Wilson's Leadership & Economic Policy, 1964-1970 (AQA A Level History: Component 2: Depth study): Revision Note

Harold Wilson: ideology and leadership

Ideology and image

• Wilson presented himself as a classless moderniser, in contrast to his Conservative predecessors

  • As the first prime minister educated at a state secondary school, he appeared less tied to the traditional elite

  • His pipe, Yorkshire accent and relaxed television manner helped create a down-to-earth image

• His position within Labour was difficult to define

  • Earlier in his career, Wilson had been associated with the Bevanite left

    • He resigned from Clement Attlee's government in 1951 over NHS charges for false teeth and spectacles

  • He later served under Gaitskell and challenged him for the leadership from the left in 1960

  • However, his support for the nuclear deterrent and for the trade union leadership also linked him to the party's right

• The "white heat of technology" became the central theme of his political message

  • Science, technology and economic planning would modernise a country held back by low productivity

  • Labour was presented as the party of the future

    • Thirteen years of Conservative rule were dismissed as "wasted years"

Approach: Wilson gave this campaign speech at Birmingham Town Hall in January 1964, while he was Leader of the Opposition. He presented Labour as the party that could use science and technology to modernise Britain and reduce poverty

The source is useful for showing Labour’s message before the 1964 general election. However, it was designed to win support, so it presents Britain’s problems in a way that strengthens Labour’s case. It should also be compared with what Wilson’s governments later achieved

Wilson's leadership in office

• Labour won the 1964 election with a majority of four seats

  • An early election in 1966 increased the majority to 96 seats

• Government depended on both the formal Cabinet and a close circle of personal advisers

  • Much of Wilson's time was spent managing divisions within the Labour Party

Labour's economic policies and problems

• Labour came to power promising to end the "stop-go" cycle

  • It aimed to raise economic growth through planning instead

The problems Labour inherited

• Britain had fallen behind competitors such as West Germany

  • Post-war affluence had not been matched by:

    • high productivity

    • strong economic growth

• The "stop-go" cycle had created repeated economic crises

  • Short periods of growth led to:

    • inflation

    • rising imports

    • balance of payments deficits

    • pressure on the pound

• Labour was warned on taking office that the deficit could reach about £800 million

  • The usual responses were deflation and devaluation

  • Wilson wanted to avoid both

    • He feared that devaluation would damage confidence in Labour's economic management

Planning instead of "stop-go"

• Wilson believed economic planning could modernise Britain

  • The government wanted steady growth rather than short bursts followed by cuts

• The Department of Economic Affairs (DEA) was created in 1964

  • It was led by George Brown

  • Its role was to:

    • set economic growth targets

    • coordinate government economic policy

    • create regional economic planning councils

• Planning relied on cooperation between government, employers and trade unions

  • The aim was to increase investment, productivity and industrial efficiency

  • This approach became known as "corporatism"

The National Plan, 1965

• The National Plan of 1965 set ambitious targets for the economy

  • It aimed to increase output by 25% by 1970

  • It aimed to:

    • increase exports

    • improve productivity

    • modernise British industry

• The plan assumed that government, businesses and trade unions would work together

  • Employers were expected to invest and modernise

  • Trade unions were expected to limit wage demands

• The targets soon became unrealistic

  • Economic growth remained weak

  • Sterling crises forced the government to focus on short-term financial problems instead

Controlling wages and prices

• The government tried to control rising wages and prices

  • The National Board for Prices and Incomes was created in 1965

    • It aimed to restrain pay and price increases

• The government also tried to move workers into manufacturing

  • The Selective Employment Tax of 1966 taxed employers in service industries

    • The aim was to encourage employment in manufacturing and exports

• These policies had limited success

  • Employers and trade unions did not always cooperate

  • Productivity remained low

  • Britain continued to struggle against fast-growing competitors

Why the planning approach failed

• The DEA came into conflict with the Treasury

  • George Brown wanted to prioritise growth and modernisation

  • The Treasury focused on:

    • defending the pound

    • controlling inflation

    • reducing the balance of payments deficit

• The Treasury's priorities became more important during sterling crises

  • The government returned to spending cuts and higher interest rates

  • Those were similar to the "stop" policies Labour had promised to replace

• In July 1966, a sterling crisis led to a six-month freeze on wages and prices

  • Spending cuts, higher taxes and tighter hire purchase controls followed

  • The freeze effectively ended the National Plan's growth targets

• George Brown was moved to the Foreign Office in 1966

  • The DEA then lost its influence

  • The National Plan had been abandoned by 1967

• Planning failed to solve Britain's external economic problems

  • The balance of payments deficit persisted

    • £382 million in 1964

    • £301 million in 1967

• However, Labour did maintain comparatively low unemployment

  • Unemployment stayed low by later standards, although it rose above 500,000 (about 2.5%) after 1967

The devaluation of the pound, 1967

• In 1967, repeated pressure on sterling made the pound increasingly difficult to defend

  • Labour was eventually forced to accept the devaluation it had tried to avoid

The road to devaluation

• Labour had resisted devaluation since taking office in 1964

  • Wilson feared it would damage confidence in:

    • the pound

    • Labour's economic management

  • The government instead relied on loans from the International Monetary Fund (IMF) and foreign central banks, spending cuts and higher interest rates

• A series of shocks in 1967 made the pound impossible to defend

  • War in the Middle East disrupted oil supplies

  • A national dock strike reduced exports

  • Confidence in sterling continued to fall

• The government devalued the pound in November 1967

  • The exchange rate changed from $2.80 to $2.40

    • More precisely, the pound lost 14.3% of its value against the dollar

• Devaluation was followed by deflationary measures

  • Defence spending was cut

  • Interest rates were raised

  • Hire purchase restrictions were tightened

    • These measures echoed the "stop-go" policies Labour had promised to replace

What was devaluation meant to achieve?

