The worst year in British politics… so far?

'Seasons in the Sun' by Dominic Sandbrook

One of my favourite moments from reading Fever Pitch as a teenager was the passage where Nick Hornby and a friend bunk off school to watch Arsenal play West Ham, a game which was being held on a weekday afternoon because there wasn’t enough electricity for the floodlights. Britain was enduring a three-day week due to the energy crisis, and assuming the ground would be empty, Hornby is stunned to find it packed with 60,000 people, all skiving off work, and he recalls his hypocritical juvenile disgust at the idleness of the British public.

The scene encapsulates the comic crapness of that period, one that many of us have enjoyed laughing at with the recent Rest is History series on 1974. I began reading Sandbrook’s book Seasons in the Sun afterwards, from where the material for the series was drawn; the early chapters comprise a highly entertaining account of what he described on the podcast as ‘the worst year in British politics’. Reassuring, perhaps, for those of us inclined towards pessimism, although to paraphrase Homer Simpson, perhaps it was only the worst year so far.

Nineteen-seventy-four saw two elections, the first of which ended in a hung parliament, with Labour as the largest party, and the second with Harold Wilson winning with a majority of 3. These were fought between parties led by exhausted leaders who had run out of ideas, with a third, the Liberals headed by Jeremy Thorpe, soon to be notorious as a dog killer. Britain had declined from the richest country on the continent to one of the poorest in western Europe, and its economy seemed to be falling apart.

During his troubled four years in office Edward Heath had called a state of emergency several times, culminating in ration cards for petrol and power restrictions. In 1973 Heath had ‘told his Chancellor, Anthony Barber, to go for broke,’ Sandbrook writes: ‘It was one of the greatest economic gambles in modern history: while credit soared and the money supply boomed, Heath hoped to keep inflation down through an elaborate system of wage and price controls.’ By October that year, ‘his hopes were unravelling at terrifying speed’.

The ‘Barber boom’ led to ‘house prices surging by 25 per cent in just six months, the cost of imports rocketing and Britain’s trade balance plunging deep into the red.’ Yet just a week after Heath had published details of his ‘Stage Three’ incomes policy, ‘the Arab oil exporters in the OPEC cartel announced a stunning 70 per cent increase in the posted price of oil, punishing the West for its support for Israel. It was a devastating blow to the world economy, but nowhere was its impact greater than in Britain.’

The stock market lost a quarter of its value in just a month, while by January 1974 share prices had fallen by almost half in under two years. Just before Christmas, the government cut spending by 4 per cent, and Labour’s Shadow Chancellor, Denis Healey, ‘warned his colleagues that Britain stood on the brink of an “economic holocaust”.’ Nine out of ten people told a Harris poll that ‘things are going very badly for Britain’ and nearly as many foresaw no improvement in the coming year. They turned out to be correct.

Amid trouble with the National Union of Mineworkers, in November 1973 ‘Heath announced his fifth state of emergency in barely four years. Floodlighting and electric advertising were banned; behind the scenes, the government began printing petrol ration cards. As the railwaymen voted to join the miners in pursuit of higher pay, it seemed that Britain was sliding into darkness. Offices were ordered to turn down their thermostats, while the BBC and ITV were banned from broadcasting after 10.30 at night. On New Year’s Day, with fuel supplies running dangerously low, the entire nation went on a three-day working week.’ Happy days.

Britain’s monthly trade deficit had reached a record £383 million, and in a desperate effort to calm the markets, the Bank of England ‘implemented the tightest credit squeeze in living memory’ - banks went into meltdown, and ‘house prices, land values, even the markets for antiques and vintage cars… simply collapsed.’

Yet at first it looked like Heath might win the February 1974 election. ‘Touring his Huyton constituency on Thursday evening, Wilson had seemed yesterday’s man, a downcast little figure trudging through the pouring rain. He had even drafted ‘an elaborate escape plan, complete with a last-minute change of hotels and an early morning flight south, so that he could escape the press after his second successive election defeat. But when the first results came in, it had suddenly become clear that he would not need it.’

It turned out to be something of a poisoned chalice. Only a few days after Harold Wilson returned to office, financier Siegmund Warburg warned him that the country faced ‘the most serious economic crisis in its history, a crisis which indeed is not only of a material character but is a crisis of the whole fabric of our society’.

As the new cabinet went to see the Queen, even the rooms at Buckingham Palace were unheated because of the energy crisis and Barbara Castle recalled a ‘very muted affair’ where the ministers were not even offered tea due to economising. Castle felt only ‘a kind of dread at the resumption of a feverish round of meetings and paperwork’. There was, she reflected, ‘no stardust left … I hardly felt my pulse quicken. How very different from last time!’

The Labour government was deeply divided between its two wings. The standard bearer of the Left was Employment Secretary Michael Foot, who ‘with his shapeless pullovers, long hair and pockets full of books’ resembled, in the words of biographer Kenneth Morgan, ‘a dilettante of bohemian inclination unexpectedly summoned to arms from the cafés and pubs of Fitzrovia’.

