The historic victory for the Labour Party in the 1945 general election saw unprecedented scenes of jubilation. Even at the opening session of the House of Commons, the massed ranks of the Labour benches, to the horror of the Tories, celebrated the event by singing the Red Flag. There was tremendous optimism everywhere. For the working class, there was a deep yearning for change. Now, with a massive parliamentary majority, this appeared to be Labour’s “finest hour”.
However, Herbert Morrison, the new Leader of the House, ominously described himself as “mildly disturbed” by these events. It was a sign of things to come. “These youngsters still had to absorb the atmosphere of the House”, he said. “But I recognised that it was largely first-day spirits.” Despite Morrison’s concerns about “high spirits”, millions of workers now looked to the Labour government to satisfy their aspirations for socialist change. Reflecting these pressures, the 1944 TUC Congress adopted a radical programme for post-war reconstruction, which included the nationalisation of all basic industries. The Labour Party followed suit with its programme Let Us Face the Future, stating that the Party’s main aim was “the establishment of the Socialist Commonwealth”.
Clearly, the deep-felt longing of the working class, after years of bitter and bloody war, harsh poverty and mass unemployment, was for an end to capitalism and the establishment of a socialist Britain. And this is what Labour had promised. That was the reason why the Labour leaders were thrust into power, literally by the scruff of the neck, on a tidal wave of working-class hope. At long last, everything now seemed possible.
Unlike its predecessors, the new Labour government was freed from the difficulties of 1924 and 1929-31. The Labour government had come to power in entirely different circumstances. Far from being a “government of crisis”, reliant on Liberal support, Labour had a crushing majority with which to act. Rather than facing a world slump as in 1929, the government was staring at the beginnings of a world economic upswing; rather than mass unemployment, the post war boom was creating full employment; rather than counter-reforms, radical reforms were on the order of the day. The Labour government quickly set about the task of reconstruction and overcoming the shortages arising from the war years. New radical policies were introduced, such as the creation of the Welfare State, a key component being the National Health Service, with free health care at the point of use. This was followed by the public ownership of the Bank of England, the coal industry, railways, road haulage, electricity, gas, and the steel industry. In addition, to the delight of the trade unions, one of Labour’s first acts was the repeal of the hated Trades Dispute Act of 1927, introduced after the defeat of the General Strike. As a consequence, the civil service unions were now able to affiliate to the TUC, and the Labour Party received a big boost to its finances when “contracting out” from the political levy was reintroduced.
At long last, for the majority of the population, a Labour government seemed to be taking bold steps in the direction of socialism, which gave rise to widespread enthusiasm. For the first time, radical measures were being pushed through Parliament in the interests of ordinary working people. Labour was carrying out its programme!
Nevertheless, despite the promising start, the Labour government still attempted to work within the confines of capitalism. They had the illusion that socialism could be introduced bit-by-bit, gradually and slowly, as the Fabians had preached. Above all, the government did not want to antagonise big business or the bankers. Labour’s nationalisation programme, instead of taking over the “commanding heights”, took over the unprofitable or bankrupt sectors of the British economy, leaving the dominant profitable sectors in private hands.
By the time of the Second World War, the four major rail companies were in deep financial difficulties. On 1 January 1948, nationalisation day, the state took over a run-down rail system, saddled with a capital debt of almost £100 million, a massive amount at the time. Although a welcomed step, this policy, in effect, represented a form of “state capitalism”, where the state would bail out the private sector and play an auxiliary role in the capitalist economy. The former owners of the nationalised industries, who put up only token resistance, received massive over compensation for their troubles. The transport bosses, for instance, received £3.8 million per annum in compensation. The former coal owners got £164.7 million for the coalmines and £78.5 million in royalties. There was also additional compensation for other assets taken over by the state. The former owners were laughing all the way to the bank!
In this context, capitalist opposition to nationalisation was extremely mild indeed, and in complete contrast to the violent resistance expected before the war. The old bankrupt industries, which needed vast amounts of capital expenditure to bring them up to scratch, were handed over to the state without much fuss – and, of course, in return for massive compensation. Once modernised at state expense, the capitalists would then benefit through the provision of cheap coal, cheap electricity, cheap gas, and cheap transport. In reality, the initiative for the nationalisation of the coal industry and the railways did not come from the Labour government, as both industries had been previously taken into state control by the Tory-dominated Churchill Coalition government. The decision whether or not to hand them back to their former owners was settled by a Royal Commission, in the case of coal by Sir Charles Reid of the Fife Coal Company, who headed the Commission. These people had a head for business, and were prepared to reluctantly accept nationalisation on their (very profitable) terms!
So, despite its radical programme, the Attlee government continued to operate as before on the basis of capitalism. With roughly 20 per cent of the economy in state hands, and 80 per cent in the private sector, it was inevitable that the latter would dictate to the former. In the stark words of Morrison to King George VI: “During the Coalition, the Labour members had learnt a great deal from the Conservatives in how to govern.” In effect, they had absorbed “the atmosphere of the House”.