Post-War Britain

I

Introduction

Post-War Britain, period from 1945 to 1960, following World War II (1939-1945), when Britain passed from an era of rationing and hardship to one of affluence and relative economic security. There was also greater security stemming from the welfare state, which provided benefits covering life’s risks “from the cradle to the grave”. At the beginning of the period, Britain remained one of the few world powers, even though its economy had been very seriously weakened by its commitment to total war, and it still held the greatest empire in the world (see British Empire). By 1960 Britain had receded to being a major European power that was relinquishing the Empire but still maintaining a reduced military presence beyond Europe. It was no longer a great power and was uncertain as to whether its future lay in alliance with the United States, the Commonwealth, or Europe.

For the Empire-minded, then and later, these years marked a regrettable, and even avoidable, decline. Others saw them as good for ordinary British people. The historian A. J. P. Taylor expressed this view in his famous conclusion to his volume in the Oxford History of Britain: England 1914-1945:

II

Britain’s Economic Weakness After World War II

World War II was a massive drain on Britain’s resources. Estimates of the cost vary, but they generally indicate that roughly one quarter of the national wealth (some £7 billion) was lost and the national debt tripled. By the summer of 1945, John Maynard Keynes, the leading economist, estimated that Britain was living beyond its means at a rate of £2 billion a year (made possible during the war by the American Lend-Lease, Canadian Mutual Aid, and Sterling Area Credits). He warned that without remedial action by the British government or further external funding, Britain was facing “a financial Dunkirk“.

In response to the serious financial position, especially the shortage of dollars to finance imports, the Labour government (1945-1951) of Clement Attlee needed to maintain substantial controls over the economy. These controls included reducing the level of imports (most advantageously by depressing consumer expenditure—rather than industrial demand for raw or unfinished materials—or by substituting home-produced goods), regulating industry, and boosting exports. In the short term, the government secured a massive US loan (US$3.75 billion at 2 per cent interest to be paid by 2001) and a very substantial Canadian loan (C$1.25 billion). Britain also benefited from the US financial assistance to Western Europe (see European Recovery Program), receiving some £2.4 billion. In spite of this financial support and the government’s best economic efforts, however, in 1949 Britain was forced to devalue the pound from US$4.03 to US$2.80.

The restricting of consumer expenditure was initially severe, with the period of the Attlee government known as “the years of austerity”. Food-rationing covered even more, not fewer, items after the war. In 1947 and 1948 about half of consumer expenditure on food was rationed, including meat, cheese, eggs, fats, and sugar. Bread was first rationed in July 1946 and potatoes in November 1947. The ending of food-rationing was a slow process from the second half of 1948 to 1954; coal rationing ended later still in 1958. At its height, in late 1947 and early 1948, consumer rationing covered about 30 per cent of consumer expenditure; it had dropped to 12 per cent by 1949.

In a period of near full employment, the Attlee government became concerned with restraining wages and prices, while maintaining free collective bargaining between employers and trade unions. In 1948 the government secured trade union support for a voluntary policy of wage restraint, with the government in return holding down prices and profits. Wage rates were restrained, though the policy was undermined by rising import prices after the devaluation of the pound in 1949.

Import controls remained extensive after the end of the war. In 1946 the government bought up some four fifths of imported foodstuffs and raw materials. While it relinquished purchasing raw materials, commodity by commodity, from 1946, it bought all basic foodstuffs until 1950. There was a further tightening of import controls under the Conservative Party in 1951 and 1952, but thereafter controls were diminished until 1957. Investment was curtailed by a requirement on industrialists and house builders to secure licences for building and machinery (the building licences covering most building until as late as 1955).

Such controls were valuable in the post-war world of outright shortages. Once the world supply of goods became plentiful, the controls were ended. The Attlee government’s efforts were made in the context of the start of a massive and sustained boom in world trade. In 1939 world trade had not been much greater than in 1913, but by 1950 it had increased by roughly 50 per cent from 1913.

The post-war economic controls not only helped to manage scarce resources but also assisted the reconversion of a war economy to a peace economy. The absorption of some 9 million people from the armed forces and war-production sector was a major achievement. It was carried out without the serious demobilization riots that had accompanied the end of World War I.

III

Britain as a Declining Great Power

At the end of World War II, Britain was still, at least in appearance, a world power. The country emerged victorious from the war with an even greater military presence than in the pre-war period. British armed forces were stationed in bases in Germany, Italy, and North Africa, as well as in South East Asia. With a greatly enlarged Royal Air Force (RAF), Britain was a major air power while still a substantial naval power. The demands on Britain as a great power and Empire led to the unprecedented peacetime introduction of conscription in 1947 and, in spite of prevailing economic austerity, an expanding defence budget.