‘Some of Wilson’s advisers considered him totally inept,’ Sandbrook writes: ‘the Prime Minister’s economic adviser Andrew Graham thought Foot had “absolutely no idea how to run a department or how to take decisions”.’ But he was very popular with activists and union leaders, and loyal to Wilson.

Foot was responsible for the promise to implement a ‘Social Contract’ with the unions, a phrase ‘that been much in the air in the early 1970s, reflecting a wider sense that the political consensus was falling apart as Britain slid towards lawless anarchy.’

In 1972 Labour had formed an official Liaison Committee with the TUC, ‘effectively giving the union leaders a say in policymaking.’ This did not endear them to middle-class voters, and what many remember about this period is the image of union leaders constantly going in and out of Downing Street, at a time when 13.3 million people belonged to organised labour.

‘Trade union power was perhaps the central theme of British political life in the Wilson years,’ he writes: ‘In 1972 five out of ten people thought the unions were too powerful, rising to six out of ten in 1974 and seven out of ten in 1975. To the left they seemed the defenders of the working classes and the guardians of the socialist flame; to the right they seemed a state within a state, anarchic, ungovernable, even subversive.’

Jack Jones, head of the Transport and General Workers’ Union, was seen by many as more powerful than the Prime Minister. ‘The son of a Liverpool docker, a veteran of the Spanish Civil War who had accepted regular KGB donations until breaking with them over the Prague Spring, this bespectacled, bullet-headed man struck fear into the hearts of Middle England.’

Sandbrook quotes another union leader who remarked that Jones had ‘a smile glinting like the sunlight on the brass plate of a coffin’, while ‘the journalist Paul Johnson nicknamed him the “Emperor Jones”, after the Caribbean despot in Eugene O’Neill’s play.’ But it was a sign of his standing and respect that the name stuck, and The Financial Times called him a ‘national statesman, devoted to doing what he believes to be best for Britain’s workers and their families’.

Yet most British unions were ‘tiny, fragmented and almost comically old-fashioned’, in the words of Financial Times’s labour correspondent Robert Taylor, led by ‘uncertain, rather frightened, reactive and muddled men’. Rather than being hotbeds of radicalism, most union members opposed further nationalisation and supported dividends for shareholders. They just saw it as a way of earning more money, ‘rather than to gain entry to some socialist paradise’.

This was not the view of Tony Benn, ‘the left’s increasingly messianic champion’, who in his diary wrote that their priorities were ‘a fundamental and irreversible shift in the balance of power and wealth in favour of working people’ which meant ‘an industrial powers act; planning agreements between companies, unions and the Government on national economic priorities; a State Holding Company; regional policy; monopolies and mergers’.

Benn wanted ‘a powerful and really strong policy alliance with the union movement’, as well as a partnership with leftist factions, including the Communist Party, thereby building ‘a popular front’ as in France. Yet ‘to many of his colleagues, all this was utter madness: but for the time being the left held the upper hand.’

Trade secretary Edmund Dell, who would go on to become one of the Labour moderates who joined the SDP, later wrote that there had been ‘no comparable example of such political and intellectual incoherence in a party coming into office’ in modern British history.

Wilson’s policy chief Bernard Donoughue remarked that he could not remember ‘a single sustained discussion in Cabinet or Cabinet Committee of central economic policy – of fiscal or monetary management, or any direct measures to curb public expenditure growth or wage inflation – until December 1974’.

Donoughue, now almost 90 and one of the last surviving figures from the politics of the time, would become a rich source of inside gossip within Wilson’s government, an atmosphere of paranoia and mutual hatred so toxic that it even extended to murder plots.

At the centre of the Number Ten drama was Wilson’s political secretary - referred to as his ‘political wife’ - Marcia Williams, who had immense power within the government and provoked resentment.

In July that year Williams was among 15 new peers, and Tory MPs jibed that Caligula had tried to make his horse a consul. By now, she owned a mews property in the West End and a country house near Chequers, maintained two cars and three servants, and sent her sons to private schools.

Her moods could be ferocious, and Donoughue recorded on one occasion: ‘Terrible lunch. We all go upstairs to the small dining-room. We discuss the CPRS [Central Policy Review Staff] and appointments. Suddenly Marcia blows up. Already upset because we were eating whitebait. She says she hates them looking at her from the plate. The PM solemnly announced that they were from the Home for Blind Whitebait, so she need not worry. I added they were also volunteers. Broke the tension for a while, but then she blew up over Harold and me having a polite and friendly conversation together. She said that it was disgraceful … She stalked out. HW followed, his meal unfinished. Gloom.’

It took Donoughue two hours to convince her not to quit, but the next day there was another bust-up at lunchtime. ‘Time and again, he recalled, Marcia would “lift her ever-present handbag”, tap it meaningfully and announce: “One call to the Daily Mail and he’ll be finished. I will destroy him.” Indeed, Wilson himself once claimed that after a particularly blazing row, Marcia had gone to see his wife Mary and announced: “I have only one thing to say to you. I went to bed with your husband six times in 1956 and it wasn’t satisfactory.”’

