Austerity Britain, 1945-1951 by David Kynaston

Author:David Kynaston
Language: eng
Format: epub
Publisher: Bloomsbury Publishing Plc
Published: 2009-09-07T00:00:00+00:00

‘Very serious dollar situation,’ noted Hugh Dalton, senior minister and former Chancellor, in his diary for 15 June 1949, less than two years after the convertibility crisis. ‘Cripps says that the danger is that, within twelve months, all our [gold] reserves will be gone. This time there is nothing behind them, and there might well be “a complete collapse of sterling”.’ Over the next three months there was a curious disjunction: the balance-of-payments position remained dire; international (especially American) confidence in the British economy steadily deteriorated; the country’s threadbare reserves continued to drain away; Sir Stafford Cripps authorised a new round of cuts in imports, ie trying to reduce dollar expenditure while formally denying that he intended to devalue sterling; the financial markets operated on the tacit understanding that the currency (long thought to be overvalued at $4.03 to the pound, the rate agreed at the outbreak of war) would be devalued sooner rather than later; and The Times published many letters that sought to diagnose the causes of Britain’s economic problems. Yet, perhaps because it was summer, there was no great sense of crisis felt by the mass of the population. ‘Any visitor hoping to discover what the ordinary Londoner is thinking about the dollar crisis could wear his ear off laying it to the ground, and get no result,’ Panter-Downes rather plaintively remarked at the start of September. ‘What he is currently talking about is his holiday or the drought or the new price cuts in utility clothing.’ She went on:

Short of the Prime Minister coming to the microphone and saying, ‘Sorry, no rations next week,’ it is hard to see how the worker can be made to realise that things are critical when, from his angle, they are looking nothing less than prosperous. Though Britain’s vital dollar exports are down, their industry is still managing to show every sign of lively good health, to judge by the full employment and increased productivity. Some luxury lines, always the first to feel the pinch, are feeling it, but on the whole the industrial picture is so surprisingly, if deceptively, bright that there is every reason for workers to believe that if this is a crisis, it’s the most comfortable crisis they ever took a ride in.17

It was enough, she might have added, to make a Times letter-writer despair, let alone a government exhorting ever-greater efforts.

The eventual decision to devalue was a slow, painful and at times muddled one, not helped by Cripps being in a Swiss sanatorium for part of July and most of August. The process included a perceived act of double-crossing, a heated discussion about bread, and a critical if predictable non-decision.

In Cripps’s prolonged absence, the three ministers left in day-to-day charge of economic matters were Hugh Gaitskell, Harold Wilson and Douglas Jay. Gaitskell and Jay were pro-devaluation, viewing it as preferable to deflation and likely to enhance competitiveness, while Wilson was seemingly of a similar mind. But at a crucial meeting at Chequers, he appeared to be covering his back, leading on Gaitskell’s part to a permanent attitude of mistrust towards him.

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