The Castle Diaries: 1974-76 0297774204

Citation preview

BARBARA CASTLE

THE CASTLE DIARIES Barbara Castle and Harold Wilson at the Labour Party Conference, November 1975 · (Evening Standard)

1974-76 Weidenfeld and Nicolson London

CONTENTS

Copyright© Barbara Castle 1980 First published in Great Britain by George Weidenfeld and Nicolson Ltd 91 Clapham High Street, London SW4 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the copyright owner. ISBN 0 297 77420 4 Set, printed and bound in Great Britain by Fakenham Press Limited, Fakenham, Norfolk

Preface

ix

Introduction

1

1974 1975 1976

263

Epilogue

737

Appendices

741

Index

761

15

619

PREFACE

A political diary is the most dangerous art form an author can adopt. It is written under the pressures of the moment, both of time and of experience. It is short-termno second thoughts. So the person who comes worst out of it is often the author, who dares to reveal all the inadequacies of those immediate judgments that he or she might wish later to modify or polish up. But it is exactly for that reason that a diary is such an important contribution to history, particularly when it is about a period in government. Because government is conducted under pressure. Cabinets have to react to crises that won't wait. Ministers have to go to the House of Commons to make detailed statements on important matters at the drop of a hat, worrying all the way whether their brief is as reliable as they are told it is. A diary records life as it is lived from day to day and in doing so it shows, as no polished treatise can do, how people, including the author, behave in given circumstances. This diary was typed by me as near the events as possible - sometimes in the early hours of the morning when something dramatic had happened which had to be put down on paper at once; more often at weekends when all the red Cabinet boxes had been gone through and my husband had gone to bed. I have kept a diary on and off all my political life, but when Harold Wilson took me into his Cabinet in October 197 4 I felt I was entering a new realm of experience which it would be a crime not to record. So a few months after entering the Cabinet I began to keep a detailed daily diary, which I kept up faithfully. I had no thought of publication then, but the longer I was in government the more convinced I became that governments - all governments make trouble for themselves by not sharing the processes of decision-making more

openly. Sitting round the Cabinet table at No. 10 I often used to think that the people outside would feel far less alienated and hostile if they only knew the sort of probl~ms with which some twenty honest men and women and true were struggling to deal to the best of their ability. The governed might be far more willing to co-operate if only they were taken into the confidence of their governors. I agree with Tony Benn that secrecy is the enemy of democracy. That is why I have decided to publish my diaries, even though they contain many irritable and irrational assessments of the moment, including some of Tony himself. Diaries can have another value, too. They can provide a crucial check on the official records and ex post facto explanations of what is supposed to have happened. Because I do shorthand, and because I laboured hard at some physical cost to keep as

THE CASTLE DIARIES 1974-76

full a reco~d as possi?le, I believe my diaries will h~lp to produce a ~ounded history of Harold Wilson s penod of government. To help this along I have tned to put this part of them, which covers the period 1974-76 when I was Secretary of State for the Social Services, in a framework which will explain why we acted as we did and what inspired the policies about which we were arguing. So I have written the Introduction, the linking passages and the footnotes myself, though I am indebted to Richard Strange and Joanna Roll for their invaluable help with the research. I have also been sustained in these labours by the unflagging competence of my secretary, Janet Anderson. Because I found I had typed about one million words on this two-year period alone, I have had to prune out a number of the details and passages to make the whole thing more readable; but, in doing so, I have not falsified the facts nor left out anything which is essential to the account of what the Government was doing, or of my part in it. The earlier story of my life in government will follow in later volumes.

INTRODUCTION In January 197 4 Britain was in a State of Emergency, the third to be declared by the Conservative Government. After three-and-a-half stormy years Mr Heath, the Prime Minister, had finally trapped himself into a confrontation with the miners. Restrictions had been placed on the use of electricity and shopkeepers were selling their goods by candlelight. Mr Heath had put industry on a three-day week and was obviously preparing to appeal to the country over the heads of the unions. With the Labour Opposition vigorously backing the miners, the stage was set for one of the bitterest clashes of post-war politics. How had British politics reached this pass? The explanation is essential for an understanding of the period 1974-76 covered by this diary. For Mr Heath's confrontation with the miners was the climax of ten years' struggle by successive governments to deal with Britain's deepening economic problems. Harold Wilson had tried in 1964 and 1966, only to be defeated at Mr Heath's hands in 1970. Now Mr Heath faced the collapse of his policies. And the Labour Party was preparing to have another try, based on a new approach which would embody the lessons of the previous ten years. They had been years of growing economic crisis. British industry had become uncompetitive and its share of world trade was declining. Investment was low and so was productivity. And so were wages. Each side blamed the other. Industrial weakness had led each government in turn into the same economic trap. Attempts to expand the economy had led to balance of payments crises, inflation and a weakened currency. Attempts to correct these developments by . deflation had depressed growth, increased unemployment, reduced the standard of living and led to industrial

unrest. Neither Government had broken out of the vicious circle and neither had succeeded in mobilizing the enthusiastic co-operation of the unions and their members on the shop floor. The failure of these previous policies was the key to Labour's new approach. Some details of them are therefore necessary. The Wilson Government of October 1964, elected with high hopes of social reform, quickly walked into the economic trap. The starry-eyed new members of that Cabinet, of whom I was one, found they had inherited a record balance of payments deficit as a result of the Conservative Chancellor Maudling's dash for growth over the previous two years. As Labour took office, the pound came under immediate attack. 1

