David Gauke: It was worse in the 1970s but it can certainly feel like history repeating itself

David Gauke is a former Justice Secretary and was an independent candidate in South-West Hertfordshire at the 2019 general election.

When it comes to writing these columns, it is proving to be surprisingly difficult to escape the 1970s.

My previous column made the case that Nigel Farage and Reform lack the coherence, competence and character of Mrs Thatcher’s Tories in opposition to the Wilson/Callaghan governments. This week, my thoughts have been focused on the period once again, listening to the excellent The Rest Is History podcast series on the era.

The cheerful message from the series is that, if you think things are bad now, you should have been around then.

A Conservative Government had lost office having obviously been unequal to the task of turning the country round, but the incoming Labour government had proven to be disastrous.  Control of public spending had been lost as the Government caved in to union demands.  The confidence of the financial markets was, at best, fragile but large parts of the Labour movement were unwilling to accept that this need be a consideration.  A sense of national decline was pervasive.

Alright, maybe matters are not so different.

But the mid-70s really were a grim time.  Inflation peaked at 26.9 per cent in 1975.  Our businesses were increasingly uncompetitive.  The trade unions were both militant and powerful.  And such was the state of our public finances that the country had to go “cap in hand” to the International Monetary Fund for a bailout to prevent a collapse of the pound.  Understandably, the IMF imposed conditions, including substantial cuts in public spending.

No one worried about high levels of net migration.  For the first time in centuries, our population was falling in the mid-70s as many of the best and the brightest looked to move elsewhere.

Our international reputation was dismal. “Britain is a tragedy”, the US Secretary of State, Henry Kissinger, told President Gerald Ford at the beginning of 1975.  “It has sunk to begging, borrowing, stealing until North Sea oil comes in… That Britain has become such a scrounger is a disgrace.”  (Admittedly, current US politicians say disobliging things about us, but Kissinger was a serious person.)

The podcast series, based on Dominic Sandbrook’s definitive and entertaining account of the period – Seasons in the Sun – tells the tale of decline and delusion.  It is particularly, and rightly, harsh on Tony Benn.  Benn ultimately became seen as something of a national treasure, renowned for his charm, intelligence and principled approach to politics.  He even had his cheerleaders on the right, infatuated by his views on Parliamentary sovereignty and the European Union.  But as a powerful Cabinet minister, he was a complete menace.

When faced with the IMF crisis, Benn proposed rejecting the deal and argued for turning the UK into a siege economy.  Imports should be restricted, he argued, without any acknowledgment that this might have consequences for exports, let alone the inflationary and productivity implications of blocking foreign competition.  He not only supported calls for the nationalisation of the 25 biggest companies in the country, he thought the Government was honour-bound to implement the policy because that was the motion passed by the Labour Party.  And he was an advocate of funding workers’ collectives, such as one that produced the unlikely combination of car parts and orange juice (it was not a success).

Benn did not prevail, although his position of prominence in the Government did a great deal of damage to the country’s credibility with the markets.  He was also thoroughly tiresome to deal with.  Cabinet meetings took hours as Benn’s absurd proposals and policies were treated with undue respect by his colleagues.  At one point, he suggested that the Cabinet take a moment’s silence in memory of the recently deceased Mao Tse Tung.  When Prime Minister James Callaghan refused to honour one of the world’s most evil men, Benn took umbrage.

There are Labour heroes from this period.

Callaghan was an impressive figure and, as Margaret Thatcher privately acknowledged, might have made a very successful Prime Minister in other circumstances.  Denis Healey had spent recklessly when first appointed after the February 1974 General Election (in the certain knowledge that another election would shortly follow) but stood up bravely to the Left thereafter.  The move towards greater fiscal responsibility and the determination to bear down on inflation began in 1976, not Thatcher’s election in 1979.  Even so, controlling trade union power, returning nationalised industries to the private sector, allowing inefficient businesses to go to the wall, and reforming our tax system to encourage enterprise was beyond them.

Defenders of Britain in the 1970s will argue that, despite the inflation and various currency crises, living standards rose faster than today.  This is true, albeit the crises were getting bigger and progress was not looking sustainable.  In relative terms, we were perceived as being the sick man of Europe, falling behind Germany, France and Italy.

Now, our problems are not unique.  Germany and France certainly have their difficulties.  Inflation is picking up, but a rate of 3.3 per cent does not compare to where we were.  The tax burden is high, but we do not have marginal rates of 83 per cent on earnings and 98 per cent on investment income.  And although there is a Benn in the cabinet, Hilary matches his father in charm and intelligence but not in political loopiness.

There is a nagging worry, though, about studying the power of the Left in the 1970s.

That strand of thinking has not been entirely eradicated.  We saw it with the election of Jeremy Corbyn as Labour leader in 2015 and his relative success in 2017.  Now we have the rise of the Greens.  The precise policies may have changed (Benn’s siege economy idea now sounds closer to the Trumpian right), but Zack Polanski’s flirtation with Modern Monetary Policy is another left-wing attempted solution to ignoring market discipline.  Imposing a maximum 10 to 1 ratio on how much an employer can pay its highest earning employee versus its lowest earning employee is another example of a crackers policy that would have appealed to Benn.

Nor are ludicrous economic ideas wholly the preserve of the Greens.

The SNP has flirted with price controls for food, while Andy Burnham – who could be Prime Minister within months – is dismissive of the bond markets and speaks warmly about rent controls, a policy that has a long and disastrous history.  Even the current Government, which supposedly opposes rent controls, has moved towards them in the ill-conceived Renters Rights Act.

Here is the point about the comparison between the 1970s and today.  We know now that the country got out of its 1970s malaise thanks to a government committed to fiscal discipline and a market economy.  But there was an alternative agenda, advocated at the Cabinet table that had much support from Labour’s grassroots, which would have taken the country in the opposite direction.  We also know that it did not succeed, that the “sensibles” like Callaghan and Healey retained control.

But is it inevitable that when a country is in difficulty, a government up to the task will be elected?  As I have argued before, Reform would not be that government.  And when it comes to the Left, is it inevitable that the “sensibles” retain control?  Given the mess that the current Government of “sensibles” has got itself into, the rise of the Greens, and the growing strength of left-wing populism more generally, I am not sure it is.

Were matters worse in the seventies compared to today? Yes.  Will matters resolve themselves as positively?  Not necessarily.