Donoughue recorded on one occasion that ‘She is very depressed and neurotic. Says we are all out for ourselves. Ganging up against her.’

It wasn’t entirely paranoia, however. Indeed, so toxic was the atmosphere that Wilson’s press secretary Joe Haines later recalled two discussions among Wilson’s aides to ‘dispose’ of Williams, and this apparently wasn’t a joke.

Wilson, melancholy and tired, was increasingly dependent on alcohol, which made him ‘very strange and aggressive’. On one occasion, ‘Donoughue recorded that Wilson had polished off four brandies before Prime Minister’s Questions and two more afterwards’; on another, ‘he drank five brandies before Prime Minister’s Questions’, and one time was slurring his words in the chamber so much that ‘the Tories howled with excitement’.

Donoughue reflected, after one lunch where Wilson drank three neat whiskies before hand and three large brandies after, that there was ‘no impression of energetic radicalism. I smell a massive financial and economic crisis.’

Wilson was also acutely paranoid: in the spring of 1974 personal tax papers were stolen from Wilson’s House while his secondary office in Buckingham Palace Road was also ransacked. The office of his lawyer Lord Goodman was also burgled, as were the homes of Donoughue and both of Williams’s, as well as Wilson’s former private sectary Michael Halls, and cabinet minister Tony Crosland. The Prime Minister suspected that a ‘dirty tricks department’ was out to get him, although it was hard to tell because crime was rising and burglaries were happening everywhere.

As early as 1945 the MI5 had in fact opened a file on Wilson due to his various trips to Moscow as President of the Board of Trade. After that job ended, he continued visiting the Soviet capital as a consultant for a timber importer, and hung around some very shady businessmen with eastern European connections, including Robert Maxwell. Certainly, some did believe he was a communist spy, including CIA bigwig James Jesus Angleton, who admittedly believed that almost everyone was a communist spy, including Henry Kissinger and Gerald Ford.

Wilson was talking to Joe Haines one day when he suddenly ‘put his fingers to his lips’ and walked to a painting of Gladstone, ‘raised it and pointed to the wall behind’.

‘We will have to go for a walk in the open’, he said.

When Wilson talked in the toilet, he’d turn on all the taps and point to the light fitting. Jim Callaghan told Tony Benn many years later that ‘Harold is just a Walter Mitty’, and yet there may have been some something going on. It emerged later that the security services had put bugs in Downing Street during the Profumo Affair and hadn’t taken them out until 1977.

His strange behaviour was certainly noticeable. When George Bush, new head of the CIA, visited Number 10 in early 1976 he came out asking ‘Is that man mad? He did nothing but complain about being spied on.’

Amid this atmosphere, the economy was collapsing: inflation would pass 16 per cent that year and reach 25 per cent in 1975, while ‘the balance of payments deficit had reached a record £1.5 billion’ and ‘public borrowing had soared to a record £4 billion and’. As Chancellor Dennis Healey admitted, ‘growth had virtually come to a halt’.

Unemployment was the great taboo, due to memories of the 1930s and the Heath government, when it briefly went over a million. The lesson of his defeat to many was that voters wouldn’t tolerate such high levels of worklessness (it would reach 3 million under Thatcher).

Healey’s first budget, although not going far enough for the hard left, caused huge alarm among the middle classes: ‘taxes went up by some £1.4 billion, with the standard rate of income tax up to 33 per cent, the higher rate raised to 83 per cent, corporation tax up to 52 per cent and tax on unearned and investment income up to a record 98 per cent.’ In the fiscal year 1974-5, public spending rose in cash terms by 35%, meaning that public spending as a proportion of GDP had risen from 45% to 58% in just ten years.

The reaction from the City was ‘utter horror’ and within four days the FT30 Index fell by 30 points: ‘To middle-class conservatives across the country, it proved that Healey really was a Balliol Bolshevik, squeezing the wealthy until the pips squeaked.’

In July Healey announced further food subsidies and other giveaways, while public borrowing reached £8 billion over the fiscal year, rising to £11 billion the following, and Treasury Secretary Joel Barnett later reflected that ‘the first few months of the Government… were characterised by our spending money which in the event we did not have’.

Sandbrook calls this increase in spending an act of ‘breathtaking irresponsibility’ when France, West Germany and the US were introducing austerity measures to get inflation under control. Britain’s rate rose to four times the German level, ‘and set the British economy on the path that led to humiliation at the hands of the IMF.’

On June 19, ‘the FT30 Index reached a new low: in the last twenty-five months it had fallen by 53 per cent, further even than in the Great Depression. In July it continued to slide: by the end of the month it was down to 236.4, its lowest level for fifteen years. But as the horrific trade and borrowing figures poured in, worse was to come. By the middle of August, the index was down to just 210.3, and on 19 August it dipped below 200 points for the first time since the 1950s.’

The news had ‘a devastating psychological effect’, recalled one investment analyst, and ‘a paralysing pessimism took hold’. City journals warned of  ‘Latin American modes of both price inflation and societal decay’, but many feared far worse; indeed, with one part of the country already in a state of civil war, some began to believe that democracy itself might be imperilled.

Continued tomorrow…