Harold Wilson was the Prime Minister of the United Kingdom for eight years. Wilson's first government lasted from 16 October 1964 to 19 June 1970, and his second government began on 4 March 1974 and ended on 5 April 1976 with his resignation.
Wilson presided over the affluent Swinging Sixties, whose relatively prosperous economy was nevertheless plagued with underlying economic problems he would have to confront as Prime Minister. Wilson's Labour government of 1964–70 is mostly known for the social reforms legislation passed during the period and the Devaluation Crisis of 1967. In the 1974–76 Wilson ministries, one of his main achievements was renegotiating the terms of Britain's entry into the EEC.
Harold Wilson Prime Minister
Fig. 1 - Harold Wilson
Harold Wilson won the 1964 general election against Alec Douglas-Home, but with a weak majority. Wilson became fearful that his position as Prime Minister was precarious, so he called for another general election in 1966. He was up against the new Conservative Leader of the Opposition, Edward Heath. He passed with flying colours, attaining a Labour majority of 98 seats.
Harold Wilson's 1964–1970 government: economy
During his first term as prime minister, Harold Wilson's biggest challenge was combatting Britain's balance of payments and inflation problems, exacerbated by the Conservatives' reliance on Stop-Go cycles. When he stepped into office in 1964, Wilson inherited a balance of payments deficit of £800 million.
Harold Wilson: Technology
Harold Wilson's stand-out campaign pledge was his commitment to forging Britain in the 'white heat of technological revolution'.
This pledge aimed to modernise Britain's economy with scientific and technological advancements during the period. Britain was falling behind other modernised economies, and Wilson labelled himself the man for the job. Against the outdated approach of his 1964 general election opponent, Alec Douglas-Home, Wilson's appeals to an increasingly modern and progressive Britain were successful.
Economic modernisation
To modernise an economy means to bring it in line with the global frontiers of capitalist expansion. An example is technological innovation.
The economic reality inherited from the Conservatives curbed Wilson's optimistic mission to modernise Britain's industries and, thereby its economy; he called it the 'thirteen years of Tory mis-rule'. The government could not afford to fund the research and development of new technologies on the scale required to modernise the economy fully.
Harold Wilson: The Ministry of Technology
The creation of the Ministry of Technology was featured in Wilson's 1964 manifesto. It stated, 'Set up a Ministry for Technology to guide and stimulate a major national effort to bring advanced technology and new processes into industry.'
The Ministry for Technology was created in 1964. However, Wilson's government lacked both the financial resources and the expertise to fulfil its promise of a technological revolution. Frank Cousins was appointed Minister for Technology though he had no experience in Parliament and Roy Jenkins was Minister for Aviation, even though he had no scientific expertise.
Harold Wilson: The road to devaluation
Wilson believed only two options existed to save the pound and, subsequently, the British economy: deflation or devaluation. Wilson was reluctant to devalue the pound lest the Labour party became known as 'the party of devaluation', as Attlee's Labour government had been forced to devalue the pound in 1949. This section will track Harold Wilson's trajectory to devaluing the pound in 1967.
Devaluation
The reduction of a currency's official value concerning other currencies. The benefit of devaluation is that it can reduce the cost of exports and help decrease trade deficits.
Harold Wilson: The Department of Economic Affairs and the National Plan
Harold Wilson created the Department of Economic Affairs (DEA) ministry in his first days in office in 1964. The job of the DEA was to find a way out of the Stop-Go cycles that had kept the economy afloat through the Conservative government years. The DEA was thereby tasked with devising long-term plans for sustainable economic growth.
George Brown, an experienced Labour politician, was appointed as head of the DEA. Brown devised the National Plan in collaboration with union leaders and industrialists to reach agreements on wages and prices in order to curb inflation.
Harold Wilson: Problems with the DEA
The DEA was a short-lived project. Chancellor James Callaghan wasn't happy Wilson had set up a new ministry to handle the economy when that was the Treasury's job. George Brown also garnered a bad reputation due to his alcoholism, making him unreliable. As a result of these internal Labour divisions, the DEA initiative fizzled out in 1967.
