Wilson and the Labour governments

He supported Britain's nuclear detterent and attempted to reform the trade unions. He did successfully link the Labour party to modernisation. He was the first PM educated at state secondary school. However in private, he was anxious and insecure about his leadership. He attempted to balance out his potential rivals so he would remain unchallenged.

Modernisation of the British economy was one of the key priorities for the Labour Government. By 1964, it was widely accepted that Britiain was lagging behind the other countries such as West Germany and Japan. Britian's economy seemed to be trapped in the cycle of 'stop-go' with bursts of prosperity always leading to inflation (rise in prices), runs of the pound and regular crises over the balance of payments.

Labour had inherited a £800 million deficit. The 2 classic economic solutions to this kind of problem were deflation or devaluation. But Wilson and his chancellor of the exchequer, James Callaghan, didn't want to do either.

Devaluation would support the value of the pound and prevent inflation. But deflation was the old 'stop-go' approach that the Labour government was determined to break away from. However, there were fears that it would stop Labour's from meeting its manifesto commitments of extra spending on welfare and technology. Devaluation would make imports more expensive and help exporters by making British goods cheaper in other countries: this would help the balance of payments. But devaluation would make Britain look weakand Wilson feared that the Labour Party was going to be branded the party of devaluation as Attlee did the same in 1949.

Wilson was convinced that problems could be solved by careful management and planning. A new department, the Department of Economic Affairs (DEA), led by George Brown, was set up. Brown set growth targets and planned a national system of 'economic planning councils'. He also tried to establish agreements about wages and prices with industrialists, trade union leaders and civil servants. The aim was to keep control which was needed to prevent inflation rising. In this was the 'stop-go' cycle of the 1950s could be avoided. But Brown's economic proposals came to nothing. They did not have united government support: Brown and the DEA were in competition with James Callaghan, and the orthodox economists at the Treasury. In 1966 Wilson moved Brown to the Ministry of Foreign Affairs and the DEA was abandoned in 1967. Instead the government brought in a price and incomes policy (government intervention to set limits on price rises and to call for wage restraint (control) in negotiations between unions and employers) to keep down inflation, put into effect by a Price and Incomes Board. But there was another sterling crisis in 1966, caused in part by a long strike by the National Union of Seamen. The government defeated the strike. Trade unionist Frank Cousins resigned from the cabinet over the incomes policy. The relationship between the government and unions was starting to break down. The labour government survived sterling crises in 1965 and 1966. But in 1967, an outbreak of war in the Middle East affected oil supplies and a major national dock strike in August 1967 affected the balance of payments. The government decided that devaluation could not be avoided; the pound dropped by 14% to 2.40 US dollars. Labour also made defence cuts and introduced higher purchase restrictions and higher interest rates. These were deflationary policies that were slightly different to the 'stop-go' policies of previous Tory governments.

Labour tried hard to avoid devaluation that the devaluation crisis damaged its credibility (quality of being trusted or believed in). A few weeks later, Britian's second application to join the EEC was rejected. These events made the government's economic policies look pointless (futile)

The economic situation improved from this low point. Callaghan's replacement as Chancellor was Roy Jenkins, who had been strongly in favour of devaluation in 1964. Jenkins used delfationary methods. He:

• Raised taxes
• Tightened up government spending
• Gave top priority to improve the balance of payments

These tough measures made the government unpopular, but by 1969, Jenkins had achieved a balance of payments surplus. This economic improvement made Labour confident of victory in the 1970 election

One of the key elements of the post-war consensus was the influence of the trade unions. Since the war all governments had seen it essential to maintain full employment and to keep the unions happy. In 1964, Wilson made the trade unionist Frank Cousins minister of technology and Wilson was relying on union cooperation with his prices and incomes policies. 

In 1966 and 67 relations with the trade unions began to deteriorate. Strikes by the seamen and the dockers caused economic problems for the government. A lot of strikes started with 'wildcat strikes' (sudden and unofficial) by activists who would not take orders from the top. Wilson and his new employment minister, Barbara Castle, started planning to use the law to limit unofficial stikes. She strongly believed in a powerful trade union movement but was also convinced of the need for it to act responsably. In January 1969, Castle produced her white paper, In Place of Strife (a written document that sets out possible direction but makes no commitment).

In Place of Strife:

• There was to be a 28-day 'cooling off' period before a strike went ahead.
• The government could impose a settlement when unions were in dispute with each other in 'demarcation disputes'
• Strike ballots could be imposed
• An industrial relations court would be able to prosecute people who broke rules.

