It is still possible to find an interesting Penguin Special that appeared in 1958. British Economic Policy Since the War, by Andrew Shonfield, then Economics Editor of The Observer, remains a striking piece of work. Among his conclusions were: that the maintenance of a separate Sterling Area, giving the comforting feeling and appearance of great power status, actually hindered the UK economy; that the UK should be more closely involved with Europe; that UK governments and the UK private sector failed to invest sufficiently in their own country and invested instead elsewhere in the Sterling Area; that the City of London had a poor and distorting effect on the UK economy; that public spending in the UK was more restrained than in other European countries for reasons that did not make much sense; that the Treasury possibly had too much power; that although industrial relations in the UK were poor, days lost through strikes were often no higher than in other countries, but too much power resided with individual shop stewards (a fact that some employers quite liked); that the national offices of the big trade unions had surprisingly little input in either planning or negotiation within significant industries, with matters being handled at a purely local level; that because of the low level of pay and facilities offered by major employers a better relationship with the trade unions was difficult to attain; and that the UK spent too much on defence.
In 1958 this was prescient. Shonfield anticipated the essential economic debates of the 1970s and 1980s, some of which remain unresolved to this day. Although this may mean that his views ultimately had little effect, it does not mean that they went unnoticed at the time or that political leaders did not attempt to alter the economic and political outlook of the UK. Harold Wilson certainly appears to have arrived at very similar views on a number of topics. George Brown may have; some of his advisors at the Department of Economic Affairs in 1964-1966 certainly did. (1) But James Callaghan, Chancellor of the Exchequer 1964-1967 and the Prime Minister 1976-1979, gave no indication of interest in such matters. The recent death of Callaghan and the continuing controversies about his legacy, to the fore in the many obituaries that appeared, are an opportunity to question why this is so and whether or not many of the contemporary conditions that preoccupy us are as ‘inevitable’ as is claimed.
Battling Mr Brown
A fierce rivalry with George Brown was evident in Callaghan’s career from early on. It was insufficiently remarked upon in the various Callaghan obituaries. This first came to attention in November 1960 during the election to chose a new deputy leader for the Labour Party. Brown was highly thought of. A bright man with impeccable working class credentials and good trade union connections, he had served as Minister for Works in the last six months of the Attlee government. James Callaghan also stood, creating a three-way contest with Brown and Fred Lee. Callaghan had no particular public profile, had not held a significant political post, and was eliminated in the first ballot with a low vote.
After the death of Hugh Gaitskell in early 1963, Callaghan stood for leader of the Labour Party. Harold Wilson announced his candidacy from the centre-left; George Brown from the centre-right. By running against Brown (again) Callaghan split the centre-right vote and allowed Wilson to win. Callaghan was eliminated on the first ballot.
The point of both these escapades, surely, was to get noticed as someone with whom any leader had to treat. It was personality politics rather than any major ideological dispute. It also appears that even as far back as 1960 Callaghan wanted to attain the highest office for himself and had marked down Brown as his most likely rival for power once either Gaitskell or Wilson had gone. He therefore decided to challenge Brown, and by doing so deny Brown victory, at every opportunity.
Forming his first government in October 1964, Wilson gave Brown and Callaghan rival and contradictory cabinet positions. Brown became Secretary of State for Economic Affairs with (eventually) a team of advisors who were separate from the Treasury and who would devise plans for the economic and industrial regeneration of Britain. This was a considerable nod in the direction of Shonfield’s proposals. Callaghan, despite having no economic background (or perhaps because of this?) became Chancellor of the Exchequer. Wilson, a former economics don at Oxford University and a former President of the Board of Trade (1947-1951), naturally took a close interest in the government’s financial affairs. The great problem the new administration faced was a large balance of payments deficit. The easiest and best way to eliminate this would have been to devalue sterling. But devaluing sterling ran against the Treasury line and implied a drop in prestige that would have impacted badly on the political fortunes of a government that had a majority in the House of Commons of only 5. Initially Brown, Callaghan and Wilson went with the Treasury line not to devalue sterling; but Brown and his team of non-Treasury advisors changed their minds and recommended devaluation because as this would eventually have to be done, it might as well be done quickly. Wilson inclined toward Brown but did not wish to overrule or sack his Chancellor and, given the need for another general election due to his low majority, postponed the decision.
