The Atlantic and Its Enemies

Italians. Now the British did the same. Heath had quite unwittingly done that service to the cause he most believed in. But Europe offered no immediate relief, quite the contrary.

The attempt to deal with the union problem was farcical. It had split the Labour government in 1969. Heath tried to deal with it by law, and made the law look an ass: jailing dockers, however repellent they might be, in peacetime, was a reductio ad absurdum of Marx’s Eighteenth Brumaire, called for ridicule, and got it. London, at the time, was plastered with government posters explaining an incomes policy of percentages of percentages minus some figure that had been thought up for the lowest-paid, and the face of the Prime Minister on television was an invitation not to bother voting at all. Heath’s incomes policy did not get off the ground; it was sabotaged by the miners in 1972 and fatally in 1973-4. A Prices and Incomes Board was established (under one Aubrey Jones, a marketer of soap powder in the 1960s). Of course, it was absurd for some central body to be controlling such details unless it had the equivalent of wartime powers. But the Atlantic world attempted such things, even under another supposed conservative, Nixon. The whole thing tended to freeze pay as it stood, ‘relativities’ being a minefield, i.e. who was paid more than whom for what. The Cabinet, to its bewilderment, found itself discussing what the secretaries should be paid. With the Coal Board, there were immediate problems, because miners saw themselves as essential, could also discern that the rise in oil prices would make coal very desirable, had their wages politically determined, and did not see why their daughters should earn more as hairdressers. In 1972 they put in a claim for 27 per cent and 10,000 of them besieged the Saltley Coke Depot outside Birmingham. This was settled. Dockers then wanted their slice.

In the end it was the inflation that caused much of the trouble, but there was as ever in England an historical element. An extraordinary British anomaly, a tribute to the very high standards of the past, was that the trade unions were subject only to the criminal law: gratuitous mayhem, of a kind that no-one, in the English nineteenth century, would have expected. In 1906 a Liberal government anxious to please labour produced a trade union law that assumed common decency. The matter was not even debated, so that the then worthies could devote their oratorical talents to the Irish Question. The trade unions’ power to ‘picket’, i.e. to deter potential customers and strike-breakers, was unchallenged. That power was not supposed to include violence, but there was nothing to prevent strike pickets from roving around to stop firms that were indirectly involved in the affairs of the struck- against one. A would-be mining revolutionary, Arthur Scargill, sent men with brickbats to raid the power stations and stop the use of coal, and the police stood by, helpless. In the docks, a similar protection-racketeering prevailed. In the event, power was switched off for much of the day, and industry itself went over to a three-day week (during which it produced more than in the previous 5?-day week). In February 1974 Heath narrowly lost an election, and Labour returned, this time producing a ‘social contract’ with the unions which was received with derision. The general idea was that there would be a ‘fairer’ society — i.e. direct taxes on the better off that would reach almost 100 per cent — if the unions restrained wage demands. They could not control their own people and the overall inflation was such that they were required to put in for higher wages in any event.

The public service unions now started. From 1961 to 1975 central government employment had risen by 27 and local government by 70 per cent. The NUPE (National Union of Public Employees) grew, from 265,000 to 712,000 between 1968 and 1978, and in 1973 came the first National Health strike, which included consultants. Jack Jones became a figure of power, as head of the TGWU, the largest of the unions, pushing for an extension of union power over Labour. It was he who produced the idea of a ‘social contract’, an echo of the ‘social partnership’ of consensus-minded Catholics. There would, he promised, be moderation in wage claims as a consequence. There followed some preposterous calculations as to permitted wage rises. As in the United States, these were soon shown to be imbecilic. Jack Jones apparently dictated academic salaries, and some deluded dons, unable to believe that an enlightened government could do this to them, demonstrated in mortarboard and gown outside Downing Street with the electric slogan, ‘Rectify the Anomaly’. By June 1975 weekly wage rates had risen by up to one third, and by summer 1977 inflation stood at 13 per cent and wages rose by 14 per cent, the better-paid workers now paying marginal rates of income tax. In fact taxation was wicked, in the sense that it was destroying the good. A married man with two children had take-home pay of ?70 per week in December 1973, but ?63 in 1977; by 1979 the incidence of taxation was growing, such that there were 2.5 million more taxpayers than in 1974, but the government’s own poverty figure was ?55 per week for a married man with two children. There was every incentive, therefore, for said married man to abandon his family and sue for ‘benefit’. A million people earned less than ?55, the lowest 10 per cent of earners in the National Health Service earning ?48, and the overall average itself was now low: ?80 in industry generally or, for the 2 million local government workers, less (dustmen earned ?56). Anthony Crosland, the ideologist of modernized Labour, became a near alcoholic. His final contribution to the country’s future was to destroy the selective grammar schools that had been a great glory, and a means to inspire and promote bright children from poor backgrounds. This was done in the name of equality: schoolchildren were all now to be brought up in the same huge ‘comprehensive’ schools, and examinations were increasingly rigged to demonstrate that these unlovely places were a success. As ever, in England, when equality was in question, all that happened was the proletarianization of the lower-middle class.

