskell’s diary entry (which was not written up until early in August) does reveal that a couple of days later, Wilson was expressing his own suspicions of Jay. ‘On Wednesday [27 July] Harold complained to me that “there was too much talking”’, wrote Gaitskell, ‘and hinted that Douglas had been indiscreet.’ Gaitskell guessed that this might have been because Wilson had learnt of a dinner on 21 July – a key date – at which Gaitskell and Jay had succeeded in convincing Strachey and Bevan of the merits of devaluation, and of the need for a deputation to Morrison on the 25th on the subject: in short, that the Wykehamists were making the running as pro-devaluation crusaders. It is possible that Jay had himself been complaining about Wilson’s attitude, and this had got back to Wilson. But this did not affect the main issue, and Gaitskell recorded that on the Thursday evening (28 July), the three economist ministers met Attlee and Morrison and discussed the key matter of timing. On this occasion, Wilson seemed to lose the argument. ‘We really pretty well reached agreement on the basis that it should be done before Washington but after Stafford was back here,’ Gaitskell noted: this was to enable Cripps to put it across to the British people, and make it appear a voluntary act of policy. ‘On this line-up I should say that [Morrison] and Douglas would have preferred it at once; Harold not till Washington and the PM and I in between – where we in fact settled.’⁴¹ After the meeting, however, the Treasury exerted pressure for delay until the Washington talks had begun, and so Wilson’s view prevailed.

In summary, Gaitskell does not seem to have observed any backtracking on Wilson’s part during the days preceding the 29 July Cabinet decision worth recording in his own long and detailed diary account written up shortly afterwards; the arguments were mainly about timing; there was a continuum of opinion on this, with Wilson not against devaluation as such, but in favour of postponing it until the Washington talks (which was when, in fact, it occurred). Finally, Jay – whose opinions on the issue differed most strongly from those of Wilson – stands alone in his indictment of the President for treachery.

Yet there was one other element. Throughout the discussions, Wilson (by Gaitskell’s account) took the same line as the Treasury, which was also assumed to be that of the Chancellor. After the Wykehamists had expressed their distrust of Wilson for ‘currying favour with the Treasury’, Hugh Dalton – in his housemasterly role, though his actual post of Chancellor of the Duchy of Lancaster was less important than that of the President of the Board of Trade – summoned Wilson, who made some significant and revealing remarks. ‘He said Cripps must have a Minister of State, to go to conferences, etc. for him,’ Dalton noted afterwards. ‘But this shouldn’t be Jay who has a few sound ideas (e.g. Development Areas) buzzing in his head to the exclusion of all else.’

The suggestion that the over-worked and exhausted Chancellor should be relieved of some of his burden was obviously a sensible one. But why was Wilson so concerned that the obvious person to help out, who was already Economic Secretary at the Treasury, should not be asked to do so? On 12 September – the day Bevin and Cripps were agreeing the new rate of sterling in Washington – Jay told Dalton once again about his own suspicions of Wilson, returning to the ‘currying favour’ charge. Gaitskell, Jay said, had made the running over devaluation. Wilson, on the other hand, was not to be trusted. ‘He trims and wavers, and is thinking more of what senior ministers – and even senior officials – are thinking of him than of what is right.’

Wilson’s fear that Jay might be promoted to Minister of State, and Jay’s fear that Wilson was out to win favour in high places, partly reflected their disagreement over the timing of devaluation, coupled with Jay’s own feeling (which Gaitskell did not seem to share to the same extent) that Wilson had let the side down. But there was also another reason: a growing realization that, after suffering the humiliation of a forced devaluation, Cripps would not retain his post for much longer.

It was now clear that the Chancellor was seriously unwell. Although he did not spare himself up until his visit to the Zurich clinic, there was no disguising his pallor, his insomnia or how much more easily he became tired. Although the length of his remaining tenure could not yet be predicted, there was speculation about the future. ‘Cripps, Jay thinks, is ill,’ Dalton noted on 12 September; ‘not much improved by his time in Zurich. He is said still not to be sleeping and, Jay thinks, if he can’t recover in a few weeks after his return from Washington, he will have to give up.’ The ex-Chancellor added (and a number of thoughts must have been in both men’s minds): ‘This would, indeed, be a bad blow – who could take his place, or even part of it?’ In the short run, there were two possibilities, if Cripps did not make a complete recovery and carry on as before. Either there would have to be a powerful deputy at the Treasury, taking over some of the Chancellor’s functions (as Wilson had suggested), who would then be a strong candidate for the succession when Cripps eventually gave up; or Cripps might resign, sooner rather than later. The existence of these alternatives helps to explain the nervousness of all three young, ambitious, and politically inexperienced ministers during the devaluation crisis.