THE CASTLE DIARIES 1974-76

INTRODUCTION

The Bank of England and the City moved in to demand deflationary policies. For four years the Labour Government allowed itself to be driven back step by step into those policies, first as a result of Harold Wilson's determination not to devalue the pound and then, when devaluation became inevitable, because the Treasury insisted that deflation was the only way to make devaluation work. The deflationary policies produced their predictable results. The budget was balanced by severe cuts in public expenditure. Industrial costs were held down by wage controls. By 1970 the record balance of payments deficit had been turned into a record surplus. But it had only been done at great political and economic cost. The growth rate had fallen from 5. 5 per cent in 1964 to 2·4 per cent in 1969, and by the end of 1969 unemployment was running at 580,000 or 2·4 per cent compared with 354,000 or 1 ·5 per cent by the end of 1964. The party's rank and file had been disillusioned and traditional Labour voters alienated . . And so had the unions. The cut-backs of those years had drl.ven a wedge between them and the Labour Government. The unions themselves had been ambivalent about their own role. Though supporting the Labour Party formally, they felt no . obligation to share the responsibilities of economic management. During the 1960s, under George Woodcock, the General Secretary of the Trades Union Congress [Tue], they saw themselves primarily as wage negotiators who would strike the hardest bargain they could with any government. Wage restraint was anathema, the Left arguing that it was just a device to make capitalism work. Hugh Scanlon, leader of the powerful engineering union , declared categorically: 'I cannot accept that any wage increase can ever be inflationary.' The unions became increasingly restless as the harassed Labour Government was driven back, first to a voluntary prices and incomes policy and then to a statutory one. The Government's problems were intensified by a rash of unofficial strikes, often in breach of procedures, for which the unions officially refused to take any responsibility. The industrial disruption this caused was typified by a strike at Girlings car components firm in 1968, when a sudden walk-out of twenty-two machine setters put thousands of car workers out of work. The unpopularity of these strikes among workers themselves was being exploited by Mr Heath. In 1965 Harold Wilson, always tuned in to the public mood, set up a Royal Commission under Lor'd Justice Donovan to examine the whole field of industrial relations. The result was a report which fended off most of the Conservative attacks on the unions. The main need, it argued, was to reform and strengthen collective bargaining. Strikes were caused by out-of-date procedures which must be reformed by voluntary agreement. Unions should be self-regulating, but · their rules should be amended to give greater safeguards for individuals. In general it rejected legal sanctions as inappropriate, but did not rule out in principle the legal enforcement of procedure agreements once they had been reformed or other enforcement powers which might prove necessary in the light of experience. It fell to me, as Secretary of State for Employment and Productivity, to deal with the report. This I did in a White Paper, In Place of Strife, in which I built on the Donovan analysis. If collective bargaining was to be strengthened, I argued, we must begin by strengthening the trade unions. My proposals, therefore, rejected the calls

coming from the Conservatives to put legal restraints on the unions and instead substantially extended trade union rights. 'The right of an employee to withdraw his labour,' I wrote, 'is one of the essential freedoms in a democracy.' But I was deeply concerned lest abuse of the strike weapon should damage the trade union movement I sought to help. I was particularly concerned with the spate ofunofficial strikes which were disrupting industry. Like Donovan I stressed that conciliation and voluntary reforms must be the key. But in order to give conciliation a chance to work I proposed to give the Secretary of State discretionary power to impose a twenty-eight-day 'conciliation pause' on both workers and management in a strike where procedures had been ignored. Meanwhile management was to be required to preserve the status quo and withdraw the offending action that might have caused the strike. Serious damage was also being done by inter-union disputes over recognition. I therefore proposed to take power to refer such disputes to the Commission on: Industrial Relations, which had been set up on Donovan's recommendation and on which the unions were strongly represented, in order that it could try to conciliate and, failing that, recommend a solution. Financial penalties were to be imposed on any employer who failed to recognize the recommended union and on the union which obstructed an employer when he did recognize it. I also originally proposed a discretionary power to order a secret ballot in official strikes which could seriously damage the national economy, but I later abandoned this as counter-productive. Whether these proposals would have worked is arguable. Harold Wilson backed them enthusiastically but the unions were outraged. They claimed - with some justification as it turned out - that the Conservatives would use my proposals as an alibi for the very different legal constraints they were proposing to place on the unions. Labour MPS mobilized in protest. So did the party's National Executive Committee [NEC], of which I was a member. Some Cabinet Ministers opposed me openly. Others, who had supported me, began to get cold feet. The dispute was finally settled, after protracted talks with the TUC by Harold Wilson and me, by the trade unions undertaking to improve their own procedures for dealing with inter-union disputes and unofficial strikes. The full story of this affair is for another volume, but the row had achieved several things. First, it had compelled the unions to face the need for voluntary reforms. The TUC called on its member unions to overhaul their rules. Vic Feather, now its General Secretary, personally intervened to try to end unofficial strikes. Secondly, it forced them to think more deeply about the need for them to play a positive role in the running of the economy. This was to bear fruit in the Social Contract a few years later. But the row had also revealed the strength of the gut reaction against any tampering with trade union freedoms . It had become obvious that no Labour Government could work unless it carried the trade unions with it and this was to become the dominant aim of Labour policy. But the bitterness remained. My own standing in the party was damaged, Jack Jones declaring that I had become 'totally politically discredited'. Ironically it was Mr Heath who, on taking office in 1970, did most to heal the breach between the Labour Party and the unions. He had no doubt that Britain's troubles were caused by Labour's welfare policies and what he called the 'monopoly power' of the trade unions. Turning his back on the moderate, middle-of-the-road Conservatism of

