THE FAILURE OF THE HEATH GOVERNMENT Also by Martin Holmes THE FIRST THATCHER GOVERNMENT: Contemporary Conservatism and Economic Change BEYOND EUROPE: Selected Essays, 1989-93 * THATCHERISM: Scope and Limits, 1983-7 * THE EUROSCEPTICAL READER (editor) * THE LABOUR GOVERNMENT, 1974-9: Political Aims and Economic Reality * Also published by Macmillan The Failure of the Heath Government Martin Holmes Leclurer in Po/ilics SI Hugh's College Oxford Second Edition palgrave macmillan © Martin Holmes 1982, 1997 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. Published by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world First edition (Political Pressure and Economic Policy: British Government 1970-1974, Butterworths) 1982 Second edition (Macmillan) 1997 ISBN 978-0-333-71607-6 ISBN 978-0-230-37611-3 (eBook) DOI 10.1057/9780230376113 A catalogue record for this book is available from the British Library. This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. IO 9 8 7 6 5 4 3 2 I 06 05 04 03 02 01 00 99 98 97 Contents Acknowledgements vii The Failure of the Heath Government: Introduction to the Second Edition IX Part I The Political Setting Chapter 1 Electoral Victory and the 'Quiet Revolution' 1.1 Opposition 1964-1970 3 1.2 The 1970 General Election 6 1.3 The 'Quiet Revolution' 9 Part II Political Pressure and Economic Policy Chapter 2 The Industrial Relations Act: its Origins, Operation and Consequences 2.1 The 1960s' background 17 2.2 The implementation of the Act 18 2.3 The docks and railways disputes 23 2.4 Putting the Act 'on ice' 30 Chapter 3 The V-turn over Industry Policy 3.1 Disengagement 37 3.2 Rolls-Royce 40 3.3 The Upper Clyde Shipbuilders' crisis 42 3.4 The political pressure of rising unemployment 44 3.5 The Industry Act and the return to interventionism 48 Chapter 4 The 'N minus l' Experiment and the Reaction to Rising Unemployment 4.1 The background to 'N minus l' 55 4.2 The politics and economics of unemployment 61 4.3 The 1972 miners' strike 68 Chapter 5 The 'Heath Dilemma' and the Drift to Incomes Policy 5.1 The 'Heath dilemma' strategy 77 5.2 The tripartite talks 79 5.3 The resort to statutory controls 84 Chapter 6 The Operation of Stages I and II 6.1 The freeze 91 6.2 By-election anxieties 91 6.3 Stage II and the dash for growth 95 Chapter 7 Stage III, the Miners' Strike and the February 1974 Election 7.1 The secret Downing Street meeting 102 7.2 The miners' dispute escalates 106 7.3 The TUC initiative 109 7.4 The February 1974 election 113 Part III Conclusions Chapter 8 Policy Reversals and Prime Ministerial Power 8.1 Mr Heath's style of Government 127 8.2 The politics of confrontation? 133 8.3 The criticisms of the Conservative Right 136 Chapter 9 Policy Reversals and Contemporary Conservatism 9.1 The context of Conservatism 140 9.2 Economic priorities and political pressure 143 9.3 Final assessment 147 Part IV Appendixes I Chronology 153 II Select bibliography 156 Index 157 Acknowledgements I wish to thank those politicians, civil servants, trade unionists, industrialists, journalists and academics who kindly consented to be interviewed for this book. I am especially indebted to Dr David Butler whose wise and patient advice is no less appreciated 15 years after the original publication in 1982. My thanks are also due to my superb secretarial assistant, Penelope Whitworth, for the speed, precision and good nature with which she worked. I would also like to thank the Principal and Fellows of St Hugh's College for providing an atmosphere conducive to scholarship and research. Tim Farmiloe and Sunder Katwala at the publishers handled the manuscript with customary courtesy and efficiency, and I am grateful to them. Needless to say any errors in the following pages are my responsibility alone. Martin Holmes St Hugh's College, Oxford January 1997 The Failure of the Heath Government Introduction to the Second Edition When this book was first published in 1982 1 the Heath government was widely accepted to have been a failure. Free-market and Thatcherite critics had long since criticised the V-turns which produced both the economic meltdown of 1973-4 and the two electoral humiliations of February and October 1974. Critics on the left had voraciously assaulted a government which had introduced the social poison of the Industrial Relations Act 1971, waged class war against the miners and exhibited, in Mr Heath's own words, the 'unacceptable