Labour Great Britain (1945-1951)

Labour Government 1945-51

Aims

• Repair war damage
• Restore overseas trade disrupted by the war
• Implement the Beveridge Report
• Implement the Party Manifesto of 1945
• Raise the standard of living

Problems 1945-50

• The Effect of War:
  • Lost markets
  • Destruction (bombing)
  • Overseas investment sold off
  • Foreign debt
• ‘Notional loss’ (what might have been achieved without the war)
• 25% of British shipping lost
• Post-war demand:
  • Food
  • Raw materials
  • Machinery
• These were in short supply because of war and drought in Argentina 1946 – less wheat and beef at higher prices
• Antarctica 1946 poor whaling season – shortage of cooking oil
• India refused to export groundnuts to Great Britain – shortage of vegetable oil
• Germany’s food shortage 1945-6 – Atlee sent wheat and potatoes which meant rationing of these in Great Britain (not rationed in the war)
• Imports mainly available from USA only – but how to pay for them?

Higher Prices

• Imports expensive due to high global demand and shortages
• This led to:
  • Balance of payments problems
  • Inflation – manufacturers and shops put up prices
  • Higher wages – workers wanted more to pay for higher priced food etc

Britain’s Trade

• 19^th Century Great Britain made enough money to pay for imports and lend money abroad
• After 1918 Great Britain continued to lend abroad
• After 1945:
  • Exports fell in volume and value till 1948
  • Imports up in price, and would have been up in quantity if people had been able to do as they wanted (eating, clothing, building etc)
  • Balance of visible trade was unfavourable
  • Invisible exports down – loss of shipping and sale of overseas investments
  • Invisible imports up due to debts
  • Balance of payments on current accounts in deficit – Great Britain spent more than she earned
• Solutions:
  • Increased exports – by 1950s exports exceeded imports
  • Cutting imports – led to severe rationing and building restrictions
  • Borrowing from abroad

US Involvement

• US feared Labour would be ‘soft on Communism’
• Stopped Lease-Lend – refused to ‘finance socialism’
• 1945 Keynes sent to US to negotiate loans
• Wanted £1,000 million to buy food, raw materials and equipment
• Higher prices meant it was spent by 1947-8 (not 1950 as planned)
• Marshall Aid (US help to Europe) gave £2400 million by 1951
• It saved Great Britain from collapse

Exports 1945-50

• 1947 exports rose
• Factories rebuilt and modernised so produced more goods
• These goods were rationed at home
• Devaluation of the pound (September 1949)
• Chancellor Cripps cut value of £ from $4.03 to $2.80
• This reduced export prices and made it easier to sell Great Britain’s goods abroad
• He cut rations 1948-9 – became known as ‘Mr Austerity’
• Persuaded unions to hold back wage demands to keep export prices down and home demand held down so more available for export
• By 1950 exports two times higher than 1938
• Imports hardly rose because of rationing
• It enabled end of rationing of bread, potatoes, petrol and clothes

The Unions

• Unions regarded labour as ‘their’ government
• 1946 Trade Union Act undid 1927 Act
• Unions co-operated by holding back wage demands (1948-9)
• 1950 refused to do this because:
  • Devaluation increased cost of imports – cost of living rose and unions wanted wage rise to compensate
  • Profits and prices were not held back
• Unions welcomed government’s nationalisation and social reform

Nationalisation

• This was state ownership of industry
• Some already in place
• Post Office state controlled since the start
• Baldwin had nationalised BBC and electricity generation
• BOAC (British Overseas Airways Corporation) publicly owned since 1940
• During war Reports wanted state ownership of:
  • Coal – 1945 the Reid Committee said it needed huge investment to survive (existing owners could not provide this)
  • Transport – rail and road, so it could be integrated and run by a National Corporation to increase efficiency. Railways needed help to recover
  • Gas – would allow best economic use of raw materials (coal) and methods of production

Economists

• E.g. Keynes said increased government spending would  be best cure for depression e.g. railways and mines
• Government wanted to use nationalised industries to provide investment to avoid depression

Profits

• From state controlled industries to be used for tax cuts or welfare spending
• In fact most nationalised industries had to be subsidised by the tax payer

1945-51 Nationalisations

• 1946 Bank of England
• 1947 coal, electricity, civil aviation
• 1948 gas
• 1949 iron and steel
• By 1950 20% of Great Britain’s industry government controlled

Welfare State

• Its basis originated from the pre-World War I government (Lloyd George and Churchill)
• Addison, Wheatley and Chamberlain later added to this
• The 1942 Beveridge Report during Churchill’s wartime government became the blue-print for the post-war Welfare state which filled in the gaps of previous measures
• Having won the 1945 election, Labour implemented Beveridge