2

3

THE CASTLE DIARIES 1974-76

INTRODUCTION

Harold Macmillan, Mr Heath deliberately set out to polarize politics. There must, he declared, be a radical new medicine for Britain's ills: more 'incentives', lower taxes, higher profits, less public expenditure. No government interference in industry and no subsidies. People must be made to stand on their own feet. And the unions must be brought to heel. This, and the cold winds of competition that would blow from membership of the European Community, would tone up the whole of British society. Once in office Mr Heath lost no time in testing his theories. In October 1970, his Chancellor, Mr Anthony Barber, startled the House of Commons with an economic programme designed to secure 'a fundamental reform of the role of government and public authorities'. Harold Wilson's modest interventionist measures were swept away. Labour's Industrial Reconstruction Corporation was wound up. Investment grants gave way to depreciation allowances, which helped the successful firms more. Financial support for industry by government was cut. Ports nationalization was dropped and the capital programmes of the nationalized industries cut back. The Consumer Council was abolished. Even the research councils felt the axe. In return corporation tax was reduced. Central to the theme was that taxation must be cut to increase incentives. To achieve this the Government adopted every device to reduce public expenditure. Charges were increased over a wide range of public services: prescriptions, school meals, even museum charges. The subsidy for cheap welfare milk was abolished and the supply of free milk to the 7s to l ls stopped. Grants for public transport were cut back. Local authorities were to be compelled by law to increase council rents so as to reduce housing subsidies. Most serious of all, Mr Barber announced that the traditional method of supporting farmers' incomes through deficiency payments financed by the Government would be dropped in favour of import levies paid by the consumer, even though Britain had not yet become a member of the European Community. This meant a tax on imported food and pushed up food prices. Finally, the pledge Mr Heath had given during the election to increase family allowances was abandoned in favour of a much cheaper, means-tested alternative: a new Family Income. Supplement for low-wage earners with children. To sugar the pill some modest mcreases were announced in the spending programmes of the social services. But the net effect enabled the Chancellor to cut the standard rate of income tax by 6d (2! new pence), to be followed later by further tax cuts which particularly benefited the well-to-do.

Mr Heath's first answer to inflation was the classic one: to restrict growth. Despite the record balance of payments surplus he had in hand, he refused to expand the _ economy. Output stagnated. Unemployment rose by over 40 per cent by the end of 1971. The a_larm bells began to ring in industry. With demand flat Mr Heath's 'incentives' fell flat too. Firms ran into difficulties. In 1971 Conservative supporters had their first shock when the prestigious Rolls-Royce company faced collapse. Mr Heath rushed to nationalize it by the unprecedented device of a one-clause Bill. But there was worse to come. In 1972 his Minister for Industry, Mr John Davies, a former secretary-general of the Confederation of British Industry [cBI], introduced an Industry Bill giving the Government far-reaching powers to help the 'lame ducks' of industry which earlier Mr Heath had said he would not support, including the right for the Government to acquire shares in these companies in return for financial help. This first U-tilrn towards interventionist policies in industry was backed by an equal reversal of economic policy. Rising unemployment became the Government's first concern. In a Maudling-type dash for growth it floated the pound and cut taxes again, but it also increased public expenditure. As a result money supply rose sharply, inflation got worse and the balance of payments ran into another record deficit. International developments became menacing. Import prices rose and oil supplies were under threat as a result of the Middle Eastern war. Faced with these alarming developments Mr Heath took fright. Once again economic policy was put into reverse. By December 1973, credit had been restricted, interest rates increased and public expenditure plans cut back sharply. During all these chops and changes of policy Mr Heath had never lost sight cif his main goal: to curb trade union power. This could be done, he believed, by bringing the unions 'within the framework of the law'. The principles had been worked out by Conservative lawyers twenty years earlier and Mr Heath had fought the election on this central theme. One of the first acts of his Government was to produce a pantechnicon Industrial Relations Bill, designed to regulate by law every aspect of trade union activity. Its basic theme was that strikes could be avoided by setting out 'orderly' procedures for the conduct of industrial relations and giving them the force of law. It also strengthened the right of individuals against their union. So the Bill set out a number of 'unfair industrial practices'. Unions who indulged in them could be brought by their employers, or by individuals, before a new National Industrial Relations Court, presided over by a High Court judge. Although the penalty was the