Harold Wilson: Prices and incomes policies
Prices and incomes policies
Policies that control the general rate of increase in prices and incomes.
Wilson then turned to prices and income policies. Wilson planned to work with unions, employers, and industrialists to limit rises in prices and wages to curb inflation.
Wilson's prices and income policies alienated the left of the Labour party and trade unionists, as Wilson was actively working against workers' best interests.
Frank Cousins, appointed as Minister of Technology, resigned over Wilson's prices and incomes policies, illustrating further divisions within the Labour party.
Harold Wilson: The Seamen's and Docks strikes
The Seamen's strike of 1966 aimed to secure higher wages and reduce the working week from 56 hours to 40 hours. The strike lasted seven weeks and caused enormous economic disruption. The Docks strikes of 1967 took place in Liverpool and London, targeting England's major ports. The Docks strikes caused further disruption, affecting Britain's exports and subsequently heightening the balance of payments deficit. Wilson was staunchly opposed to the strikes, saying they were the work of Communists.
The devaluation crisis of 1967
These strikes put further pressure on the pound. The Six-Day War between Arab states and Israel affected Britain's oil supply, raising the cost of oil. Harold Wilson applied for another loan from the IMF, but it was not enough to offset Britain's trade and balance of payments deficits.
Wilson thus turned to his last resort in 1967: devaluation. Before devaluation took place on 18 November 1967, £1 was worth $2.80. After the devaluation, the pound was worth 14 per cent less at $2.40.
Harold Wilson: The purpose of devaluation
The main purpose of devaluation is to make exports cheaper, and it has a twofold effect:
Lowering the cost of British goods encourages foreign economies to buy from Britain, thereby increasing exports and offsetting the balance of the trade deficit.
To motivate Britons to buy British, importing goods from other countries will become more costly, making it more cost-effective to purchase goods produced in the British Isles by British firms.
Devaluation should, therefore, allow the economy to recover from the economic crisis partially.
Harold Wilson: The political downsides of devaluation
Wilson had been reluctant to devalue as the price rises for domestic products that accompany a devaluation would affect low-income households. In terms of politics and optics, the devaluation was seen as an embarrassing failure for Britain. By going down the devaluation route, Wilson's government admitted to World governments that the British economy was weak and could not compare to other post-war, modern economies.
Chancellor Roy Jenkins' deflationary policies
Wilson's government also put deflationary measures in place to curb inflation. In 1967, Roy Jenkins took up a new post in the Wilson government as Chancellor of the Exchequer.
The deployment of deflationary 'Stop' measures meant the Wilson government continued the Stop-Go economic cycle. The purpose was to reduce aggregate demand, which would continue to target the trade deficit.
Fig. 2 - Roy Jenkins.
Roy Jenkins' 1968 budget
Jenkins' 1968 budget laid out austere plans to deflate the British economy through a series of tax increases and expenditure cuts:
- Raised the Selective Employment Tax (SET) to subsidise Britain's manufacturing industry, aiding exports. Men over 18 years of age paid 25 shillings in SET in 1966, which was raised to 48s in SET by 1969.
- Raised the tax on petrol known as petrol duty.
- He restored NHS prescription charges which Wilson had abolished earlier in 1964.
- Introduced a one-off 'Special Charge' on personal incomes over £3,000 (£53,000 today).
Jenkins increased taxes by a total of £923 million. Jenkins' deflationary economic policies were a success: by 1969, Britain beat its balance of trade and balance of payments deficits and achieved a balance of payments surplus.
However, by the end of Wilson's Sixties government, inflation was once again high, at a staggering rate of 12 per cent.
The rejection of Britain's 1967 application to the EEC
The Wilson government put forward Britain's second application to join the EEC in May 1967. A few weeks after the devaluation of the pound, French Premier Charles De Gaulle vetoed Britain's second application to join the European Economic Community in December 1967 (as in 1963 after the Macmillan government's 1961 application).
European Economic Community is known as the Common Market and today as the European Union.
Being rejected twice from the EEC was considered a further embarrassment to Britain.
