London, 28 November 1967
Now that the dust has started to settle following the Devaluation decision perhaps you would like me to give you a few reactions to it.
The Government has received as bad a press as can possibly be imagined. Even those newspapers, such as The Times, which favoured devaluation of up to 15%, are sternly critical of the Government’s somersaults, twistings, and oft-repeated denials of their intention to follow this course. Harold Wilson more than any other person, emerges the most tarnished. It would be difficult to conceive of a leader more widely disparaged at the moment. For once he slipped in his telecast the day after devaluation was announced: some of his cunning deserted him, and the outstanding impression he gave—not only to me but to everyone I have spoken to—was insincerity.
I think our own decision not to move downwards with the pound caused little surprise. In some of the press comments there are undertones of regret that for the first time in currency matters Australia is taking a different course from Britain (they forget our initial devaluation at the end of the 1920s in terms of sterling). Other commentators chalk this up as yet another divergence in the ways of England and Australia. But so far as I can gather the Treasury view is that you did what they hoped for. Certainly, amongst M.Ps that I have met there has been no criticism at all. I have not yet had an opportunity to talk with Callaghan, but will do so as soon as this presents itself.
Of course, if we increase some of our tariffs on British imports we shall be accused of selfishness, and uncooperative attitudes towards this country in her distress.
Apart from the economic argument, devaluation has come as a blow to British prestige. This is the way most people see it. And this is what underlies their antipathy to the Government.
The Labor Party is well aware of these things, and so there has been a quick closing of the ranks. I went to the House of Commons on two afternoons last week whilst the debate was on. The Government Benches presented a remarkable spectacle of cohesion. For them, the issue is now survival. Memories of 1931 are still strong.
As you can imagine, the atmosphere in the House was electric. The Benches were packed, but the debate itself did not manifest any outstanding quality. Leading for the Opposition, lain Macleod was effective, but rather over-reached himself to the point of rudeness. Heath was reasoned and pointed, but I have heard him better. From a debating point of view, Wilson made the best speech (he still has no equal as a Parliamentarian), but it was not the sort of speech which, in the present temper of the nation, made any impact. The two best comments I have read—or heard—are contained in the attached press articles. One is by Lord Cromer, who I think is a friend of yours; coming from the former Governor of the Bank of England, his criticisms are weighty indeed. The other is by an independent-minded Labour M.P. Desmond Donnelly, who wrote this article for the Daily Telegraph. Despite his strictures, Donnelly voted for the Government when they took the division last Wednesday night.
What depresses me about the decision to devalue is that only strong, ruthless, hurtful, action by the Government will make it an effective remedy. Of this they give no promise. Harold Wilson continues to emphasise that there will be relief for those worst hit—the elderly, and other less fortunate sections of the community. This must imply some additional social payments. He is also adamant that there will be no cuts in expenditure on the Welfare State. He has said that there will be no reduction in allocations for education, schools, hospitals, and the like. All policy will be designed to achieve the goal of full employment. This is to be the lodestar.
Simultaneously, Industry has received a few more buffets. Corporation tax is to be increased from 40% to 42%. The rebates to manufacturers of selective employment tax are withdrawn, except for industries in what are described as developing areas. Threats have been made about a close watch on increased dividends. There is no hint of a firmer policy towards some of the trade unions, for example the dockers and the railwaymen. Frank Cousins1 in his public utterances seems sulky and uncooperative.
Nor is there the slightest indication by the Government of any willingness to make it worthwhile for people to work harder by tax incentives. This is one of the strong points that the Conservatives have been plugging for months now. Indeed, they have come out with a series of specific pledges for tax reform. The Government, on their part, still seem to be thinking of higher taxation according to Socialist doctrinaire principles.
The defence cuts, although not very substantial, once more show the way the wind is blowing so far as we are concerned. I do not believe that the nebulous assurances we received from Wilson and Healey about an amphibious force in East Asia after the mid-1970s should be seriously considered in our own defence plans. If the present Government remains in office, I am afraid we must contemplate the last remnants of East of Suez being jettisoned at the next blow of economic adversity.
I hope I am wrong in my pessimistic feelings. If Wilson were a strong Prime Minister, a real National leader, all of us could entertain high hopes. After 3 years in office, when you consider his record of broken promises, and sharply changed attitudes, he emerges—regretfully—as a master of expediency, a tightrope dancer, a tempo riser, rather than a national figure. Either you or Bob could make devaluation work: Harold Wilson, unless he is assisted by adventitious circumstances, will not[…]
1 General Secretary of the Transport and General Workers’ Union.
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