No one could deny that Mr Heath had thoroughly tried out his new ideas. Unfortunately for him, the reaction was not what he had anticipated. When the excitement had died down the average worker was able to calculate what he had gained by th~ 'incentives' deal and was not impressed. All he noticed was that prices ha.d been dehberately pushed up, though Mr Heath in the election had promised to br~ng ~hem down. The unions growled angrily. Nor were they mollified by Mr Heath's re1ection of a statutory prices and incomes policy as incompatible with his free market philosophy. When, true to his word, Mr Heath abolished Harold Wilson's Prices_ and Incomes B.oard, the unions decided to recoup the price increases through wage mcreases. The mflationary upsurge had begun.

criminal charge of contempt of court. As a result the closed shop was effectively outlawed. So were sympathetic strikes. So were strikes for union recognition while the procedures laid down were being followed. The statutory right to belong to a union, which I had initiated, was accompanied by a statutory right not to belong. To the unions this approach vitiated their whole history. Unions had come into being as voluntary combinations of workers seeking to control the forces that shaped their working lives. Independence from government was crucial to this struggle. So was solidarity among members. From this struggle grew the concept of 'borrowed strength', with strong unions lending their support to weaker ones through sympathetic action. From it grew also the hatred of the 'free rider', who weakened the

4

civil one of compensation and orders, defiance could bring the unions under the

5

THE CASTLE DIARIES 1974-76

collective strength by refusing to join a union, while reaping its benefits. But the most serious part of the Bill from the unions' point of view was the reintroduction of the doctrine of 'agency', and civil liability. This had been propounded in the notorious Taff Vale judgment of 1901 when the House of Lords ruled that railwaymen on strike at Taff Vale were acting as agents of their union, which must be held accountable for the effects of their action. The Lords therefore mulcted the Amalgamated Society of Railway Servants for heavy costs and damages. The judgment roused the whole trade-union world. Unions could see that in future their funds would be at risk in any dispute. The outcry led to the passing of the Trade Disputes Act of 1906 which restored the protection the unions had lost by the judgment - a milestone in trade-union history. Now the Conservative Government was turning back the clock. Unofficial strikes, it said, must be stopped by making a union legally responsible for what its members did. This was to be done by a system of registration, the Bill's centrepiece. Unions could only register if they drew up an approved set of rules, policed by a new Registrar. These must lay down clearly who in the union had the right to call a strike and in what circumstances. The Bill then limited the right to strike to registered unions and their members and officials 'acting within the scope of their authority'. So the unions were in a trap. Failure by registered unions to secure the observance of the new rules could lead to penalties on the union itself. Failure to register could also lead to penalties through the loss of legal immunity. The violence of the union reaction surprised the Conservatives. Once again they had ignored history. The Bill was bitterly - but vainly - contested by Labour MPs in the House of Commons. Once it became law the unions set out with calculated non-co-operation to make it unworkable. Major unions like the Transport and General Workers' Union [T&Gwu] refused to register, thus losing their legal rights. Others, like the National Union of Seamen [Nus], who felt compelled to register in order to survive, were expelled from the TUC, adding to the general bitterness. Union representatives withdrew from conciliation agencies like the Commission for Industrial Relations because these bodies had become part of the new legal machinery. The TU c called on its members to boycott the new court. Industrial relations quickly moved through tragedy into farce. The T&GWU was the first to be caught by the doctrine of agency. Dockers up and down the country were 'blacking' lorries carrying goods to container depots outside the docks, because they could see their own jobs vanishing. It was the sort of problem which could only be solved by a carefully worked-out compromise. But conciliation had given way to legal rights. Under the new law, the lorry drivers' employers could take the union to court for the dockers' action, and this they did. Sir John Donaldson, President of the National Industrial Relations Court [NIRC], took the court's respo~sibilities very seriously. The court ordered the blacking to be stopped and, when the dockers persisted with it, it fined the union for contempt. But the blacking persisted- and so did the applications to the court. Once again the union was threatened with contempt. This time the union decided to defend itself, arguing that its shop stewards were locally elected representatives for whose actions it was not accountable. The argument went all the way up the legal hierarchy. The 6