Evaluating the economy of Wilson's 1964–70 government
Wilson broke his pledge to not devalue in 1967. On top of this, devaluation did not suffice to remedy the economic crisis. Home Secretary Roy Jenkins turned to the IMF for a loan of $1.4 billion in 1968, which was the biggest loan Britain had requested.
Wilson also went back on his word when it came to the employment of deflationary policies. He didn't want to turn to this economic approach as it meant cutting welfare spending, which was against Labour values. However, deflationary methods accompanied the 1967 devaluation.
On the other hand, the withdrawal east of Suez can be seen as an economic achievement, as fewer government funds were spent on Britain's defence expenditure, which was costly and set back the economy during the Economic Golden Age. Wilson was also to be credited for a balance of payments surplus in 1969.
The first Wilson ministries' economic policies targeted the medium to long term health of the British economy. However, Wilson still relied on relatively short-term expenditure cuts, deflationary policies and IMF loans that only alleviated temporary crises rather than laying the foundation for a sustainable economy.
Harold Wilson's 1964–1970 government: domestic policy
Harold Wilson's first ministry saw significant social change in Britain. His ministry brought about educational and social reforms. However, Wilson also had to weather fraught relations with trade unions.
The Wilson government's reforming legislation
The creation of the Open University in 1969 was a major achievement for the Wilson ministry. The Open University made higher education available to students who didn't meet the requirements of traditional universities. The university allowed students to learn remotely and part-time through television and radio courses. By 1981, 45,000 students had attained degrees from the Open University.
The Open University was part of Wilson's plans to modernise British society, as the accessibility of the courses through new technology created more equal opportunities and increased social mobility.
Harold Wilson: Social reforms
Secretary Roy Jenkins drafted or supported all the social reforms legislation bills passed during the Wilson government. The Wilson government is thus credited with cementing the social progress of the Swinging Sixties within the law, promoting greater individual freedoms:
The Murder Act of 1965 abolished capital punishment.
The Abortion Act of 1967 made abortion more accessible to women.
The Sexual Offenses Act of 1967 decriminalised private-sphere homosexual relations.
The Race Relations Acts of 1965 and 1968 made race-based discrimination a civil offence.
The Theatres Act of 1968 ended theatre censorship.
Divorce Reform Act of 1969 made divorces more accessible to unhappy couples.
Harold Wilson: Trade unions and industrial relations
Previous post-war governments had maintained good relations with the unions. Tensions rose, for example, when Wilson put in place prices and income policies, leading to his Minister of Technology, Frank Cousins, leader of the Transport and General Workers Union, to quit.
Following the Seamen's and docks strikes of 1966–67, Wilson blamed the disruption the unions caused for the exacerbation of Britain's balance of payments problems.
'In Place of Strife: a Policy for Industrial Relations' 1969
In 'In Place of Strife', the Secretary of State for Employment Barbara Castle laid out a set of proposals aimed at limiting workers' strikes. The problem with strikes was that workers were taking unofficial strike action, which meant strikes took place without first being ratified by the relevant trade unions.
An astounding number of working days was lost to unofficial strike action: from 1964–67, there were 2,125 unofficial stoppages, which amounted to a total of 1,857,000 working days lost.
Fig. 3 - Secretary of State for Employment Barbara Castle in 1965. Castle wrote 'In Place of Strife' with Harold Wilson.
The key proposals of 'In Place of Strife':
Introduce a 28-day cooling-off period before a strike can be carried out.
Introduce strike ballots: a union must hold a ballot before organising industrial action.
If unions disagreed with these proposals, they would face prosecution in an industrial relations court and be met with fines.
The failures of 'In Place of Strife'
In trying to stifle industrial action, the Wilson ministry betrayed Labour values and damaged relations with the unions, one of Labour's principal financial supporters. The paper led to significant internal divisions in the Labour party, with MPs threatening to quit over the proposals. After Home Secretary James Callaghan's staunch opposition to the proposals, the proposals were abandoned.
Though the paper was unsuccessful, some of the measures outlined in this paper, such as strike ballot requirements, were later reinstated by PM Margaret Thatcher and are still in effect today.
