What would Clem have done?
Bubble — By Nicklaus Thomas-Symonds on August 17, 2010 7:00 am
Attlee weathered a "financial Dunkirk" in 1947
ON 19th August 1947 Clement Attlee broke off his family holiday in North Wales to return to Downing Street to deal with an economic crisis. From 15th July 1947 Sterling had been made freely convertible, with organisations being able to demand payment in dollars rather than pounds. Since dollars could then be spent outside Britain, it left the country spending far more dollars than it was earning. Britain’s problem, that it was importing far more than it was exporting, was exacerbated and on 20th August Sterling’s free convertibility into dollars was ended. A week later, in order to bridge the gap, and squeeze imports, Attlee’s government introduced stringent “austerity” measures including the tightening of meat rationing, freezing of the tea ration and limits on travel abroad.
Almost exactly two years previously, on 21st August 1945, the United States had ended Lend Lease which had given aid to Britain in return for military bases, leaving the nation facing what the economist John Maynard Keynes famously called “a financial Dunkirk”. In November 1945 the United States had made available to Britain a line of credit of $3.75 billion until December 1951, when in 50 annual instalments the money would be repaid with 2% interest added every year. Clause 7 of that Loan Agreement was the famous “convertibility clause” which had created such difficulty for Attlee in the summer of 1947.
Yet, with these post-war economic challenges – arguably far greater than those Britain faces today – the Attlee Government was able to create the Welfare State with the landmark National Insurance Act of 1946, the National Health Service, and introduce wide-scale nationalisation, including the Bank of England, the coal industry, aviation, electricity, gas, transport and more controversially, iron and steel and road haulage. Far from curtailing the role of government, it underwent an unprecedented expansion under Attlee’s premiership.
A new “Age of Austerity” was proclaimed by the then Shadow Chancellor, George Osborne at the Conservative Party Conference in 2009. This was followed with a budget on 22nd June 2010 freezing Child Benefit and public sector pay, and introducing a 25% cut to public service spending. David Cameron declared that he passionately believed that this was the right thing to do for the health of the economy, for the poorest in our society, and for the future of our country, and the Coalition Government indicated that its cuts would be quicker and deeper than any proposed by the outgoing Labour Chancellor, Alistair Darling. Wales is currently protected from the additional spending cuts being planned for the Treasury for the 2010/2011 financial year, but such flexibility will be lost by the 2011/2012. Then, the Welsh Assembly Government will be faced with the unpalatable task of bringing the axe down on Welsh public spending. Welsh First Minister Carwyn Jones AM has estimated that the £6 billion savings being sought by the Westminster Government in 2010/2011 would mean cutting between £220 million and £250 million from the Assembly Government Budget, which would go far beyond any “administrative savings”.
Few serious economists argue that the deficit should not be reduced, but it is feared by many that the underlying agenda of some Conservative elements of the Coalition Government – perhaps the Chancellor of the Exchequer – is in the long term to severely curtail the role of the State in British and Welsh society. But indiscriminate slash-and-burn of public spending is done at our peril. It’s not that the State always has all the answers. Most certainly not. Indeed, I am strongly in favour of voluntarism. The birth of the Trade Union movement is one of the great examples of the so-called “big society” that one will ever find. Neither should anyone every ignore arguments about the dangers of an over-mighty authoritarian state. Indeed, it was during the life of the 1945-51 Attlee Government that George Orwell published his famous dystopian tract 1984 on 8 June 1949. The lesson in 2010 is that Big Brother may be great entertainment on a summer evening, but not a template for government’s relationship with its citizens.
Yet one significant legacy of the Attlee Government is its positive belief in the empowering role of the State. This view – and the policies it produced – still has a positive impact on the lives of so many people. I see it regularly, whenever I, or my family, receive healthcare free at the point of delivery. Of course times have changed – there is no American loan available to a British Government in 2010. Neither am I suggesting that there should be wide-scale re-nationalisation of industries. But there are essential functions in society that the state is best placed to perform. No developed nation has an entirely private education system. When, in 1987, Neil Kinnock asked why he was the first Kinnock in a thousand generation to attend university, the answer was because only recent generations had had the advantage of collective provision. Private insurance cannot replace the welfare state: even in the free-market United States, healthcare has been dependent on state aid in the form of Medicare and Medicaid. Realistically, only that state can direct and support nationwide transport and infrastructure projects. A thriving private sector also relies upon the public sector for support, not least in terms of employment, where private sector firms have numerous contracts with the public sector creating jobs. Taking away that support does not automatically mean that the private sector will grow to fill it, as some in the Westminster Coalition Government appear to think.
In the modern day parlance of “deficit reduction” and public consultations as to which particular piece of public spending should be axed next, we should not lose sight of the positive role the state can play – or, indeed, of the role that the Attlee Government’s vision of collective provision played in the creation of post-war Britain.
Attlee: A Life in Politics by Nicklaus Thomas-Symonds was published by I B Tauris (ISBN 1845117795) on 30 July 2010.
