The British Disease

The ‘trade-union problem’ has dominated British politics for the last two decades. It has been the downfall of three governments – Wilson’s in 1970, Heath’s in 1974 and Callaghan’s in 1979. During that time, full employment and free collective bargaining became at last incompatible, and the former was in effect abandoned in 1968. As the union problem grew more acute, the relative decline of the British economy accelerated – although which was chiefly responsible for the other is less obvious. Successive governments attempted to intervene in collective bargaining with incomes policies, or to regulate the industrial relations system at law, but at the end of two decades both strategies were in disrepute. The problem seemed more intractable than ever.

During those decades Britain became more famous for its trade unions than for anything else. Strikes, demarcation disputes and tea breaks replaced cricket and the changing of the Guard as the popular stereotypes of the British way of life. As the crisis deepened, we became the butt of the kind of mocking contempt we had reserved for the French during their Fourth Republic. Typical of the verdicts passed on Britain’s slow industrial death was the Brookings Institution’s ‘bloody-mindedness syndrome’. The ‘union problem’ had become a cultural deformity.

For some of this time the British, or at least some of them, imagined themselves to be blazing a trail for advanced industrial society. George Brown’s incomes policy and National Plan and, later, the Social Contract were claimed as major socio-economic innovations – British firsts. The Manchu Empire had suffered similar ethnocentric delusions and had published maps which showed it to lie at the centre of the world; the British, for their part, did not seem wholly to grasp that in other countries things were ordered differently. ‘Keep the law out of industrial relations,’ said the conventional British wisdom, but nearly everywhere else industrial relations were conducted within a legal framework. ‘Wages don’t cause inflation’ was another superstition, promulgated by trade-union leaders and monetarists alike. Trade-unionism – British-style – was taken for granted like the weather: something about which there was nothing to be done except complain. Accused of drinking champagne at breakfast, Noël Coward asked: ‘Doesn’t everybody?’ Accused of committing a form of national suicide, the British in the Sixties and Seventies merely raised their eyebrows, as if this was the way of the industrialised world. Wasn’t everybody?

Sir Denis Barnes spent his entire civil service life (apart from one brief early interlude) at what was the Ministry of Labour and is now the Department of Employment. He rose from being Ernest Bevin’s private secretary to Permanent Under-Secretary. He observed the whole story of governments’ relations with the trade unions during the post-war period from the inside. During the most fateful of those years, the ones which saw ‘In Place of Strife’, the Industrial Relations Act of 1971, and the road to confrontation in 1974, he was the hardened senior adviser of Ministers and Prime Ministers.

His book is the story as told from the centre. It does not attempt to write the history from the bottom up; it is about trade unions, not workers. Nor does it delve at all deeply into the unions themselves as bureaucracies, or into the structures of collective bargaining; it is an account of what went on between government and unions, and what each was trying to do – the story, as it comes out, of their deteriorating relations. Nor is it an insider’s account in the sense of spilling the beans. Sir Denis is properly discreet about the beans, in the manner of a retired mandarin, and one suspects that where he may have been tempted to say a little more, the weevils of official secrecy have been at his manuscript. This is a pity, for although the subject is generally a grey one some of the characters – Brown, Castle, Wilson, Woodcock, Jones – had colour and some of the events contained high drama. The book does not quite do justice to the sense of desperate exasperation which overcame everyone I know – including Sir Denis – who was obliged during those years to grapple with the ‘union problem’. It is nevertheless of importance and great interest. It shows that from the early Sixties the relationship between government and trade unions underwent a systemic deterioration. It was not a matter of governments expecting too much and making mistakes, but rather of basic incompatibilities of goals as well as of the means of achieving them. The problem became more and more intractable, and Sir Denis’s calm and precise narrative supports the unmitigated pessimism of his conclusion.