INTRODUCTION

Court of Appeal under Lord Denning ruled that the shop stewards were not agents and revoked the fine on the union. The NIRC thereupon decided to proceed against the individual dockers - the very opposite of what the Government had intended and to the Government's consternation issued orders for the arrest of three London shop stewards defiantly picketing the new container depot at Chobham farm and eager for martyrdom. Disaster-and a nationwide walk-out from the docks-was only averted by the mysterious intervention of the Official Solicitor, a legal official of whom few people had heard until he was wheeled out to save the day. On his representations, the Court of Appeal hurriedly set the arrests aside - a rescue operation which one of the disappointed shop stewards bitterly described as a 'bloody liberty'. Sir John Donaldson, however, continued to assert the court's authority. When the picketing of the depots continued and another firm complained, he committed five London dockers to Pentonville. This brought 85,000 workers out on strike. There was uproar in the House of Commons. The House of Lords reversed the Court of Appeal's findings at record speed, making the union once again liable. So the Official Solicitor appeared again. Against their will the dockers were released, on the curious argument that, although they refused to apologize for their contempt, they need not remain in prison since action could now be taken against the union. The unrepentant dockers were carried shoulder high by an enthusiastic crowd outside Pentonville. This farce did more than anything else to discredit the new Act. Serious newspapers began to question it. But the legal juggernaut rolled on. When the Amalgamated Union of Engineering Workers [AUEW] refused to call off a strike to secure recognition at Con Mech Engineering Ltd, the court sequestered £100,000 of the union's assets. It was the Government which had earlier added the richest touch of comedy. Faced with a threatened railway dispute over pay, it applied to the court under the provisions of the Act for a compulsory ballot and cooling-off period on the argument that there was serious doubt whether the union's members supported the dispute. This theory was quickly exploded. In the ballot the railwaymen voted six to one to escalate the dispute into a national strike. Two months later the Government was forced to compromise. The railwaymen got another £2 million. Lord Devlin, a High Court judge, complained that the courts were being brought in to make judgments on matters that were really political. 'The prestige of the judiciary ... ,' he wrote, 'is not at the disposal of any government.' Even Sir John Donaldson admitted that parts of the Act had been 'thoroughly misconceived'. The assumptions behind the Act had been proved wildly wrong and the Government began to hint that amendments might be necessary. With his legal curbs on the unions in disarray, Mr Heath turned desperately to other ways of curbing their bargaining power. Inflation was galloping ahead and the employers urgently demanded action to deal with it. His first manoeuvre was to clamp down on wage increases in the public services. He produced the 'N minus One' formula under which each settlement must be 1 per cent lower than the previous one. But by now the unions were up in arms. One after another the dustmen, power workers, postal workers, miners and railwaymen hit back angrily. A series of bitter disputes rocked the economy. From all of them - except the postal workers - the 7

THE CASTLE DIARIES 1974-76

INTRODUCTION

Government came out worst. In February 1972, after a seven-week strike and a Declaration of Emergency, the miners won a then spectacular wage increase of 25 per cent. By the beginning of 1972 wage settlements were running at twice the level they were at the end of the previous Wilson Government. More working days were being lost through strikes than at any time since the general strike of 1926. The CBI complained that industry was being 'murdered' by wage-cost inflation. In this situation a chastened Mr Heath made his first overtures of reconciliation with the unions. From July to November 1972, in a series of tripartite talks with the TUC and the CBI, he struggled to win union support for voluntary wage restraint. In doing so he moved dramatically away from his previous attitudes. When the unions pressed the needs of the low paid, he offered an almost egalitarian formula for p~y increases, combining a flat rate increase with a percentage one. When they demanded protection against price increases, he accepted the Tuc's suggestion of 'threshold agreements' under which every 1 per cent increase in prices above the threshold of 6 per cent would lead automatically to an increase in wages. When they raised the question of pensions, he offered a Christmas bonus. But it was too late. He had driven the unions back into the arms of the Labour Party. At the beginning of the year a Liaison Committee had been set up between the TUC, the National Executive of the Labour Party and the Parliamentary Committee of Labour MPs to heal the breach with the unions. The committee had already spent several months working out agreed social and economic policies. The unions would be content with nothing less from Mr Heath. They demanded the abandonment of import levies on food and of the automatic increases in rents under the Housing Finance Act; a lower rate of VAT; higher pensions and family allowances. Above all they demanded the non-implementation of the Industrial Relations Act. All this was too much for Mr Heath. Matters like these, he told them, must be the responsibility of government. On 6 November the TU c broke off the talks. Thoroughly alerted now to the need to share in economic decision-making, it complained that Mr Heath had rejected 'a real partnership with both sides of industry in the management of the economy'. That afternoon Mr Heath announced to Parliament a statutory freeze on prices, incomes and dividends. Another reversal of policy was under way. Six months later, under Stage Two of wage restraint, the old apparatus of control was reconstituted. A Price Commission and Pay Board were set up to enforce a new Pay and Price Code. By October 1973, Mr Heath was feeling his way towards refinements of what he clearly saw as a permanent policy. The consultative document on Stage Three, due to run to the autumn of 1974, stressed the need for greater fairness and flexibility. It announced that, within the permitted maximum increase of 7 per cent in a group's pay bills, flat rate incre~ses could be negotiated, if preferred, instead of percentage ones. An additional 'flexibility margin' of 1 per cent was to be provided to deal with special factors and improve efficiency. Threshold agreements could be negotiated outside the pay limits - again on a flat rate basis to help the low paid. These would provide an increase of 40 pence per week for every 1 per cent by which prices rose above the threshold of 6 per cent during the next twelve months. Finally, the document said, the Pay Board was producing a report on pay anomalies which had arisen and had been asked to produce a further report by the end of the year on 'pay