Tags: clement Attlee, Economy, industrial history
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6 Comments
“I see it regularly, whenever I, or my family, receive healthcare free at the point of delivery.”
… the NHS in the United Kingdom is paid in full by the taxpayers of the United Kingdom, including the money in the UK overdraft that will be repaid by our descendant’s yet to be born; and this is the nub of this particular offering, what percentage of the output of UK PLC might the State legitimately use, what amount of money might a government borrow as a percentage of expenditure, and how should this money be used.
A comparison of today with post WWII is ungenerous, the financial war wounds of the 1940′s were the result of the majority of humanity opposing an enemy intent on the destruction of civilised life, the current situation has been caused by a financial bubble that governments from around the world were active participants.
This is a good and well-argued piece. It also reminds us, if we didn’t already know, that there’s no correlation between cutting public sector and building up private sector – and if we don’t be careful, that untruism will be an accepted dogma of the ConDem coalition. The progressive parties, politicians et al should make sure it doesn’t embed itself any further.
That said, it was also an accepted dogma of the Labour party in power, who handed huge swathes of public sector responsibilities to private profiteers, often incompetent ones at that. Not many of their elected and ex-elected MPs and grandees showed any queasiness about accepting directorships with said private profiteers, either, so it’s a debate the Labour party needs to have inside itself, and not just turn the accusations, now that they’re in opposition, against the coalition…
Another good point raised here is that a great deal of the ‘private’ sector (in, say, health, administration, and transport etc.) is directly and indirectly funded by the state, kept afloat by it, underwritten by it, cushioned by it. Think how much time you spend on a crappy British train (late, chaotic, crowded, overpriced) being called a ‘customer’, when actually you’re on a tax-revenue-dependent public transport system you’ve probably paid twice over for, and at some level part-own (though don’t control).
Private and Public, State and Business, are so deeply imbricated and co-dependent that playing one against the other is wrong, but ideologically catchy. There’s going to be a return to ideology, now that Labour aren’t hampered by power and can suddenly become fans of all sorts of things (i.e. the devolution referendum, re-shaping Barnett, etc they weren’t so keen on before May 1 and now suddenly see the importance of…) and the Tories have the political and economic climate to apply their instinctive ideology.
A well written piece and I have alot of time for Nick as a bloke – but I am curious as to the argument being put. My understanding (happy to be corrected) was that Labour were to deliver 5/6ths of the cuts the ConDems are proposing.
If the argument is that such reductions in public spending are dangerous, I am sure those of us on the left would agree. If the argument that 5/6ths of the cuts are fine, but the other 1/6th takes us to madness, I don’t agree.
Atlee’s lesson is surely even more pronounced for Labour than it is for the ConDems?
That said, I do think Nick is at least looking at how the left offers a coherent riposte to the ConDems plans, if it is rather let down by the same criticism being levelled at Labour’s plans to make most of the same cuts.
My view is the one of ‘permanence’. The left should argue that cuts will have to be made, fairly and with the biggest burden on the biggest shoulders, but the cuts will be temporary and that services and investment will resume. Cameron is on the record saying that the investment and public services cut are not coming back, clearly implicit in that is the Tories and Lib Dems belief in reducing these services forever, regardless of how the economy recovers.
A clever article that merits wide reading, of a quality sufficient for a Sunday newspaper. It’s refreshingly historical in presenting a left alternative to the new government’s policy. Nevertheless, bearing in mind the paucity of ambition and delivery Labour achieved in its last term of office (especially the last three years) I doubt they’d have come anywhere close to achieving similar grand designs to Clem Attlee even if Brown had clung on for longer.
Thank you for the reflective article.AttIee once said ,my father told me – “I think the British have the distinction above all other nations of being able to put new wine into old bottles without bursting them. ” I and others look forward to seeing the new wine…first.The State cannot tax itself.Post War Britain was in need of infrastructure and indeed even the great Mr Bevan could not find the labour/ resources to build the new houses required.Among the most important pieces of legislation was the National Insurance Act 1946, in which people in work paid a flat rate of national insurance.A recent election debate ensued on that but VAT was raised instead.But care should be taken on the notion of Attlee “cradle to grave social security” in Wales – the economic inactive rates has reduced the Welsh devoluion “dividend ” to its people.Productivity with the protection of the vulnerable went hand in hand post War -we do not live in such selfless times.We should believe in encouraging productivity or promoting the productive and the positive …”or the new wine”.
John Tyler is right that the current economic crisis is the result of a financial bubble aided and abetted by governments around the world. De-regulation of the market was at fault, we did nothing to stop it. However I think he is wrong to dismiss parallels with the 1945 government. We are also kidding ourselves if we think that the cuts agenda will not cause wide spread revulsion when people see that it will cause real suffering. Labour seems to be crying crocodile tears given that they had signed up to the cuts agenda themselves. A genuine alternative, rooted in our beliefs of community solidarity and community action for the collective good is a difficult sell. People are cynical, post WW2 people both had hope and a determination not to go back to the “old bad ways”.