He begins with a sketchy recapitulation of the early history: the legislation which placed the industrial relations system (fatally, we may now think) largely outside the law; the industrial-political marriage (no less far-reaching in its consequences) of the unions and Labour Party; and the calamity of the General Strike, which prolonged the oppositional relationship between unions and government. He deals briefly also with the period from 1940 to 1960. The war brought the unions into a new relationship with government – a relationship embodied in the figure of Bevin – and the partnership between Cabinet and General Council continued throughout the Attlee Government. However, the seeds of future trouble were already visible. Full employment strengthened immensely the hand of the trade unions in collective bargaining; at the same time, full employment, together with the wage restraint which had to be its concomitant, was undermining the authority of the union leadership and greasing the elbow of rank-and-file militancy.

In the Fifties these implications of full employment were, Sir Denis reminds us, a perennial theme. Concern about inflation grew, and from 1957 the search for a pay policy intensified. Comparability became more and more of a problem; Sir John Cameron, adjudicating a railway pay claim, declared that the nation ‘having willed the end, the nation must will the means’; it was not an answer any government could for long accept. Government’s increasing concern with wages was accompanied by the emergence of a new, more left-wing trade-union leadership of which Frank Cousins was the champion. 1961 brought the Selwyn Lloyd ‘pay pause’ (and in its wake the return to planning, or ‘Macmillan Socialism’), and the ‘trade-union problem’ in its modern form can usefully be dated from then. Sir Denis puts his finger on the paradoxical dilemma which faced the policy-makers: incomes policy was an instrument intended to curb the bargaining power of the unions, yet it was incomes policy which now caused their memberships to increase for the first time since the war, which generated an identity of interest between professional groups – public servants, white-collar workers – and the more traditionally organised manual workers, and which was, in the course of time, to enhance the political power and influence of the trade-union movement more than anything else.

Sir Denis takes up the story in more detailed form from 1964 onwards. With the election of a Labour Government came the first attempt to re-create the kind of partnership with the unions which had served the Attlee Government so well: but as economic difficulties grew, voluntary co-operation degenerated (in 1966) into the first attempt to impose a statutory pay policy. Then, after the debacle of ‘In Place of Strife’ and the 1970 election, we had the Selsdon experiment and the first attempt since 1912 to alter fundamentally the position of the unions in law; the famous U-turn of 1972 (following a humiliating defeat by the miners) led to the Chequers talks – another essay in statutory incomes policy – and the eventual fall of the Heath Government (again at the hands of the miners).

Three themes run through this narrative account. One is the increasing drama which surrounded the question of pay policy. Another is the politicisation of the industrial relations system itself. The third is the weakening authority of government, not least as the consequence of chronic economic difficulties. Incomes policy brought the government into direct conflicts with unions over wages; as strikes against the government’s policies became more frequent and serious, ‘it became politically impossible for ministers to ignore the issue of trade-union power’; as trade-union power was called into question, so the lines between industrial and political activities became more and more blurred. The government was greatly enfeebled by the devaluation of 1967 and the failure of its economic policies. By 1970 both the attempt to regulate collective bargaining with incomes policy and to curb trade-union powers by law had been abandoned.

The problems inherited by the Heath Government were considerably worse than those which had faced Labour in 1964. Sir Denis is reserved about his own role in those years but, if we read between the lines, it is plain that he was most sceptical of the attempt to open a new chapter of pay policy in 1972 and, later, opposed to the course of confrontation on which the Government set itself with Phase Three, and held to in spite of the transformation of the international economic situation by OPEC in 1973. The ambitious character of the elaborate incomes policy which was being put together in Whitehall (one may suspect that the late Lord Armstrong is the chief target of Sir Denis’s criticism), combined with the Prime Minister’s characteristic determination, was, he judges, ‘politically disastrous’. It was the ‘inflexibility’ of this policy which was to set the Government on a collision course. Sir Denis hints strongly that he would have used the energy crisis as an excuse to take avoiding action. But it was the Armstrong view which prevailed. By January 1974 (with Sir Denis removed from the Department of Employment) it was too late. Heath was now on a hiding to nothing. The choice was between a humiliating and grossly inflationary capitulation and confrontation together with almost certain defeat. He had been misled, Sir Denis suggests, by the unions (who had never intended to come to an agreement with a Conservative government), and then trapped into a statutory pay policy.