relativities' between different workers and different groups. The man who in the election had declared, 'We utterly reject the philosophy of compulsory wage control' was embarked on a fully-fledged statutory prices and incomes policy. The scene was set for another battle with the miners. In July the National Union of Mineworkers' [NUM] conference had rejected the Government's wages policy. In September the miners had submitted a claim for substantial wage increases desi?ned to recover the ground that had been lost since the settlement of 1972, The mmers were in a powerful position, knowing that the Middle East crisis and the huge increase in the price of oil had put a premium on the coal industry. On 12 November they started an overtime ban. By January 1974 this was already having its effect and there was worse to come. On 1 February the NUM balloted its members on a national strike. On a high poll, 81 per cent voted for a strike. This time Mr Heath decided to turn and fight. An election on 'Who Governs Britain?' seemed his only hope . Throughout all this the Labour Party had been digesting the lessons of Mr Heath's failure and its own previous defeat. Mr Heath's travails had proved two things: that good industrial relations cannot be imposed by law and that an incomes policy ca~not work without consent. Harold Wilson's earlier travails - and my own - had dnven home the lesson that there could be no future for a Labour Government which set itself at odds with the trade unions. This was not merely because the Labour Party was dependent on union money, but because its rank and file were ready to defend the unions to the death as a vital expression of democracy. The unions' resistance to the Industrial Relations Act was in line with a growing school of thought that democracy is defective unless it also extends into industry and that industrial democracy begins at the shop floor. This had been the theme of the Donovan Report, which complained that the 'formal' system of collective bargaining, with its industrylevel agreements, was woefully out of touch with the real - but informal - system in which the effective decisions were hammered out at the workplace . It had also been the theme of speeches by Jack Jones, dreaded leader of the Transport and General Workers' Union, who had been urging the importance of the shop steward as the authentic voice of workers trying to control a major part of their lives: their working environment. A movement had begun on the left of the Labour Party to formalize this belief into a programme for workers' control of industry, in which Tony Benn was an influential voice. Few Labour leaders were prepared to go as far as this, but all of them realized that the next Labour Government must carry the trade unions with it in its policies. Without this the dream of growth without inflation would be a mirage. Statutory policies to curb trade union bargaining power had failed under successive governments. The only way was to turn that power into something more positive by involving unions in the responsibilities of economic management in return for involving them also in the choice of social policy . It was from this approach that the concept of the Social Contract eventually emerged. Its evolution was slow. The first meetings of the Liaison Committee were preoccupied with the unions' basic demand for the immediate , unconditional repeal of the Industrial Relations Act. Gradually the discussion widened. What should take its place? What should be Labour's answer to the problem of strikes? It was Jack Jones,

8

9

THE CASTLE DIARIES 1974-76

INTRODUCTION

gradually emerging as the most dedicated supporter of a Labour government, who proposed the setting up of a new Advisory Conciliation and Arbitration Service [ACAS] as a means of settling disputes on a voluntary basis. The CBI, with which the TUC had been having talks, welcomed the proposal and readily agreed that such a service must be independent of the Government. In July 1972, the Liaison Committee issued its first joint statement covering these two points. But the biggest hurdle remained. What were the unions prepared to do to help overcome inflation, which was deteriorating steadily and approaching double figures by April 1973. Incomes policy was anathema. Labour's leaders gave solemn pledges that they would never return to a statutory policy, but this was not enough. So bruised and sensitive were the trade unions that any mention even of a voluntary policy was taboo. When at one of the meetings someone dared to refer to the role of incomes in the management of the economy, Jack Jones jumped in at once: 'It would be disastrous if any word went from this meeting that we had been discussing prices and incomes policy.' The unions insisted that the problem of inflation must be approached from the other end by keeping prices down. Gradually the consensus emerged that the right answer was government action to create a 'climate' to which the unions would respond. This, it was agreed, would involve the reversal of most of the Tories' policies. It would mean price controls, food subsidies, the repeal of the Housing Finance Act, the reversal of Tory tax concessions to the rich, an immediate increase in pensions and other social services, reform of the terms of entry into the EEC, a policy for planned growth, industrial democracy, new public enterprise and greater controls over investment in order to channel public and private funds into manufacturing industry to create new jobs. By February 1973, these ideas had been embodied in another joint statement, 'Economic Policy and the Cost of Living'. This new approach, said the document, 'will further engender the strong feeling of mutual confidence which alone will make it possible to reach the wide-ranging agreement which is necessary to control inflation and achieve sustained growth in the standard of living'. The politicians were still uneasy, but it was the nearest they could get to voluntary incomes policy. Meanwhile the Labour Party activists had been rallying their forces. Backed by the left-wing leadership of some of the major unions, the rank and file insisted that never again must a Labour Government be driven to deflationary policies with their accompanying cuts in the social services. At party conference resolutions were carried triumphantly demanding an immediate increase in pensions to £10 single and £16 for a married couple (a campaign led by Jack Jones), improvements in the social services, a major house-building programme, new help for mothers through a child endowment scheme (later known as child benefit), a new deal for the disabled and the ending of social privilege by such means as comprehensive education and the abolition of pay beds in the National Health Service. (The majority of conference wanted to abolish private medicine altogether.) The National Executive Committee of the party, whose membership reflected the party's left-wing bias, responded enthusiastically to this mood and in 1973 embodied these conference decisions in a comprehensive statement of party policy: 'Labour's Programme 1973'. The aim, it declared,