England had the dearest labour and the cheapest management, and a spiralling down began. The public debt was added to, by over ?10bn in 1975-6, and at the same time the GDP fell (by 1 or 2 per cent in the middle seventies). This compared badly with the German or Japanese experience, and even the American, because inflation in those countries was much less (in Germany even in 1975 6 or 7 per cent). England could only compete by selling London property to the new oil money, and was not exporting goods; the ‘pump-priming’ strategies of the era meant that none-too-good manufacturers were able to sell indifferent goods to the domestic market. The balance of payments deficit increased to ?1.5bn in 1975 and a sterling crisis broke early in 1976. Healey himself decided boldly on a new programme of cuts in spending, and recognized that wage demands and inflation (plus an exchange rate of $2 to ?1) made the country uncompetitive, and the government was divided (Wilson himself resigned in March 1976). In the latter part of 1976 the IMF was called in, to reinforce Healey’s existing strategy, and the cuts went ahead — the first and in some ways the only truly serious cuts made. A humiliating ‘Letter of Intent’ had to be signed by the British government, one of the founders of the IMF. By the autumn, Wilson’s successor, James Callaghan, was publicly warning his own supporters that they would have to give up the idea of spending their way into employment: ‘Higher inflation, followed by higher unemployment. That is the history of the last twenty years.’ By 1976 the Treasury itself was somewhat converted to the idea of monetarism, a limitation of the quantity of money such that inflation could be contained. But the conversion was not enthusiastic. The Bank (and the City) expressed greater enthusiasm.

It was an unhappy time, the country winding down, and a slow crisis started. In 1976-7 the world economy did pick up, as the oil-shock money was recycled back to the industrial and exporting countries (which grew overall at 5 per cent). But the British economy was by now too fragile to gain much more than a respite, and inflation still ran high — 25 per cent in 1975, 16 per cent in 1976 and in 1977 (earnings keeping apace until 1977). As the pound was now a petrol currency, it naturally rose; keeping it down meant selling it, and that made for inflationary pressures, compounded by the inrush of Arab money. Still, there was a respite, unemployment not much above a million, and inflation down below 8 per cent in 1978. The respite did not last long.

Seventies England finally fell apart over an absurd wrangle about Scotland. The vagaries of the electoral system had made the government dependent upon a few Scottish Nationalists. Theirs was a cause not worth discussion: careerist soft-profession mediocrities with no sense of their own country’s considerable history. They had to be placated, and a referendum was staged as to independence. It failed, and, without the votes of the few Nationalists, the Labour government collapsed. It did so as the economic strategy also collapsed: the comic arithmetic of the pay policy anyway fell apart because in far-away Teheran the Shah lost his Peacock Throne, and in the ensuing panic oil prices doubled. Iran was the second-largest oil producer, and revolution there affected 5 million barrels per day. Production was suspended for ten weeks after 27 December 1978, and then recovered only to 2 million. By June 1979 the price of Saudi Light Crude had risen from $12.98 to $35.40, and there was a very harsh winter in the USA and Europe; the spot price affected marginal, non-contracted oil, and some crude-oil prices — Nigeria’s for instance — even reached $40 per barrel. In Britain, with inflation rising, the barriers broke. The TUC wanted 22 per cent, not the 5 per cent they were supposed to accept, and various strikes began in the winter of 1978-9. Callaghan, who himself said that if he were younger he would emigrate, confessed that there was a strange new tide a-flowing, and he was right.

By this time, the government’s policies were spreading havoc. The headmaster of an infants’ school in a small Berkshire town wrote to parents whose children usually had school dinners that they would have to go home because of a strike. He added: ‘we cannot allow you to provide packed meals instead, as this could be regarded as