When Dalton saw Wilson in July, he told him: ‘You three young economists must work together.’⁴² It was not surprising that they found it hard to do so. Each had some claim to consideration as a potential Chancellor, depending on the timing of Cripps’s retirement. Wilson – not just in his own mind – had the most obvious claim. He was the only Cabinet minister, and had been in the Government the longest; he was in charge of a major economic department, which Cripps himself had previously headed. He was also known to be regarded with favour by the Chancellor. Early in September, one newspaper which discussed the question of the succession had concluded that ‘the clear favourite is Mr Harold Wilson, thirty-three-year-old President of the Board of Trade.’ A key qualification, the same paper said, was his loyalty to Cripps: ‘The two men are quite inseparable.’⁴³ Though there were non-economist ministers also likely to be considered if the Chancellorship fell vacant, the chance of a progression to the most important economic post, one he had coveted since a child, seemed not only real but imminent – the logical next step in his astonishing ascent since he had been selected as candidate in Ormskirk, five summers before.

Gaitskell and Jay, however, were also contenders. The least likely of the three, at this stage, was the Minister of Fuel and Power. Though he was highly regarded, Gaitskell was neither a Treasury nor a Cabinet minister. The ambit of his department was narrower than that of the Board of Trade, providing few of the same opportunities for participating in the international negotiations on which economic policy increasingly depended. Jay, on the other hand, looked like a serious rival. The Economic Secretary was not just the only Treasury minister of the three; he was also a protégé of the Prime Minister, for whom he had worked before entering Parliament in 1946. We may guess that Wilson’s acute anxiety lest Jay be upgraded within the Treasury stemmed, partly at least, from a fear that this would turn him into the heir apparent.

Whether or not Wilson was suspicious of Jay’s ambition, Jay was certainly suspicious of Wilson’s. Cairncross attributes the lateness of Wilson’s conversion to devaluation to his belief, shared with Cripps, in controls as the alternative. Jay is more cynical. ‘Cripps’s health was failing and it was becoming clear that he could not go on,’ he says. ‘The real decision about the succession was expected to be taken by Bridges, who was thought to be anti-devaluation.’⁴⁴ According to Jay, this was the reason why, as soon as the pro-devaluation decision had been taken in London, Wilson tried to make himself the hero of the hour by volunteering to go to Zurich and talk Cripps round.⁴⁵ What were Wilson’s real intentions? Jay believes they were to tighten his own alliance with Cripps, or at any rate ingratiate himself: it was because Attlee saw through this ruse that he insisted on a clear message coming from himself, without Wilson taking part in the drafting, ‘I was deeply disillusioned,’ says Jay. ‘So were Gaitskell, Attlee and Morrison.’ After the meeting at which Wilson offered his personal postal service, Jay walked across Palace Yard in a group that included Morrison, I wouldn’t trust that so-and-so’, he heard the Lord President say, referring to Wilson, ‘as far as I can throw a halfpenny.’ Jay remembers thinking at the time: ‘not the next Chancellor’.⁴⁶

Perhaps he thought it with satisfaction: the recollection may indicate better what was in Jay’s mind, than what was in Wilson’s. Nevertheless, it is clear from Gaitskell’s account of a conversation with Wilson which took place immediately after the President’s return from Zurich, that the Chancellor did not accept the devaluation message meekly, that Wilson was, indeed, much more than a postman, and that the Chancellor had by no means given up his fight to preserve the parity. Wilson reported that Cripps was, in any case, opposed to devaluation taking place before the Washington Conference, and ‘could not therefore agree to any of our proposals but wished to discuss the matter on his return to England’.⁴⁷ Cripps went on fighting to the end: in his reply to the Prime Minister, he pressed for the latest of the three suggested dates – 8 September, the date eventually agreed. Even after he got back to London before Washington, however, he continued to hold out against any change in the parity.⁴⁸ ‘Jay wonders what [Wilson] said to Cripps and Bevin when he took messages to them on the Continent,’ Dalton noted in his diary.⁴⁹ Whatever he said, it is unlikely that it made much difference to the Chancellor’s view, which had been unwavering throughout. Nevertheless, Jay’s anxiety is understandable.

