The post-war consensus is a term used to describe the general agreement between the two main parties in several important areas of policy, in the aftermath of the second world war. Its foundations were based upon the coalition government, led by Winston Churchill, of the second world war, when the parties united in the battle against Hitler. After the war, people hoped for a new and better beginning. When the Labour Party won the 1945 general election under Clement Atlee it introduced changes across several areas of policy, including foreign, social and economic. Although Labour warned throughout several of its election campaigns that the Conservatives would return to their inter-war policies if elected, these claims were untrue, and the reforms that Labour had introduced were not rejected by subsequent Conservative governments.

The consensus was based, partially, on the acceptance of Keynesianism. John Maynard Keynes had identified unemployment as the key social evil, and the parties pursued policies that they hoped would bring about full employment. Keynes also promoted a mixed economy. Once in office, Atlee’s government proceeded to nationalise thus far private companies. Major manufacturing industries, however, remained in the private sector.

The Labour government also introduced the welfare state. This included the setting up of the NHS in 1948, and an extension of free education, public housing, sickness benefit and family allowances.

During the post-war consensus, the foreign policy of the two main parties was similar. The foreign policy was shaped by Ernest Bevin, Labour’s foreign secretary. When Churchill came into power in 1951, Anthony Eden, his foreign secretary, perpetuated Bevin’s policies.

Bevin based his policies on the assumption that Britain was a great world power. She ranked herself as the third great nation of the world, after the USA and the USSR.

Although Germany, and Japan had been defeated in the war, Britain still had a large army. France was in no position to rival Britain. Britain had also received great Kudos because we had stood against Nazism alone in the first years of the war.

Our Empire, although it was diminishing, was still huge, covering a quarter of the world surface, and world population. The two parties agreed that the Empire was of great importance and both sought to maximise the area. Britain withdrew from countries that she thought that she could not hold onto to. Agitation in India, Pakistan and Bangladesh in 1947, and in Burma and Ceylon in 1948, led Britain to believe that it was better to allow them their independence than to struggle to withhold them. The cost outweighed the benefit.

As the Empire faded, we tried to negotiate co-operation to maintain a self governing commonwealth, and our world power.

Labour also though that Britain should also have its own atomic bomb. Under the Manhattan Project, Britain and the US co-operated to create an atomic weapon. Although British scientists had helped, the US stopped further co-operation in 1945. It was not until 1952, when Churchill was back in power, that we tested our first nuclear bomb, in the Australian desert. By this time, the Americans and the Russians had both exploded hydrogen bombs, so we started development of our own.

Bevin also based his foreign policy on the belief that an active British foreign policy was vital to world peace. To these ends, Bevin involved Britain in a fight against communism. Britain also maintained a number of overseas bases, and equipped them with a British atomic bomb.

Britain had a special relationship with America, as we had been allies in the second world war. We relied on America to lend us money in 1941, because the amount of money spent on weapons had bankrupt. Lend-Lease, as it was called, confirmed the special relationship between America and the UK. Bevin believed that it was necessary to involve the USA in the containment of communism. US bombers were encouraged to base in the UK from 1946 onwards. From 1949, the US had nuclear bombers based in this country.

In 1948, when the Russians blockaded Berlin, the UK co-operated with the US to remove the blockade.

In 1949, NATO was set up with Bevin’s involvement. It was designed to contain communism.

By 1954, the fact that Britain was pursuing these policies meant that spending on defence accounted for 8% of GDP. Britain was spending more per head on defence than America. This trade off between guns and butter led many to argue that Britain was spending too much money on defence and not enough on domestic products and investment.

Both parties also agreed that Britain should play no part in European integration. Although there were moves by the Europeans to forge closer ties with one another, Britain remained aloof.

After 1952, the Schumann Plan for a European Coal and Steel Community led France and Germany to integrate their coal and steel communities, the idea since it made it impossible for there to be war between France and Germany.

The Messina Conference in 1955 was a preliminary discussion about European integration. It led to the creation of the European Economic Community by the Treaty of Rome in 1957.

Britain did not feel that it needed to co-operate because it was a world power in its own right. Britain did not want to compromise its national sovereignty, and was suspicious of the federalist aspirations of the founders of the EEC. We felt that we were economically and politically closer to the US and the Commonwealth, and that we should remain separate from Europe.

The war had created changes in British society that prepared Britain for the development of a post-war welfare state. There had been a shift in opinion during the war, in favour of the welfare state. People believed that they deserved to be looked after by the government. The wartime coalition government had given Labour influence in parliament. Labour was a radical party, and it argued for the creation of the welfare state.

There was a massive extension ion the role of the government in all aspects of human life. The government used its power to allocate the distribution of labour and resources. There were also price controls and rationing.

The blueprint for the welfare state was set out in two key documents. These were the Beveridge Report of 1942, and the White Paper on Employment Policy in 1944.

