Harold Wilson. Peter Hennessy
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Wilson’s Canadian report) Bridges summed up Treasury opinion when he informed ministers that ‘most of us, with differing degrees of emphasis, are opposed to devaluation now,’ which did not exclude the possibility of a forced or voluntary devaluation later. The alternative was seen as immediate cuts in public expenditure – in particular food subsidies – together with an increase in Bank Rate, higher interest rates generally and limits on bank credit. Though Cripps remained immovable, the opinions of officials, and other politicians, began to shift.12 By the end of June, Morrison and Bevin were probably supporters of devaluation, and Douglas Jay, Economic Secretary to the Treasury, had been half-persuaded. Yet it was still not considered to be an imminent possibility. Gaitskell wrote a few weeks later that when discussions on the crisis began at the end of June, ‘devaluation was mentioned but not taken seriously as something to be contemplated fairly soon’.13 When the US Treasury Secretary, John Snyder, arrived on 7 July, the subject was not even mentioned, and the same day the Chancellor told Parliament that ‘the Government have not the slightest intention of devaluing the pound.’14
On 19 July, Sir Stafford Cripps – whose health had been poor – departed for a stay at a clinic in Zurich, with pressure on sterling still increasing and the matter remaining unresolved. No individual was appointed to deputize in his absence. Instead, the three men dubbed by Dalton the ‘young economist ministers’ – Hugh Gaitskell (Fuel and Power), Douglas Jay (Economic Secretary to the Treasury) and Wilson – were put in joint charge of economic policy, under the notional direction of the Prime Minister (who knew nothing about economics). In retrospect, it was an extraordinary decision: to place the fate of the nation at a time of emergency in the hands of three ministers, none of whom had even been in Parliament as much as four years. All had more experience of Whitehall as temporary civil servants than as ministers.
No doubt the decision to impose this responsibility concentrated their minds. The day before the Chancellor’s departure, Gaitskell – who up to this point had been undecided – and Jay, who had been moving in a pro-devaluation direction, decided jointly on the need for a change in the parity.15 ‘On 18 July, I came to a firm conclusion about what ought to be done,’ Jay recalls, I had to argue it with Gaitskell and Wilson. I saw Gaitskell first, and found he’d come to the same conclusion. I thought that it would be a formality meeting Wilson and getting his agreement.’16 It wasn’t. Wilson, according to Jay, at first objected. How firm Wilson’s attitude was at the outset we do not know, but it seems to have contained some flexibility. By the end of the meeting, the two Wykehamist economists had, as they thought, won him over. Eventually, they ‘extracted from him an undertaking that he’d come round to our view – though he seemed to be taking refuge in ambiguity’.17 Perhaps, outnumbered two to one, he merely reserved judgement. In any case, the ambiguity was the basis for, at best, a serious misunderstanding, at worst – as Jay came to think – an unpardonable double-cross.