Harold Wilson: The beginning of the Troubles in Northern Ireland
The Wilson ministry also had to deal with the inception of the 'Troubles' in Northern Ireland. The Troubles in Northern Ireland began during the last years of the Wilson ministry, and the conflict continued into the late 1990s. At the request of the government of Northern Ireland, Wilson agreed to send the British Army to restore the peace in the Bogside area of Londonderry, where violence had broken out.
Harold Wilson's 1964–70 government: foreign policy
The Wilson ministry carried on Harold Macmillan's decolonisation project and maintained the special relationship with the United States on the foreign front.
Decolonisation: the Withdrawal East of Suez
In January 1968, Wilson's Secretary of Defense, Denis Healy, announced that Britain would withdraw its military bases in all states 'East of Suez'. The aim was to cut Britain's military defence expenditure, as the burden of upkeeping Britain's overseas military bases in colonies made a huge dent in the British economy.
Healy and Wilson were thus adamant about bringing the defence budget under £2 billion by withdrawing troops from the following countries by 1971:
Aden (now part of Yemen)
Malaysia
Singapore.
Decolonisation: Rhodesia
Rhodesia, today Zimbabwe, was a self-governing British colony. In 1963, the Federation of Rhodesia and Nyasaland was dissolved into three states, with Zambia and Mawali gaining independence. However, Southern Rhodesia was not granted independence due to the white minority regime in power; Britain would only grant Southern Rhodesia independence if it could guarantee a black majority government. Wilson was opposed to leaving Rhodesia in the hands of the racist Rhodesian PM Ian Smith, who refused to grant equal voting rights to the natives.
Wilson's negotiations with Ian Smith were unsuccessful, as were the oil sanctions imposed on Rhodesia. By the end of Wilson's first government, the decolonisation and independence of Rhodesia remained a problem.
Harold Wilson: The special relationship with the US
Harold Wilson continued to prioritise the special relationship with the US. For example, he continued to support the UK–US Nuclear Deterrent project. The Wilson ministry also expressed support for the US's Cold War involvement in the Vietnam War conflict. However, Wilson refused to send British troops to back up the US front in Vietnam, successfully keeping Britain out of another war through harming the special relationship.
Harold Wilson loses the 1970 general election
Harold Wilson's loss to Edward Heath in the 1970 general election came as a shock. Harold Wilson was a seasoned campaigner and performed much better on television than his opponent Edward Heath, whom he had previously beat when he called for a general election in 1966. Wilson seemed to be in a more favourable position by 1970 due to the success of Roy Jenkins' budget cuts and deflationary measures.
Wilson's loss can be attributed to several factors. First, Labour supporters and the public had grown disillusioned with Wilson, who failed to deliver his grandiose modernisation promises. Wilson's hostility to the unions, his move to devalue the pound, his inability to negotiate with Rhodesian PM Ian Smith, and his failure to get Britain into the EEC contributed to this loss.
Harold Wilson ministry 1974–76
Harold Wilson returned to power in 1974, forming a minority government. During the Heath ministry 1970–74, Britain saw the breakdown of the post-war consensus, which continued through the Labour government of 1974–79. Wilson retired as Labour Leader and Prime Minister in 1976. James Callaghan replaced him, earning the Labour government of the 1970s another three years in office until the 1979 general election voted Callaghan out of office.
The Wilson 1974–76 ministry was fraught with economic hardship and conflicts with the unions. On top of this, internal divisions plagued the Labour Party. Wilson called for a referendum on Britain’s EEC membership in 1975.
Wilson forms a minority government
The first general election took place in February 1974 and resulted in a hung parliament; Labour won by five seats but lacked an overall majority in the Commons, leading Labour to form a minority government the Labour leader Harold Wilson led.
Minority governmentA government formed when one political party attains the most seats in parliament but still less than half the total, lacking the overall majority. For a party to have a majority, they need at least 326 seats.
The inherently precarious position of having a minority government led Wilson to call a second general election in October 1974. Labour earned a majority of 42 seats over the Conservatives, amounting to an overall prevalence of three seats, which was, however, a very tight margin. The government became dependent on the support of the Liberal MPs to ensure they had sufficient backing in Parliament.
Harold Wilson: Economy
Wilson had inherited a dire economic situation from Edward Heath.