In the post-war period of international scarcity of many commodities, however, Labour ministers favoured a policy of development and partnership. This involved more social and economic investment in the colonial territories with Britain benefiting from cheap raw materials and food. At the same time, there were movements towards self-government for colonies in West Africa and the West Indies. In 1957 Ghana (the former Gold Coast) and in 1960 Nigeria gained independence within the British Commonwealth.

Britain withdrew from South Asia within four years of the end of the war, with India becoming independent in 1947 and Burma (Myanmar) and Ceylon (now Sri Lanka) in 1948. In the case of Burma, early inflexibility embittered the nationalists, resulting in the country withdrawing from the Commonwealth in January 1948. In India there had been expectations of independence since at least 1919, as well as nationalist pressure during and after the World War II. In August 1947 Britain hurriedly transferred power in India, as the pre-war foundations of British rule crumbled and serious provincial disorder appeared inevitable if there was delay. In Ceylon, Britain also left quickly but achieved a handover of power to moderate nationalists.

IV

Nationalization and the Welfare State

The Labour Party won its first-ever majority in the House of Commons in the general election of July 5, 1945. On July 26, after the service votes had come in, the count showed a Labour landslide. Labour polled nearly 12 million votes, the Conservatives nearly 10 million, and the Liberals 2‚ million. Labour won 393 seats (with a further 6 on the left), the Conservatives and their allies just under 220, and the Liberals 12.

New ministers included those who had some experience from the 1929-1931 Labour government and who had taken major responsibilities in the wartime government of Winston Churchill (1940-1945). In contrast to the Labour victories in 1924 and 1997, the Labour team was very experienced in government. With a parliamentary majority, Labour moved ahead with its programme of domestic change, including nationalizing major sectors of the economy and creating a welfare state.

Nationalization took place in a piecemeal manner, argued for on the grounds of providing a more rational and effective form of organization for the industries concerned. In several cases the areas taken into the public sector had previously been run by local authorities (for example, the utilities) or had been public corporations (London transport). In the case of the coal mines and the railways, they were sectors that the British Labour movement had long tried to take into the public sector. The main measures were passed from 1946 to 1949: the Bank of England Act (1946), Cable and Wireless Act (1946), Civil Aviation Act (1946), Coal Nationalization Act (1946), Electricity Act (1947), Transport Act (1947), Gas Act (1948), and Iron and Steel Act (1949). The government faced especially vigorous opposition over iron and steel from the Conservatives, and the measure was delayed in the House of Lords. When the Conservatives regained office in 1951, they speedily returned the industry to the private sector (Iron and Steel Act, 1953). (Labour later renationalized the greater part of the industry (Iron and Steel Act, 1967), but what remained of it by 1988 was then privatized.)

For all this, nationalization did not fulfil the hopes of its proponents. In the longer term it pleased neither the workforce nor consumers. Nor did nationalization fulfil the fears of those who saw it as the beginning of a slippery slope to a communist-style economy. It did, of course, result in a larger state sector. This encouraged more interventionist policies in the economy. The initial impetus for intervention was provided by the experience of the managed economy during World War II; by the acceptance of many of the economic and social objectives of the economist John Maynard Keynes and the former civil servant William Beveridge; and by Britain’s straitened financial circumstances at the end of the war. The large public sector, including the publicly owned Bank of England, enhanced the government’s ability to influence aggregate demand in the economy, including the ability to set what it deemed an acceptable level of wage settlement. By 1966 total public authority expenditure reached 47 per cent of the gross national product, with the public sector employing about 25 per cent of the labour force, owning some 40 per cent of the nation’s capital assets, and contributing roughly 45 per cent of total fixed investment annually. Hence the government was directly involved in decisions that affected the performance of the economy.

A major recipient of government money, and a major employer, was the welfare state (notably the National Health Service), a major achievement of the Attlee government. Labour had entered office in 1945 committed to acting on the 1942 Beveridge Report (see Beveridge, William Henry, 1st Baron Beveridge of Tuggal). Between 1945 and 1948 the Attlee government brought in legislation that broadly carried out Beveridge’s ideals of a welfare system that would cover the major risks in life. The National Insurance Act of 1946 provided a full range of benefits. However, government payments did not cover everyone’s need; the poorest still required further assistance under the National Assistance Board (set up in 1948). The National Health Service Act, 1946, set up a truly national health system that was available to all, regardless of their income (see National Health Insurance: Great Britain). This was a major advance in health provision, though rapidly rising costs ensured that the bulk of its funding came from general taxation rather than from national health insurance contributions.

Politically it would have been difficult after World War II for the Attlee government not to have delivered an instalment of welfare provision. Throughout the early 1940s there had been massive propaganda aimed at maintaining domestic morale by promising future benefits as recompense for wartime deprivation. However, both sides of industry had also been promised that the exceptional interventionism of the war would be temporary. There was little likelihood of the “imposed plans of development” being acceptable, and the Conservative Party soon found popularity with pledges to end the wartime controls.