Voters liked Castle's proposals, as well as many Labour MPs such as Roy Jenkins, the chancellor, but the unions and the left of the party hated them. There were a storm of protests from powerful union leaders such as Jack Jones of the Transport and General Workers' unions, supported by the home secretary, James Callaghan and at least 50 Labour MPs who were ready to rebel. In June 1969, the TUC negotiated an alternative compromise but everyone knew it was a humiliating climbdown by the government.

Although Wilson wanted to emphasise technology and science in modernising Britain's economy, the government was hindered by a lack of expertise. Frank Cousins also had little interest in technological development. In 1966, when Tony Benn took over as minister, the department performed better. Research and development was costly. Although Britain pursued some projects such as Concorde which it developed in partnership with the French it couldn't compete with the USA.

The divisions between the Left and the Right of the Labour Party remained in the period after 1964. However, after the death of Bevan, the leader of the Left, in 1960 and Gaitskell, the leader of the right, in 1963, Wilson had emerged as the peacemaker of the party. However, there were still personal rivalries between Wilson and his most powerful cabinet colleagues. Wilson always feared that he might face a leadership challenge from Brown or Callaghan or Jenkins. Brown was hugely resentful that he had lost the leadership election to Wilson and was further disappointed that he was not made Foreign Secretary in 1964. Wilson was also suspicious of Jenkins, a Gaitskellite. When the seaman's strike of 1966 caused a sterling crisis Jenkins tried to get the cabinet to support devaluation. Wilson interpreted this as a plot to replace himself and Brown with Callaghan and Jenkins. However it was highly unlikely that Jenkins and Callaghan would work together as Callaghan didn't approve of Jenkins' pro-European stance nor his liberalising legislation.

Ireland was partitioned between 6 counties in the North of Ireland that would remain part of the UK and the other 26 counties would be the Irish Free State, what would become the Republic of Ireland. The partition was extremely controversial at the time leading to civil war, with unionists (supporter of being a part of the UK) and nationalists (supporting a united Ireland) The majority of people in Ireland as a whole were catholic but the majority in Northern Ireland were protestant. This meant that the Belfast parliament at Stormont and the whole socio-economic system in NI was dominated by protestant unionists. By the mid-60s there was mounting evidence that Catholics in NI were discriminated against in employment and housing and that electoral boundaries had been deliberately drawn to prevent Catholics from being elected; in addition, it was seen that the Royal Ulster Constabulary (RUC), the NI police force, was biased against Catholics.

In 1964, the civil rights movement in NI started to challenge this. Tensions rose as some unionists feared that the Irish Republican Army (IRA) would start a new campaign (they fought for independence). These so called loyalists started to set up paramilitary (non-state military) organisations to defend the union. Civil rights marches were held in 1968 to protest against discrimination. They were attacked by loyalists. Catholics complained that the RUC failed to protect them. In 1969 the situation got worse. The loyalist Apprentice Boys went ahead with their annual march in Derry and were attacked by nationalists in the Catholic area of the Bogside. The RUC tried to storm the Bogside but were held back. TV broadcasts showed the RUC beating catholics. Riots spread to the towns and cities. The stormont government offered concessions (granted) on housing and electoral boundaries; this sparked rioting from loyalists. In August 1969, Wilson sent in British army troops in attempt to keep peace

By 1970 there were obvious signs that the post war consensus was breaking down. Britain's economic problems did not seem to have been solved by consensus policies. Trade unions seemed to be more uncooperative, forcing even the Labour Party to try and reform industrial relations. The Left of the party was dissatisfied by moderate consensus Labour policies. Social problems and poverty had not been ended. Meanwhile in the Conservative Party, Heath and his shadow cabinet were also starting to doubt the efficacy (ability to produce an intended result) of key elements of the post-war consensus. They also questioned whether the State should take as great a role in planning the economy and in ensuring full employment.

In some ways the win for Conservatives was a surprise. Labour had seemed to get through the tough times with Jenkins credited for achieving economic and financial stability; Wilson was considered a master campaigner, far more experienced and popular than Heath. However, Heath  had greater strengths that he was given credit for and Labour's position in 1970 was fragile. 

Heath was hard working, conscientious and had an image of competence. 

In 1968, Enoch Powell had made his 'rivers of blood speech' which warned against further immigration. Although Heath sacked Enoch Powell from the shadow cabinet and refused to let him take part in the election campaign, some people believed that Powell did make voters more likely to vote Conservative. 

Furthermore, concern that the post-war consensus was not working meant that the Conservatives' new ideas gained support.