Clement Attlee’s post-war Labour government is rightly lauded for its radical zeal. Inheriting a Britain emotionally scarred by the horrors of the Second World War, economically ruined by record debt levels and with many still living in Victorian slums, Attlee set about implementing an egalitarian and redistributive programme to build a socialist ‘New Jerusalem’ from the ruins of war.
Expectations were high, given his unexpected thumping majority at the 1945 election. But, against all the odds, Attlee and the Labour Party largely delivered on their promises.
By the end of their tenure, 1,016,349 new homes were built, of which, 806,857 were council homes. 20% of the economy was nationalised. Full employment was achieved. The Welfare State was constructed, providing universal unemployment and sick benefits. And of course, the crown of Attlee’s illustrious achievements - the creation of the National Health Service, providing healthcare to everyone regardless of their income, from cradle to grave.
For a new government, coming to power in such uncertain and tumultuous times, the achievements of the post-war Labour government were historic. Its legacy was immortalised by Conservative acceptance of Attlee’s economic and social reforms, creating the ‘Postwar Consensus’ for decades to come. Attlee’s promise of a ‘New Jerusalem’ was realised.
And yet, it could only be delivered through harsh austerity measures. With national debt having breached 200 percent of GDP, Attlee continued wartime rationing to help pay down Britain’s debts and manage consumption demand, going so far as to add bread to the long list of everyday items being rationed. A progressive tax system was imposed, placing higher taxes on wealthier individuals and those on higher incomes, raising much needed revenues to fund redistributive public spending measures. Import restrictions were imposed to protect foreign currency reserves and limit the purchasing of non-essential goods. Outside the essential areas of healthcare, education, housing and infrastructure, public spending was tightly controlled. Prices and wages were also tightly controlled, in order to control inflation.
Ultimately, Brits sacrificed any short-term economic relief for long-term stability and growth.
Fast forward to today and there are clear similarities. For one, today’s Labour government received a pretty dire economic inheritance from the previous Conservative government. And Labour is hell-bent on proving their worth by taking a page out of Attlee’s book of frugality.
The recent spending audit clearly showed that Reeves’s tenure as Chancellor will be extremely mindful of public finances. Highlighting that the Treasury had discovered a £22bn spending ‘black hole’ left by the Conservatives, Reeves laid out short-term spending cuts, including scrapping the Winter Fuel Payments for pensioners not receiving means tested benefits, removing the cap on social care costs and cancelling spending on “non-essential” consultants for ministers, to help plug the hole.
New taxes were also rolled out, with the removal of VAT exemption for private school fees starting in January 2025, a new residence-based tax to replace the non-domiciled tax status from April 2025 and an increase in the windfall tax for oil and gas companies to 3% from November, making the headlines.
Whilst Reeves’s announcements didn’t make up the £22bn budget hole, we can be certain that more tax rises and spending cuts will occur in her Autumn budget.
Clearly, Reeves is trying to exude economic prudence, and well, it isn’t just for political reasons. Labour governments of the past have had to deal with immediate sterling crises, caused by markets and bankers alike fearing that a Labour government will impose socialist policies upon the masses. Gordon Brown’s first day as Chancellor sought to undo this by giving the Bank of England independence, reassuring the markets in the process. Having planned for years knowing what the worst-case scenario could look like and being backed by significant political capital following Labour’s stunning victory at the recent general election, I am in no doubt that Reeves has always planned to show financial restraint upon taking power, enacting policies that try to discourage any kind of crisis in the markets.
But there have also been promising signs of a refocus towards policies that foster long-term economic stability and growth. The loosening of planning laws will help to spark a new house-building revolution throughout the country. Investment in more green renewable energy sources is being encouraged through the establishment of GB Energy. Nationalisation of the railways is widely expected, ending the calamity of the franchise system that has wreaked havoc upon our sanity and bank accounts.
Reeves’s message of economic prudence, mixed with laying the groundwork for more long-term macroeconomic policies is a breath of fresh air.
And while there are similarities between the problems facing today's Labour government and the post-war Labour government, these are much changed times. The financialisation of our world means that our macroeconomic policies instil confidence within the financial markets. Rationing, wage control and import restrictions are clearly not fit for the globalised world we live in today. Attracting private investment is also badly needed, something which the Conservatives failed to deliver.
However, creeping levels of extreme poverty and economic inequality in our country, which have been exacerbated by the pandemic and the subsequent cost-of-living crisis, also need to be addressed urgently. Recent violent disturbances in Harehills, Rochdale and Southport, as well as rioting by far-right protesters across the country reflects the failure of successive governments to tackle growing levels of poverty. And whilst extremists from all communities have tried to hijack the unrest through rioting and thuggery, there is a growing disconnect between people who are really feeling the bite of the cost-of-living crisis and our elected politicians. The Labour Government needs to make tackling poverty a high priority, and fast, if they are to have another crack at rebuilding ‘Jerusalem’, with a blueprint of what it once was.
Image: Number 10/Flickr
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