Jay believed that Wilson had agreed to support the Jay–Gaitskell view and recommend it to Attlee and Morrison at a meeting later the same week. In reality, whatever he had agreed, his attitude remained unsettled. On 25 July the three ministers met the Prime Minister, together with Morrison, Bridges and Sir Henry Wilson Smith (another Treasury official). The Wykehamists imagined that the young economist ministers – themselves and Wilson – would present a united front on devaluation, which it would be difficult even for so powerful a gathering to resist. According to Jay, Gaitskell began by expounding the arguments in favour of devaluation. ‘Hugh stated the case very clearly and made a great impression.’ They then received an unexpected shock: Wilson proceeded to expound the arguments against. ‘Astonished at this, Gaitskell arranged to see Wilson a second time and again thought he had agreed,’ Jay records. But, once again, when they met Attlee and Morrison, Wilson seemed to back-track, making ambiguous statements.18
Events, however, were undercutting the anti-devaluationists fast. On 26 July a note on the economic situation was submitted to the Prime Minister by the three most senior Treasury officials, arguing in favour of devaluation together with cuts in public expenditure and higher interest rates; this seems to have weighed with Attlee.19 Gaitskell and Jay saw Dalton, who had acquired the status of a Cabinet elder statesman (he was also both an ex-Chancellor and an economist) and succeeded in talking him round. Dalton saw the Prime Minister, who said that he had changed his view.20 At a crucial joint ministerial and official meeting on 29 July, before a meeting of the Cabinet, the decision to devalue was taken in principle, Wilson accepting what by this time had become the majority verdict. ‘Wilson changed sides three times within eight days, and ended up facing both ways,’ Jay claims.21
Meanwhile, Wilson – hitherto the most reluctant of the three – had volunteered to act as messenger, to carry the news of the recommendation to the ailing Chancellor of the Exchequer in Zurich. He explained that he was taking a family holiday in the South of France and would also be attending a meeting of GATT at Annecy, close to the Swiss border. He could easily pass through Switzerland and make Cripps an apparently casual visit, in order to secure his agreement.22 This offer was accepted (though Jay believes there were reservations among the older men at what appeared an obvious device to enable Wilson to talk to the Chancellor alone).23 Attlee instructed that a minute from himself to Cripps be drafted in London first, and then conveyed to Zurich by Wilson’s private secretary, Max Brown. Cabinet on 29 July gave the Prime Minister authority to take what steps he thought necessary.24
A few days later, the message to Cripps was dispatched. Brown’s recollection is that in one sense, at least, the trip was a ploy. ‘Wilson was ostensibly on a motoring tour, but it was a cover – arranged for this purpose,’ he remembers.25 Wilson told Lady Cripps through the British consul in Zurich that he was coming, and then accompanied by his family drove to Zurich, met Brown who was already there with the precious and highly secret letter, picked it up and took it to Cripps in the clinic.26 Brown recalls handing over the letter ‘in the outskirts of Zurich’.27
The letter informed the Chancellor that all concerned had now agreed that devaluation had become a necessary step to halt the dollar drain before reserves fell to a dangerous level, I handed the letter to Stafford,’ Wilson records in his memoirs. ‘He read it very carefully and, somewhat to my surprise, did not challenge its conclusion. He then sat down and wrote by hand a lengthy letter to Attlee …’28 Cripps’s reply dwelt more on the timetable than on the issue itself. He argued that the announcement could best be made in a broadcast on 18 September, after his own and the Foreign Secretary’s impending visit to Washington.29 Cripps’s letter was duly sealed, and carried by Brown to Dover, where it was handed back to Wilson, who took it straight to the Prime Minister in Downing Street.30 Cripps’s request for a postponement until the Washington talks were over was agreed, following the Chancellor’s return to England in mid-August. The actual rate – devaluation to $2.80 – was decided by Bevin and Cripps in Washington six days before the announcement on 18 September. On this, the young economist ministers were not consulted: Wilson still did not know the rate two days after the decision, even though the Bank of Brazil had already managed to pick it up.31
Thus devaluation, which might theoretically have been carried through as a considered strategy (as some had suggested) earlier in the year, was eventually close to a forced move, not very different from the humiliating decision to suspend convertibility two years before. At the height of the crisis, Hugh Dalton commented, not without a touch of rueful satisfaction: ‘It reminds me awfully of 1947.’32 The most critical phase of the crisis was in the second half of July, when the pro-devaluation camp gathered strength in the Treasury and two key ministers, Gaitskell and Jay, joined it. Though Wilson was regarded as an uncertain ally, his hesitancy (if such it was) did not substantially alter the course of events. Given Cripps’s hostility to devaluation per se, and his refusal to contemplate devaluation before the Washington talks, it is hard to see how, even with greater enthusiasm from Wilson, the timetable could have been brought forward. Retrospectively, Wilson might be blamed for not listening to Cairncross earlier in the year, and for listening to his senior officials: but much the same could be said of Jay and Gaitskell, who only came down firmly on the ‘pro’ side eleven days before the issue was decided.
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