In fact, it was not Wilson, or Jay, who emerged best out of the devaluation debate, but the ‘young economist’ who started in third place: the Minister of Fuel and Power. Three days before the devaluation announcement, Robert Hall recorded a conversation with Oliver Franks, Roger Makin and Edwin Plowden, three powerful officials. The collective view which emerged was ‘that H. Wilson is no good, ought if possible to be shifted from the Board of Trade, and certainly ought not to succeed SC. If any young one is to do it, it is to be Gaitskell.’⁵⁰

Unlike Wilson, Gaitskell had impressed ministers and civil servants alike during the crisis. He had taken a strong and reasoned line on the need for devaluation. Though persuasive in his campaigning, he had steered a middle course between Jay and Wilson on the timing of a devaluation announcement. By the autumn, he was appearing the most judicious and balanced of the three – with the most solid Whitehall reputation.

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 while only essential controls would be retained, these included price controls, and some basic controls necessary for full employment, for the proper location of industry and for keeping the economy on an even keel. These, he said, ‘will remain a permanent instrument of our national policy’.⁵⁹

He repeated the point, defiantly, at a noisy meeting in Bromley a month later, after the Government’s package of cuts had been announced. His attacks on Winston Churchill for ‘lies and misrepresentations’ and for ‘making party political capital out of the nation’s problems’ brought howls of protest, enabling him to respond with deliberately provocative sarcasm: ‘it is surprising to see such touching affection for the Leader,’ he said – adding, to the delight of his own side: ‘This “leader” concept, this “führer” principle, is something which is getting dangerous at the present time.’ To a chorus of Tory shouts, he declared: ‘Our policy is one of production, exports and controls … It may well be that the election when it comes will be fought on this business of controls.’⁶⁰

The election date was announced in January. Wilson had a busy campaign. His Cabinet post made him a national figure, widely in demand. Despite his developing line in repartee, his speeches were safe and moderate. He spoke of ‘a battle for freedom … in the full sense, economic, moral, and social as well as political freedom’,⁶¹ yet claimed: ‘I have never read Karl Marx.’⁶² But he also liked to boast about his visits to Russia and his understanding of the Soviet system, ‘I have been on the road to Moscow three times’, he told a red-baiting heckler in Rhyl, ‘to get trade agreement for Britain with the Soviet Union. Anyone who knows anything about Communism knows that the best bulwark against Communism in this country is social democracy.’⁶³ Despite the marginality of his new constituency, he embarked on a whistle-stop tour of North Wales and the North-West.

Last minute predictions put the two major parties almost equal.⁶⁴ Fortunately for Wilson, Labour ended up 2.7 per cent ahead in the actual voting, with an overall Commons majority of 7 seats. His own result was a microcosm of the country as a whole: 21,536 compared with 20,702 for his Conservative opponent, with 1,905 for a Liberal and 387 for a Communist. The margin of victory, 834 on a minority vote, was one of the smallest in the country, and made him vulnerable to the slightest further swing to the Conservatives.

Afterwards, Wilson told Dalton that ‘RCs swung violently against him in the last three days’,⁶⁵ and he told Raymond Streat that the Tory candidate had played the Catholic card against the Labour Government on the educational issue. When the ballot boxes from Catholic wards were emptied and the votes unfolded, he saw at once that these areas had gone solidly Tory, ‘It could only have been because of the recommendations of the Church.’⁶⁶ There was no doubt, however, that he had received a nasty fright. Other 1945 new boys with bright futures, also ministers – David Hardman, Christopher Mayhew – lost their seats: though some got back in, their political careers never recovered. For the second time, Wilson had been very lucky. He could not be confident that his luck would hold. Throughout the precarious new Parliament, his behaviour was conditioned partly by the knowledge that at any moment the adventure on which he had embarked in 1945 might be abruptly ended.

*

If Wilson’s political career had finished once and for all in 1950, it would have been a noteworthy one. His record was unique. Under thirty-four when Attlee went to the country, he was the only member of the very large ‘class of 1945’ to attain Cabinet rank during the Parliament. Enemies later dismissed him in this period as Cripps’s errand boy, a grey and anonymous technician of no political weight: yet, at an age when none of the Big Five – Attlee, Bevin, Morrison, Cripps and Dalton – were even MPs, Wilson had become one of the Cabinet’s mainstays, his bank-manager appearance a familiar image on the newsreels of austerity Britain. Not only did he run a major economic department while still in his early thirties, at a time when economic departments were more powerful than they had ever been before, he had played an important part in the historic decision over devaluation, and continued to be seen as a possible successor at the Treasury. He was not glamorous, but glamour was not the style of the 1940s. He stood for unpretentious youth, well-trained efficiency and modernity in an elderly and, in some ways, old-fashioned administration.