must be 'to bring about a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families'. Once again the party was in danger of enthusing about ends and neglecting means. Denis Healey, as Shadow Chancellor of the Exchequer, warned that Britain faced the most severe economic crisis since the 1930s. Some of us on the NEC urged that, even with the introduction of a wealth tax which conference was demanding, all the dreams of social expenditure could not be realized at once. As a result of our promptings the NEC published in 1973 a document, 'Paying for Labour's programme' , which we hoped would stimulate 'an informed debate in the party about priorities in spending'. But choice was too painful a process for most conference delegates to face. The NEC's answer was a new industrial strategy to promote growth and the revival of manufacturing industry. Like Mr Heath, it looked to increased production to solve Britain's problems painlessly. But, unlike Mr Heath, it did not believe that this could be achieved by bribes to private industry. He had tried that and it had not worked. There must, the NEC argued, be more, not less, government intervention, financing and ownership if manufacturing industry was ever to recapture its old supremacy. Rejecting the old approach to public ownership, which tended to saddle the taxpayer with declining industries, it argued that in future the state must invest in profitable industries. So in addition to calling for the nationalization of aircraft and shipbuilding, ports and steel because of their importance to the economy, the NEC document demanded that a National Enterprise Board be set up, with government funds, to invest in profitable companies in return for a controlling equity interest. National economic planning must be underpinned by a new system of planning agreements at company level to be concluded by the Government with all major firms as a condition of receiving government aid. These tripartite agreements would give both the Government and the workers in these companies, through their trade unions, a say in deciding the planning objectives of the firm - its export, pricing and investment policies. It was a new attempt to reconcile public ownership and control with private initiative in a mixed economy. It was also a practical instalment of industrial democracy. Few party members absorbed the details. The more timid Labour politicians had their private reservations. But Harold Wilson embraced the new concept enthusiastically in a speech which brought the 1973 party conference to its feet in the exciting belief that next time things would be different. But this euphoria concealed dangerous rifts. The swing to the left had not gone unchallenged. A group of Labour MPS had begun to mobilize against what they considered the 'extremism' of the NEC and the party conference. Their ideological leader was Roy Jenkins, who aroused the same devotion among his followers as Hugh Gaitskell had once done. And they had never forgiven the former Bevanite, Harold Wilson, for capturing the succession to their adored leader when Gaitskell died in 1963. But this time , unlike Gaitskcll, the ' moderates' had become fanatically devoted to the European cause. Like Mr Heath, they had lost faith in their country's ability to solve her problems outside the wider free trade market of the Community and the assumed economic stimulus it would bring. They denounced the Left's

10

11

THE CASTLE DIARIES 1974-76

INTRODUCTION

policies as 'little Englandism'. The Left, in turn, denounced this approach as a surrender to free market economics and coalition politics. It was with this explosive situation that Harold Wilson had to deal. He had personally become a convert to Britain's membership of the Community and as Prime Minister he had persuaded his Cabinet and the party conference to allow him to apply for membership in 1967 on strict terms and conditions, but the application was vetoed by President de Gaulle before negotiations could begin. De Gaulle resigned in 1969 and, on coming into office a year later, Mr Heath had seized his opportunity and re-started talks. These were successfully completed a year later. The Labour Party immediately split. The anti-marketeers denounced the terms, later getting the support of the party conference, a majority of Labour MPS and most of the unions. The pro-marketeers fought back, making it clear they would put Europe first. Roy Jenkins, in a speech interpreted by the press as an oblique attack on Harold Wilson, called for 'honesty and consistency' in the party's policy. George Thomson, who had been Minister for Europe in the Wilson Government, wrecked the party's line by claiming that the Heath terms were as good as any the Labour Government could have got. (Two years later he gave up British politics to become a European Commissioner.) The bitterness intensified when, in October 1971, sixty-nine Labour MPs, headed by Roy Jenkins, defied the Labour whip and voted for Mr Heath's motion approving entry on his terms, giving him a majority of 112. On Europe the political coalition had become a reality. As leader Harold Wilson had seen .it as his prime function to hold the party together, whatever the cost in ideology. Indeed, his original backers, the Left, complained that he had gone out of his way to conciliate his right-wing critics. Now the party was tearing itself apart again. In February 1971, Jim Callaghan came out against the terms. The party crisis had become a crisis of Harold Wilson's own leadership. He privately told some of us that he was going to come out against the terms, even though he knew it would destroy his credibility. This he did at a special conference of the party in July in such a low-key speech that both Left and Right complained of his lack of leadership. Later he became a convert to Tony Benn's idea of a referendum on Britain's membership as the best way to defuse the situation. This eventually became party policy. As he had anticipated Harold Wilson was mercilessly pilloried in the pro-Market press. His old ally, the Daily Mirror, came out against him, deriding him as a 'tethered sacrificial goat' to party unity. Newspaper after newspaper harped on his 'loss of authority' . On 20 October 1971, The Times excelled the chorus by declaring he must never again be Prime Minister. By contrast Roy Jenkins was built up in the press as a 'man of principle'. The more fanatical pro-marketeers began to campaign for a change in leadership. There was increasing talk of the need for a new centre party and in 1972 Dick Taverne, Labour MP for Lincoln, whose local party had passed a vote of no confidence in him because of his vote to support Heath's terms, resigned the Labour Whip to fight as an independent Democratic Labour candidate. He held the seat in a by-election, though he was to lose it at the general election of October 1974. The strain on Harold Wilson began to tell. He became dispirited and more than