Wilson increased his majority to 96 in April 1966. The Treasury and Bank of England now maintained that the real cause of the problem was the failure of the government to have the type of prices and incomes policy that the Treasury recommended: i.e. the trade unions were responsible by their actions for the bad impression given to ‘investors’. No proof was ever provided for these assertions. In August 1966 Brown quit the Department of Economic Affairs. It had failed to wrest real power from the Treasury.
Callaghan eventually devalued the pound on 18 November 1967. The consequences were significant. There were heavy government spending cuts. Callaghan resigned as Chancellor on 29 November 1967, swapping jobs with Roy Jenkins, the Home Secretary. A day later the British left Aden. In January 1968 it was announced that all the UK bases east of Cyprus would be abandoned within 3 years and that all the Royal Navy aircraft carriers would be scrapped. The irony of Callaghan, from a career Royal Navy family, being responsible for this downgrading of the senior service does not appear to have been remarked on. After a period as Foreign Secretary, Brown, with a serious drink problem, resigned from the cabinet in March 1968 ‘in disgust at the conduct of government business’.
King of the castle
Callaghan’s next major struggle arose from the report produced in June 1968 by the Royal Commission on Reform of the Trade Unions and Employers Associations. This had been one of the keystones of Wilson’s efforts to relaunch Britain as a modern technocratic European-style nation. The Commission had been established in 1965 under Lord Donovan, who, as Terence Donovan, had served as a Labour MP 1945-1950, before becoming a judge. Also on the Commission was Andrew Shonfield. They reported that shop stewards caused substantial disruption and were often undemocratic; and that too much power lay at too low a level in the UK economy (i.e. there should be much more high level planning in which the national leadership of the unions and the major employers negotiated together). They recommended that industrial disputes should only commence after a full membership ballot and a 28 day conciliation period. This was all very unexceptional by the standards of Germany, France, Australia even. (So unexceptional was it in fact that Wilson was actually rather disappointed by the outcome.) The Report did not, for instance, recommend any statutory obligations; its thrust was voluntary. There were no penalties for failing to comply with its suggestions. Nevertheless a White Paper duly appeared, In Place of Strife (January 1969), proposing some rather mild legislation along the lines set out by Donovan and Shonfield. The White Paper was introduced by Barbara Castle.
Like Wilson, Callaghan and Brown, one of the 1945 Labour intake, Castle had risen quickly through the ministerial ranks: Overseas Development (1964), Transport (1965) and Employ-ment and Productivity (1968). A close friend and ally of Wilson, many saw Castle in 1968-1969 as possibly the first woman Prime Minister of the UK. In Place of Strife was debated in Cabinet in March 1969 when it became clear that Callaghan had mobilised a majority against the proposals. He had also organised a major trade union lobby aimed at defeating them. The White Paper was abandoned on 17 June 1969 with Wilson and Castle accepting ‘a solemn and binding undertaking’ from the TUC that its members would not disrupt the economy. This has no legal force and was duly ignored.(2) From 1968 through to 1984 UK industrial stoppages – almost all low level and localised – ran at a high level, climaxing with Arthur Scargill and the 1984-1985 NUM strike, the defeat of which allowed Thatcher to pursue deliberate de-industrialisation. Following this the figures for days lost through industrial stoppages declined to almost nothing. Adopting Donovan would have avoided much of this and would never have given Thatcher the credibility that she appeared to have (to many) on the issue of industrial disputes.
Why did Callaghan do this? There were, of course, criticisms that could be made of In Place of Strife. There was no binding statutory framework; there was no proposal to index link pay; there was no mention of improved child care or other facilities for the work force that were taken for granted overseas. Callaghan made none of these points. His opposition seems to be been driven by a need to defeat a potential rival for the office of Prime Minister, Barbara Castle. He achieved his aim and Castle remained bitterly opposed to him for the remainder of her UK political career.