Harold Wilson: Inflation
The full effect of the 1973 Oil Crisis was beginning to sink its teeth into the British economy when Wilson returned to office. Britain was on the verge of bankruptcy, with the pound's value dropping to below 2$ in exchange value in March 1976, at the time of Wilson's resignation. High inflation led to the 1976 IMF crisis that Wilson's successor, James Callaghan, faced.
1976 IMF Crisis
The IMF Crisis of 1976 was a balance of payments crisis. The Chancellor of the Exchequer of the Callaghan ministry, Denis Healey, applied for a loan of $3.9 billion from the IMF. The loan conditions were that Britain had to make extensive cuts to public expenditure. Giving in to the demands of the IMF hurt the reputation of the Labour government badly.
The EEC: renegotiations and the 1975 Referendum
The 1974 Labour manifesto pledged to renegotiate Britain's terms of accession into the EEC and call a referendum on the issue. Foreign Secretary James Callaghan foregrounded this pledge. After renegotiations on the UK's terms of membership concluded, Wilson called for a referendum on Britain’s membership in the EEC on 5 June 1975.
Harold Wilson: Renegotiations
The renegotiations of Britain’s entry into the EEC were one of Wilson’s key achievements. According to the Wilson government's pro-Europe Referendum pamphlet, the government had secured a 'new deal':
The most important were food and money and jobs.
- 'Britain's New Deal in Europe 'pamphlet by the Labour government.
- The pamphlet claimed that Britain had negotiated more flexible terms regarding the EEC's restrictive Common Agricultural Policy (CAP).
- The government had ensured a better deal on food exports, such as Commonwealth sugar from the Caribbean and New Zealand dairy.
Harold Wilson: The 1975 Referendum
Wilson's main motivation in calling the Referendum was to improve relations with the unions and the left of the Labour Party, as both groups were sceptical of the EEC's Common Market. The Labour government was in favour of staying in, but dissent was widespread in the Labour Party. Many Labour MPs, such as Tony Benn and Barbara Castle, saw the Common Market as a 'capitalist club' that would get in the way of any chance the Labour government had of making Britain more socialist.
The financial insecurity of Wilson's second term influenced the public to vote in favour of staying in the EEC in the 1975 Referendum; 67.2% of the electorate voted 'Yes'. Britain's membership was thus safely confirmed, remedying the split within the Labour Party on the issue.
Wilson resigns in 1976
Wilson resigned as Prime Minister and Labour leader in 1976. In a press conference held on 16 March 1976, the day he resigned, Wilson claimed that he had never intended to stay in office for more than two years. He claimed this was a favourable time to resign, as the economy was improving, and a new leader would help bring a fresh outlook to Britain's problems.
James Callaghan, Prime Minister from 1976 to 1979, replaced Wilson.
The legacy of Harold Wilson
Harold Wilson's legacy is often measured by how he was able to fulfil his goal of bringing Britain into the modern world, both socially and economically.
Harold Wilson: Ideology and political style
In the earlier years of his career, Harold Wilson was seen as part of the political left of the Labour Party. In 1951, Wilson resigned as a Cabinet Minister when prescription charges were introduced in the NHS. Wilson went on to work in the shadow Cabinet under Hugh Gaitskell, a Labour leader with whom he fundamentally disagreed.
One possible conclusion to draw from this is that he lacked strong political convictions or went back on his leftism over the years. Another possible conclusion is that Wilson was a skilled politician who strategically adapted his ideology to advance his career goals.
During the early years of Wilson's government, Wilson was seen as in touch with the younger generation and as a man of progress. His rhetoric of modernising Britain in the 'white heat of technology' and the social reforms legislation evidenced this. However, his rigorous approach to the trade unions – as the 'In Place of Strife' white paper evidenced – cast doubt on his leftism.
Harold Wilson's 'Kitchen Cabinet'
Harold Wilson relied on internal advisers during his time as Prime Minister in the Sixties. The term has been coined due to the close relationship between Wilson and the group and the informality of the connection. Its members were informally-employed advisors and allies such as his personal secretary Marcia Williams. His sidelining of the traditional, democratically-elected Cabinet in favour of his 'Kitchen Cabinet' inhibited communication and cooperation with fellow Cabinet members.