The experience had its effects. Before, he had been friendly and approachable, yet also self-contained; now he was deprived of the possibility of equal relations with his contemporaries. Feed a grub with royal jelly, Churchill reputedly said of the unassuming Attlee, and you turn it into a queen bee. Yet Attlee had grown to political maturity on comparatively humble fare. Wilson’s rapid promotion, and high responsibilities at an early age, had given him an understanding of government that served him well during later years of Opposition. But it also isolated him. He became distanced, not only from working-class back-benchers whose routines he had never shared, but also from other well-educated MPs, some of whom were rising in the Government. To the public school socialists (many of whom later coalesced into the so-called ‘Hampstead Set’), Wilson seemed a dull fellow, narrow and socially inept for all his cleverness and bonhomie. It began to be a convention in these circles to regard him with a subtly snobbish contempt, masking jealousy.

Pomposity was one accusation levelled against him. Excessive self-regard was another. Robert Hall found him ‘very conceited’,⁶⁷ Streat thought him egotistical. ‘Wilson’s chief interest is Wilson,’ the Cotton Board Chairman noted just after the election.⁶⁸ Since a young Cabinet minister from a humble background might be forgiven for having a high opinion of himself, the real objection was that he was bad at hiding it. This was Gaitskell’s complaint, as the two ascending politicians began to take different routes. If there was a fault, however, it may not just have lain with Wilson. At the beginning of 1950 Gaitskell composed a character analysis of his rival which is as interesting for what it says about Gaitskell’s own circle as about Wilson and how he was perceived:

It is a pity that Harold Wilson, whom I regard as extremely able and for that reason alone most valuable to the Government, should offend so many people by being so swollen headed. It may, of course, be that I am regarded as a rival of his and therefore my friends are always talking to me in deprecating terms about him. But I do not think this is altogether the case. What is depressing really is not so much that he is swollen headed but that he is such a very impersonal person. You don’t feel that really you could ever be close friends with him, or in fact that he would ever have any close friends … How different he is, for example, from John Strachey with whom one may often disagree but who is a real person with interests and feelings rising above politics, and with whom one can have that emotional and intellectual intercourse which is really the stuff of friendship though it does not always go with friendship. And, of course, for me there are others of whom that is much truer, such as Douglas, Frank Pakenham, and even to some extent Nye Bevan.

Gaitskell was not alone in finding Wilson, then and later, ‘a very impersonal person’. Yet a notable aspect of this passage is that apart from Bevan (whose name is added as an afterthought and with whom Gaitskell was about to pick an Homeric quarrel) all those ‘with whom one can have that emotional and intellectual intercourse which is really the stuff of friendship’ were educated at Winchester or Eton.

We should not over-simplify the barrier that divided Wilson from such people, whose intellectual leadership counted for so much in the Labour Party. A Winchester education did not necessarily unite Labour politicians: it could, as later between Crossman and the Gait-skellites, push them apart. Neither did it create an unbridgeable gulf: Gaitskell was to have relationships of almost equal intimacy with disciples from less exalted academies. Nevertheless, to an alumnus of a provincial grammar school who had every reason to be proud of his success, the Bloomsburian exclusiveness of Gaitskell and his circle must have been extremely trying. Between Gaitskell and Jay during the devaluation debate, moreover, there seemed to exist an unspoken bond – social and psychological – that kept Wilson at arm’s length.

Recording how he reached his decision in July 1949 that a change in the parity was necessary, Gaitskell wrote that, having revised his own views, I found that at just the same time, Douglas Jay, my closest friend in the Government and Economic Secretary to the Treasury, had changed his too.’⁶⁹ It is possible to imagine that, for all his outward confidence and conceit, Wilson did not find relations with these two powerful intellectuals easy: and was deeply conscious that, though the only Cabinet minister among them, he was on his own, facing two close friends who were near to each other in age (Gaitskell was ten years older than Wilson, Jay nine), and had attended the same school and Oxford college. In the years that followed, it remained a difficulty that Wilson – sharp, philistine, unashamedly competitive – had a different way of thinking from that of these public-spirited public schoolboys, for whom socialism was part of an olympian ethical calculus.