Lord of all he surveys
In 1976 Callaghan became Prime Minister. Other than immediately sacking Barbara Castle, he made few changes to the team that Wilson had assembled in 1974. Nor did he announce any major changes of political direction. (With no majority in the House of Commons, this was hardly surprising.) There were economic difficulties, inherited from the previous Heath government, that Callaghan and his Chancellor, Denis Healey, gradually overcame; and by mid-1978 things did seem to be looking up. In six out of seven opinion polls between May and November 1978 Labour led the Conservatives. It was widely assumed that Callaghan would announce an autumn 1978 election. Instead he announced, at the Labour Party conference in October 1978, that there would be no autumn election. He gave no convincing reason for doing so. Had there been a late 1978 election there would have been a small Labour majority or a hung Parliament. But there would never have been a majority Thatcher government. It was an extraordinary misjudgement. Callaghan’s personal ratings collapsed after December 1978 and a damaging local government workers strike (January-February 1979), which could not have happened had In Place of Strife been adopted, cost the government some political support. The May 1979 general election resulted in a victory for Mrs Thatcher.(3) It could all have been very different.
Many people have wondered why, having lost an election and 66 years of age, Callaghan stayed Leader of the Labour Party. But by 1979 Callaghan was triumphant. Brown was a comical, ridiculed drunk. Wilson was forgotten and discredited. Jenkins had left to become an EEC Commissioner. Barbara Castle, too, had gone to Europe, as Leader of the Labour Group of MEPs. The period 1979-1980 saw Callaghan basking in a kind of unchallenged Indian Summer. Had he gone quietly in May 1979 he would have been replaced by his deputy, Dennis Healey; and had Healey become leader many commentators believe the SDP would never have been launched and the result of the 1983 election would have been different (a much lower Conservative majority). By staying on and adopting an easy-going and lacklustre stance, Callaghan gave credibility to the many demands for a radical change of direction. When he eventually went, in late 1980, Michael Foot was elected Leader, narrowly beating Dennis Healey.
In retirement
In retirement Callaghan continued to frequent the Houses of Parliament well into his 80s. It is said that he enjoyed the day-to-day gossip of the tea rooms. He was popular with the Queen. (His father had served on the Royal Yacht in the 1920s.) Occasionally he intervened – notably his speech in 1982 during the emergency session before the Falklands war, shaking with rage at the service cuts that the Conservative government had imposed on the Royal Navy – his own role in the 1967 defence cuts conveniently forgotten.
The Roy Jenkins obituary of Callaghan in The Sunday Times on 27 March 2005 made many of these points but failed to home in on why Callaghan was so determined to outdo both Brown and Castle. Perhaps personal advancement as an explanation was unlikely to be offered by another politician. One is struck, though, by Callaghan’s apparent lack of any real interest in the issues that confronted him, as opposed to a concern with the day-to-day grind of office seeking and manoeuvring. He was not much interested in modernising British society. He was not agitated about Europe. He didn’t challenge any of the established views in any of the offices that he held. He was apparently not even greatly concerned about the fate of his own political party.
It is convenient for contemporary politicians to say that the Thatcher years were something that Britain either needed or could not have avoided. But had it not been for Callaghan’s decision to postpone the election from 1978 to 1979 Thatcher might never have got to 10 Downing Street; or, if she did, would have been ousted very quickly. It is also true that the 1974-1979 Wilson-Callaghan governments made a reasonable job of recovering from the inflation caused by Heath and Barber in 1971-1973. ‘Old Labour’ did OK. It was just a shame it didn’t have a better leader.
Some of the Callaghan obituaries claimed that he was consulted by Blair on some issues. There is no evidence of this. Blair, paying tribute, said that Callaghan was a ‘giant of the Labour movement’. While this may have been true in terms of attainment of the highest offices of the state, Blair has avoided any repetition of the Callaghan style of government: no deals with the trade unions or the Liberals. The Callaghan Labour Party eventually producing the Blair government is one of the great ironies of modern times.
Notes
[1] These advisors included Michael Shanks author of The Stagnant Society (1961) and Britain and the New Europe (1962), who co-operated with Andrew Shonfield on Suicide of a Nation (1963) a series of essays that originally appeared in Encounter magazine. Shanks was later Director General of Employment and Social Affairs for the EEC.
[2] The phrase ‘solemn and binding’ was used so frequency at one point that a story arose that a foreign lobby correspondent at Westminster actually thought for a period that it referred to a significant and powerful individual, Solomon Binding.
[3] But not by a great margin. Her majority was 44 (unexceptional) and her share of the vote the same as MacMillan achieved in 1959.