The final sections of the book are written with a freer hand and are for that reason the best. Sir Denis still knew pretty much what was going on but, from the sidelines, feels more able to say what he thinks. He regards the Social Contract as marking an important change in the unions’ attitude towards government: by extending the scope of collective bargaining, they set themselves more openly political goals. He compares the crisis over ‘In Place of Strife’ with the crisis of 1931, and Jack Jones’s role to that of Bevin, who determined that the unions would in future keep the Labour Party under firmer control. The result this time was the Liaison Committee which gave birth to the Social Contract. In the aftermath of the Heath debacle, a return to pay policy was a most dubious political and practical proposition. Sir Denis finds it impossible to believe that Ministers (Michael Foot?) seriously supposed that the unions would be capable of voluntary wage restraint. So he at least was not surprised when this ‘trade-union pay policy’ resulted in 31 per cent wage inflation between July 1974 and July 1975.

He concedes that the 5 per cent policy which ensued – Jack Jones’s policy – was ‘remarkably effective in terms of wage restraint’ and achieved ‘the most severe cut in real wages in twenty years’. But, Sir Denis argues, ‘like the standstill and the period of “severe restraint” in 1966-67, it was in a sense wasted effort.’ That is, inflation soon gathered pace again. He dates the demise of the Social Contract from 1976, which was the year of the worst sterling crisis since the war. Agreement between unions and government became impossible. The partnership was broken. In 1979: ‘For the first time the unions openly used their industrial power to wreck the policy of a Labour Government.’

Sir Denis peers into the future with the aid of three bleak assumptions. There will be no change in the two-party system. The relationship between each of the two parties and the trade unions will not change. The trade unions themselves will not change: that is to say, the TUC will continue to have little authority over its affiliates, unions will continue to compete for membership, and union leaders for power within the Labour Movement. On the basis of these assumptions, he predicts that the unions will continue to insist upon free collective bargaining, will demand changes in the law to assist them in this purpose, will pursue ‘syndicalist objectives’ – through public ownership, ‘industrial democracy’ and planning agreements – and will seek to increase further their political power. In the final paragraph of the book Sir Denis wonders, gloomily, about his forecasts and assumptions. ‘The continuation of the existing relationship between governments and the trade-union movement in a situation of continuing economic failure could have unpredictable political consequences. These may compel changes in the trade-union movement itself, the party political system in which it plays a key role, the relations it has with governments and the legal framework within which it operates.’ Although what he seems to have in mind is some sort of political crisis or breakdown, it is difficult to disagree with the logic of his conclusions.

Since his book went to press, there have been some signs of a check to trade-union power. Membership is falling, especially in the public service unions; militant leadership has been in some cases spurned; the ‘economic whip’ may be having some effect. Whether the balance of power can be redressed it is too early to say. The massive unpopularity of trade unions, not least among their own members, suggests that their legal immunities and privileges are not indefinitely sustainable, and yet during the period covered by this book we have seen the trade-union habit of mind and behaviour spread almost across the nation. Professional, technical and managerial groups have organised themselves and engaged in – or at least threatened – ‘industrial action’; essential services have been withdrawn and humanity, occasionally, forgotten; hospital consultants have become ‘militant’ and the language of Dave Spart has taken on a middle-class accent. We are all trade-unionists now.

There is also the question of the economy. Sir Denis’s book only touches obliquely upon the subject which occupied almost as much ministerial time in the Sixties and Seventies as the restraint of wages – the promotion of productivity. It was time spent to equally little avail. Productivity in manufacturing has been falling since 1973. Poor productivity has no single cause and has been a reason for concern for at least seventy years. Compared with other countries, the record of deterioration is appalling. Low productivity and low wages are both the fruits of past decline and the seed corn of future decline.

It would seem improbable that the economic policies now being attempted will attack the cultural and historical roots of the wage and productivity problems. The structure of British trade unionism as modelled by a hundred years of history is singularly inappropriate for the task of co-operation in wealth creation but is brilliantly devised for the purpose of generating inflation and impeding production. Attitudes have formed hard over the years and have bred despair in management and a fatalistic negativism in workers. It is this helpless imprisonment in the ancient and historic edifice of the Labour Movement which is the most distinctive cause and symptom of the ‘British disease’.