face of capitalism'. The Heath government, while the memories were still politically fresh, was associated with the three-day week, five States of Emergency in three and a half years, and the dismal series of power cuts resulting from protracted industrial disputes. By the late 1990s, however, several studies had emerged which portrayed the Heath government in a much more favourable light. These revisionist works sought to place the 1970-4 Conservative government in an historic context which exonerated Heath from the culpability which both his own party, and his nominal political antagonists on the left, had ascribed to him. 2 Revisionist analyses have been characterised by - even though not necessarily motivated by - anti-Thatcherism. To the opponents of the philosophy, style and policies of 1979-90, the Heath government has acquired the status of a tragic, yet heroic, administration which, albeit unwittingly, paved the way for Thatcherism. On the principle that the enemy of your enemy is your friend, the Heath government has been enlisted in the rollcall of honour of those who opposed the Thatcherite project. The revisionist defence of Heath falls into three main categories: there was no alternative, practical or ideological, to Heath's V-turns; international economic circumstances were severely adverse; and the Labour governments 1964-70 and 1974-9 were even less successful. As a subtle variation on the revisionist theme it has also been argued that the economic and industrial failures of the Heath government should be offset against the successful entry of Britain into the European Economic Community on 1 January 1973. But how convincing is the revisionist defence? How far is it simply a continuation of the ideological battle against Thatcherism by other means? To evaluate the revisionist case it is necessary to examine it from first principles. The most frequently cited exculpation is that the Heath government had no ix x Introduction to the Second Edition option but to abandon its original Selsdon Park policies, because the tide of fashionable intellectual opinion was still favourable to the postwar Keynesian consensus based on a high level of government intervention in the economy. Moreover, it is argued, the requirement of practical politics - based on the concept of what is politically possible - necessitated the V-turns in the absence of any feasible alternative policies. Thus Dennis Kavanagh writes that: Ministers and advisers clung to a Keynesian paradigm which was out of date but no credible alternative was available in the early 1970s.3 Similarly the same apologist ventures that 'In 1970 incomes policies were not widely regarded as a failure and there was no comprehensive monetarist analysis available at the time.'4 Even Edward Heath's fainninded and perceptive biographer, John Campbell, referring to the V-turn on incomes policy, has argued that 'the fact remains that there was near universal support for Heath's approach in 1972, if only he could have pulled it off, and little confidence that the country could be saved from the abyss by any other means'.5 To Anthony Seldon, 'there was no alternative and acceptable philosophy available which would have provided the intellectual underpinning for an assault on the prevailing orthodoxy of Keynesianism',6 while Robert Taylor goes as far as to suggest that 'the Conservatives came to power in 1970 without any detailed promise to roll back the frontiers of the state' .7 The difficulty in assessing such views is that it depends what is meant by 'credible', 'acceptable', and 'comprehensive' alternatives to Heath's V-turns. But although any assessment is inevitably subjective, sufficient evidence existed at the time to indicate the availability of alternatives which had already entered the bloodstream of Conservative politics both before and after the 1970 election. John Charmley has traced this process back to the 1965 Conservative policy document Putting Britain Right Ahead so that by 1970, there was 'not much ... that Thatcherites would cavil at'. But Charmley is correct to argue that 'whilst Heath was good at expousing proto-Thatcherism, he was a good deal less adept at implementing it'.8 The majority of Conservatives, however, did take seriously the fundamental policy re-appraisal of Opposition and did not expect the next Conservative government simply to continue the policies of its Wilsonian predecessor.