1946 National Insurance Act

• All adults except married women paid a weekly contribution to cover sickness, unemployment and retirement

1946 Industrial Injuries Act

• Replaced the Workmen’s Compensation Acts
• Provided state pensions for men injured or disabled at work

1946 National Health Service Act

• Free medical attention for all irrespective of income
• Began April 1948

Summary

• People were now cared for ‘from the cradle to the grave’ including:
  • Family allowances
  • Maternity grants
  • Sickness benefits
  • Unemployment benefits
  • Retirement pension
  • Death grants

National Assistance Board (1949)

• Replaced the Public Assistance Committees
• Provided help for those not covered by the welfare system i.e. handicapped, deserted wives, unmarried mothers, wives of criminals etc
• Grants for those whose weekly incomes were too low to give them a minimum standard of living

Housing

• High demand for housing from:
  • Need to build houses to replace lost and damaged houses (wartime bombing)
  • Rising expectations – people in old houses wanted proper water supplies and sanitation
  • Growing incomes – more people could afford good housing
• The demand could not be met due to balance of payment problems caused by adverse import/export ratio
• Strict licensing system limited amount of private housing
• Council houses for rent increased after 1945
• 1950 – 200,000 houses being built (sign import/export situation getting better)
• Million houses built 1945-50
• This was better than after 1918 but lower than expected after the boom of 1930s

New Towns

• 1946 New Towns Act introduced
• This created Development Corporations
• Used state money to build new towns (houses, shops factories, schools etc)
• Added to pre-war council estates built on edges of towns
• 16 new towns planned with 8 to take people from London
• The rest served other cities e.g. Birmingham, Liverpool, Glasgow etc

Education

• 1944 Education Act implemented
• School leaving age raised to 15 by 1947
• To be raised to 16 eventually
• Fee-paying abolished for entry to grammar schools
• Tripartite system set up – divided 11 year-olds by the 11-plus exam into
• Grammar schools for the most academic
• Technical schools for the more practical clever children
• The rest went to secondary modern schools

1950 Election

• Called by Prime Minister Atlee in February 1950
• Labour vote rose to 13 ¼ million
• Many middle class seats won by Labour in 1945 returned Conservative Members of Parliament because of –
• Continued rationing and restrictions
• High taxes
• Middle class standard of living had fallen relative to working classes

Election Result

• Labour – 315 seats
• Conservatives – 298
• Liberals – 9
• Irish Nationalists (Ulster) – 2

Second Atlee Government 1950-1

Korean War

• Huge demand for raw materials so prices rose sharply
• So Great Britain’s import bill rose – balance of payments problem
• Government decided to rearm
• £1,500,000,000 to be spent each year
• This strained:
  • Exports – labour and materials diverted to war effort
  • Imports – would have to provide raw materials and machinery
  • Inflation – caused by more money through wages to munitions workers, but no increase in goods in shops

Gaitskell

• He was the new Chancellor of the Exchequer
• Had to find a way to pay for the continually rising cost of the new Health Service and rearmament
• He opted for small charges on dental treatment, and prescription charges

Bevan

• Regarded Gaitskell’s measures as a betrayal of the principle of free health
• He and Wilson and 3 other left-wingers resigned
• Atlee wasn’t able to smooth things over because he was in hospital

Morrison

• Foreign Secretary had to deal with the nationalisation of the Anglo-Iranian Oil Company nationalised by Mossadeq
• He refused to resort to force and so Great Britain failed to prevent it

1951 Election

• The government had a majority of 6 and could fall at any time
• King George VI was due to go on a world tour in autumn 1951
• Atlee (Prime Minister) feared the government might be defeated while he was away and thus unable to dissolve Parliament
• So in October he called an election before the King left
• Bad time for the government because –
  • Rising prices (caused by Korea)
  • Rising taxes (rearmament)
  • Divisions in the Labour Party and government caused by the Bevanites
  • Its weak foreign policy
• Churchill and the Tories were stronger than 1945 because: R.A. Butler set up a ‘Think Tank’ at Conservative Head Office; it produced radical pamphlets of radical policies
• Lord Woolton helped rebuild the Party machinery in the country including election agents in every constituency with active workers in the growing Young Conservative organisation
• Electors saw the Tories wouldn’t undo welfare provisions but expected a firmer foreign policy from the Conservatives

1951 Result

• Conservatives – 321 seats
• Labour – 295
• Liberals – 6
• The new Prime Minister was Churchill