What does Wilson's Kitchen Cabinet tell you about Wilson's approach to leadership? Is this evidence Wilson was an insecure leader that mistrusted his Cabinet? Was Wilson's unusual leadership style beneficial to his premiership, or did it cause further setbacks? Think of the 'Kitchen Cabinet' and the DEA and internal Labour divisions during his leadership.
Harold Wilson achievements
Wilson's legacy mostly lies in the liberalising legislation passed under his Sixties' government. Wilson's government made abortions and divorces more accessible, abolished the death penalty and censorship of the stage, and made strides in decriminalising homosexuality. Wilson ensured his Home Secretary Roy Jenkins, who led the reforms, had sufficient backing in Parliament to put them in effect.
He is also best known for democratising higher education by creating the Open University.
Harold Wilson: Reputation
In terms of the social reforms passed, he can be said to have been successful in socially modernising Britain; however, he could not fulfil his promise of modernising Britain's economy, being instead hampered by economic crises. The Devaluation Crisis of 1967 marred his reputation – the crisis contributed to the view that Wilson was an inconsistent politician who could not keep to his word.
Wilson showed further potential weakness as a leader when he gave into the demands of the trade unions, abandoning the plans set out in 'In Place of Strife' and in his failure to grant Rhodesia independence, as his negotiations with Ian Smith were unsuccessful.
Sir Harold Wilson
Harold Wilson was appointed a Knight of the Garter by the Queen and later created a Life Peer in 1983.
Harold Wilson: Historical debate
Historians such as Anne Perkins have also argued Wilson's inability to get the economy under control was useful for pushing Thatcher's agenda for an alternate approach to the economy in the late 70s:
'The Thatcherite right’s portrayal of Wilson as the personification of the failure of the postwar settlement provided an invaluable justification for its mission to remodel its relationship with the citizen.'¹
Historian Glen O'Hara argues that Wilson deserves some credit for his modernising efforts, as the PM managed to weather the storm of Britain's economic position in the Sixties:
'Science and education spending grew very quickly; industrial investment rose; government was increasingly well informed and better advised about the performance of the economy.'²
These historical perspectives highlight the complexity of the legacy and reputation of Harold Wilson, which remains open to debate. Now it is up to you to judge which aspects of Harold Wilson's leadership define his legacy – his policies, leadership style, or the crises his government weathered.
Harold Wilson - Key takeaways
- Harold Wilson was Prime Minister from 1964 to 1970 – during the Swinging Sixties – and again from 1974 to 1976, during the End of the Post-War Consensus.
- The economic policy of Wilson's 1964–70 government: Wilson made efforts to modernise the British economy through the creation of the Ministry of Technology and the DEA. However, economic modernisation was sidelined by the urgency of economic crises, sending Wilson down the path to devaluation. Wilson devalued the pound in 1967, from $2.80 to $2.40, and adopted deflationary policies, leading to a balance of payments surplus in 1969.
- Domestic policy of Wilson's 1964–70 government: Wilson created the Open University in 1969, and his government passed a wealth of social reforming legislation. On the other hand, Wilson also struggled to keep the unions under control.
References
- Anne Perkins, Labour needs to rethink Harold Wilson's legacy. It still matters, The Guardian, 2016
- Glen O'Hara, 'Dynamic, Exciting, Thrilling Change': the Wilson Government's Economic Policies, 1964–70, Contemporary British History, 2006
- Fig. 2 - Roy Jenkins (https://en.wikipedia.org/wiki/File:Roy_Jenkins_1977_(cropped).jpg) by Jean-Louise Debaize/European Communities (no profile) Licensed by CC BY-4.0 (https://creativecommons.org/licenses/by/4.0/deed.en)
- Fig. 3 - Barbara Castle (https://en.wikipedia.org/wiki/File:Mme_Barbara_Castle,_Ministre_britannique_du_d%C3%A9veloppement_outre-mer.jpg) by National Archives of Malawi (no profile) Licensed by CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/deed.en)
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