once hinted at resignation. But Roy Jenkins had no stomach for political in-fighting. After a series of major political speeches, which the press applauded as an attack on the Left, he resigned the deputy leadership, leaving his supporters dismayed. Denis Healey gladly stepped into his shoes as Shadow Chancellor. Michael Foot, who had run Jenkins close in the elections for deputy, increasingly emerged as a conciliator. It was therefore a bruised and shaken Harold Wilson who prepared for a general election in January 1974. His party was held together only precariously. Although important steps had been taken towards reconciliation with the TUC, the unions remained suspicious of any hint of a return to the old policies or any curbs on their freedom of action. In readiness for the election, the Labour Party had set up the joint meetings of the NEC and the Parliamentary Committee of the Parliamentary Labour Party which, under its constitution, were responsible for deciding which items from the party programme should be included in the Manifesto. It had drawn up a campaign document, based on the agreement reached with the TUC and resolutions · passed by party conference. Meanwhile the economic crisis was deepening. And the British public groped its way through the mysteries of the three-day week.

12

13

1974

3 JANUARY 1974

Tuesday, 1 January Another wonderful Christmas over. Ted festooned Hell Corner Farm again with ivy and old man's beard; my food was a success and I even managed to squeeze in the children's play on Christmas Eve. It was a mad, impromptu rush and I would never have coped without Jennie Hall's help in dressing up the children. I was improvising the last act as I went along but the children all rose to the occasion. On Sunday, the family 1 gone, we gave our adult party. Everyone said it was our best yet. There is no doubt that Ted and I are very good at giving parties. Ted, of course, is the supreme giver of himself and I am happy to dash around feeding everyone. Hell Corner Farm [HcF] looks so lovely on these occasions with the log fire greeting e~ryone as they walk into the dining room, the flames flickering across the polished ~les. I remember John Freeman saying to me years ago how he envied us particulai"ly Ted - for our capacity as hosts. Some people, he said rather wistfully, would like to be able to give out as we do, but they just can't. One unexpectedly nice touch to Christmas: a card from Vic Feather signed 'Affectionately, Vic'. And I had always thought his cards were routine official necessity. Yesterday we set off for Southampton to spend New Year with Phil and Colin 2 and are just recovering from their New Year's Eve party. Thursday, 3 January Terry Pitt3 has become a menace. With three weeks to do his redraft of the campaign document he has left it to the last minute as usual and has called a meeting of the redrafting committee, of which I have been made a member, today. I am not going to curtail my bit of holiday still further to be there. Terry had to rush his 'redraft' down to Southampton by train yesterday and it turned out to be almost the same wording which we criticized so strongly at the December joint meeting with the Parliamentary Committee. I am waiting for him to phone me for my comments - in vain. 1 My only sister, Marjorie Mcintosh, had died in 1961 leaving three children, Sonya, Philippa and Hugh, to whom I became 'proxy Mum'. Childless ourselves, Ted and I made our rambling old cottage in the Chiltern hills the family gathering ground for the three children, their spouses, nine great-nephews and nieces and my mother. • Philippa, my niece, and her husband, Colin Dobson. They have two children, Kathryn and Ben. • Head of the Research Department at Transport House, the Labour Party's HQ.

17

THE CASTLE DIARIES 1974-:76

Friday, 4 January My hopes of a week's rest after Christmas have been dashed as the Liaison Committee with the TUC has been called unexpectedly for this morning. It is all part of the emergency atmosphere. I make my way to London by train without too much difficulty, though the trains are running spasmodically. The meeting was at Congress House, so Sid Greene [general secretary of the National Union of Railwaymen] was in t~e chair. Theyarliamentary side was strongly represented - Harold [Wilson], Dems [Healey], Jim [Callaghan], Wedgie [Benn], Reg Prentice, Mik [Ian Mikardo], Bob Mellish, Douglas Houghton, Ron Hayward and me - but the trade unions were terribly thin on the ground: only George Smith [general secretary of the construction workers' union, UCATT] in addition to Sid and of course Len Murray 1 and his officials. When I arrived Wedgie was reporting on the campaign document as it had emerged from yesterday's redrafting committee, which our visit to Southampton had forced me to miss. He was rubbing in how closely it conformed to the joint statement agreed 2 with the TUc. (One piece of good news: Mike [Foot] has app