• British exports became cheaper for overseas buyers

  • This was intended to increase demand for British goods

  • Higher exports could improve the balance of payments

• Imports became more expensive

  • Consumers and businesses were encouraged to buy British goods instead

  • However, dearer imports also increased the risk of rising prices

• Devaluation could not solve Britain's problems on its own

  • British firms still needed to:

    • increase productivity

    • meet overseas demand

    • compete successfully in world markets

Approach: Its purpose was to reassure the public and defend a decision his government had previously tried to avoid. The phrase “the pound here in Britain…has [not] been devalued” separates the pound’s international value from the money people held at home, but it downplays the likely effect of more expensive imports on prices and living costs. Wilson also stresses the benefits for exporters and British goods, presenting devaluation as an opportunity rather than a sign of economic failure. The source is therefore valuable for showing the government’s public justification, but it should be compared with evidence about inflation, imports and the balance of payments.

The political cost

• Devaluation damaged Labour's reputation for economic competence

  • Wilson's statement was widely mocked

    • Prices rose despite his attempt to reassure the public

• Chancellor James Callaghan resigned soon afterwards

  • Roy Jenkins replaced him as Chancellor

• Britain's second attempt to join the European Economic Community (EEC) was rejected only days later

  • This added to the impression of economic and political failure

• Devaluation was particularly damaging as Wilson had resisted it for three years

  • The eventual decision appeared to be a forced retreat

  • It weakened the government's claim that planning had replaced "stop-go"

Roy Jenkins and economic recovery

• Roy Jenkins, the new Chancellor, gave priority to restoring the balance of payments

  • Taxes were increased

  • Government spending was reduced

  • Demand within Britain was restricted

• These policies helped create a major economic turnaround

  • By 1969, Britain was moving into a substantial balance of payments surplus

• However, the recovery came at a cost

  • Economic growth was restrained

  • Taxation increased

  • Labour had returned to the deflationary methods it had once criticised

• Jenkins' achievement provides an important qualification

  • Devaluation was a political humiliation

  • However, it helped create the conditions for an improvement in exports and the balance of payments

Other domestic policies

• Beyond economic management, Labour tried to fulfil Wilson's promise to modernise Britain through science, technology, changes to government and social reform

The "white heat" in practice

• A new Ministry of Technology was created in 1964

  • It aimed to connect:

    • science

    • industry

    • government

  • The wider goal was to increase productivity and modernise British industry

• The ministry supported work in new technologies

  • These included:

    • computers

    • electronics

    • machine tools

• The government encouraged industrial modernisation

  • It wanted firms to become larger and more efficient

  • Modern technology was presented as the answer to Britain's low productivity

Major technology projects

• Large and ambitious projects continued

  • The Concorde partnership with France became a symbol of "white heat"

• Such projects demonstrated advanced British science and engineering

  • They also supported Wilson's claim that Labour represented the future

• However, they were expensive

  • Their economic benefits were slow to appear

  • Financial crises placed pressure on long-term investment

• The contrast between ambition and results was important

  • Projects such as Concorde raised Britain's international profile

  • They did not provide a quick solution to wider industrial decline

Reforming government

• Labour also changed the machinery of government

  • The office of Parliamentary Commissioner (Ombudsman) was created in 1967

• The Ombudsman investigated complaints against government departments

  • This gave members of the public a new way to challenge poor administration

• New ministries reflected Wilson's belief in expert government

  • However, new departments sometimes created rivalry and confusion rather than a more effective government

Housing and welfare

• Labour promised to raise house building to 500,000 homes a year by 1970

  • Completions peaked in 1968, but the target was abandoned after devaluation

• The Rent Act (1965) introduced "fair rents" set by independent rent officers

  • It also restored security of tenure to many private tenants

• Prescription charges were abolished in 1965

  • They were reintroduced in 1968 as part of the spending cuts that followed devaluation

• Regional policy tried to bring jobs to areas of high unemployment

  • The Regional Employment Premium (1967) subsidised manufacturing jobs in the development areas

The limits of modernisation

• Economic pressure restricted what Labour could achieve

  • Sterling crises repeatedly led to spending cuts

  • Less money was available for long-term projects

• Britain's underlying problems remained

  • Productivity increased too slowly

  • Economic growth remained below the government's ambitions

• Wilson's greatest success may have been changing the language of government

  • Science and technology became central political priorities

  • However, the promised transformation of the economy was not fully delivered

How successful was Wilson's economic record, 1964-1970?

• This question weighs the government's achievements against its failures and forced retreats

  • Some key evidence for each side is outlined below

The case that Wilson's economic record was successful

• Roy Jenkins restored a balance of payments surplus by 1969

  • This marked a major improvement after years of deficits and sterling crises

• The economy began to grow again

  • Unemployment remained relatively low

• Labour continued its modernising programme

  • The Ministry of Technology promoted science and industry

  • Projects such as Concorde supported Wilson's aim of creating a more modern economy

• By 1970, Labour believed the economy had recovered enough to support an election victory

The case that the record fell short

• Labour's main planning policies failed

  • The National Plan and the DEA had both collapsed within three years

• The government was forced to devalue the pound in 1967

  • This was seen as a major political setback after Wilson had fought hard to avoid it

• Repeated sterling crises pushed Labour back towards deflation

  • Spending cuts and higher interest rates repeated the "stop-go" methods Labour had criticised

• Inflation remained a serious problem

  • Prices rose by about 6% in 1970, while wage increases reached around 12%

• Labour's modernisation programme produced mixed results

  • Some major projects advanced; however, productivity and growth remained below the government's ambitions