William Beveridge investigated social welfare and identified idleness, want, disease, ignorance and squalor as the five evils in society. Beveridge said that the five were inter-linked.

In the White Paper, Keynes said that it should be the government's role to maintain “a high and stable level of employment” as one of their “primary aims and responsibilities.”

The Labour government adopted all of the policies that Beveridge and Keynes had suggested. They promised to provide “care from the cradle to the grave.”

The government had committed itself to post-war reconstruction. This was signalled by the 1944 Education Act, and the introduction of family allowances in 1945. In 1944, White Papers entitled ‘A National Health Service,’ which envisaged a free and comprehensive health service, and ‘Social Insurance,’ which accepted virtually all of the Beveridge report and was soon followed by the establishment of a new Ministry of National Insurance in 1944, signalled the government's intentions.

The government’s economic policy during the post-war consensus is sometimes known as Butskellite, because of the continuation of policy by successive Chancellors of the Exchequer Rab Butler and Hugh Gaitskell. The general theme of post-war economic policy was closer government involvement in managing the economy. The creation of a mixed economy was achieved by a series of nationalisations by Atlee’s government which were retained by the Conservative governments with the exception of steel and road haulage. Labour said that these industries should “belong to everybody, not just a few.”

The government took on responsibility of managing the economy, by using fiscal and monetary policy. Successive Chancellors of the Exchequer, both Labour and Conservative, manipulated tax rates and interest rates in order to bring about changes in the economy. The government was able to control economic growth, consumer spending and employment.

The government allowed businesses, represented by the CBI, and the Trade Unions, represented by the TUC, involvement in decision making, in order to avoid damaging industrial conflict like that which had occurred in the 1920s. The government thought that corporatism was a sensible idea because if the TUC and the CBI were consulted there should have been no reason for any unrest. Corporatism is sometimes called tripartisanship because it assumes the involvement of three bodies, the government, the CBI and the TUC.

By the 1950s this economic policy was working. Unemployment for the most part remained below 300,000 until into the mid 1960s, the economy boomed in the 1950s, and the balance of payments was very healthy.

The period following 1955 saw the consensus under considerable strain. There was a decline in the comparative position of the British economy and in Britain’s international status.

This period saw Britain’s collapse of the world role, the displacement of the Commonwealth by Europe, and increasing reliance upon the USA. Britain was very slow to realise what was happening and still spent huge amounts of money on defence and overseas commitments.

There was a flood of decolonisations. Seventeen colonial possessions became independent between 1960 and 1964. By 1979, very little of the Empire remained.

Some historians attribute the demise of the Empire to the Suez affair in 1956. Gamal Abdel Nasser, the Egyptian leader, nationalised the Suez Canal, which was owned by British shareholders. The British wanted to recover the canal, and overthrow Nasser, who was encouraging unrest in Africa. Britain colluded with the French and the Israelis to launch a joint military expedition on Egypt. However, international opinion was against them. The US put pressure on sterling forcing Britain to withdraw, humiliated, before their objective had been achieved. This dealt a ruining blow to Britain’s self-perception as a great world power.

At the same time, the French and the Belgians were withdrawing from their colonies. President de Gaulle decided to liquidate French colonial entanglements in North and West Africa after 1958, and Belgium withdrew suddenly, from the Congo in mid-1960. These decisions greatly influenced Britain.

Britain’s economy was flagging due to over-expenditure on defence and under-investment in other areas. British governments were well aware of the problem. In 1956 Harold Macmillan, as Chancellor of the Exchequer, remarked that “for every rifle our comrades in Europe carried we were carrying two. If we were to follow the European example, we could save £700 million a year. If only half of these resources were shifted into exports the picture of our foreign balances would be transformed. If the other half were available for investment, there would be less critical comment about our low rate of investment compared to many other countries.”

However, many politicians remained committed to a world role for Britain, as indicated by the search for a genuinely independent British nuclear deterrent. The British attempt at real nuclear independence ended in the cancellation of the surface-to-surface missile ‘Blue Streak’ in 1960, and the decision to purchase a new generation of nuclear weapons, launched from Polaris submarines, from the US.

Denis Healy as Defence Secretary finally managed to wind down military attachments ‘East of Suez,’ with the 1967 promise to withdraw British forces from Singapore and Malaysia.

The notion of Britain, and its Commonwealth, as a world power was at an end. British trade with the Commonwealth was in decline, while exports to the EEC grew rapidly. In 1960, Macmillan decide that Britain should join the EEC as it became evident that the EEC was succeeding. His motives were predominantly political but were also economic. The USA wanted us to join as a counterpoise to France and Germany, and to continue the Atlantic partnership. It was also apparent that our rate of economic growth was slowing, and was lagging behind that of our European competitors.

However, our attempts to join the EEC in 1962 and in 1967 were both rejected by de Gaulle who claimed that Britain was not truly European. He blocked our entry due to animosity about the war between the French and the British, and also because France was unwilling to share its leadership of the EEC with Britain. De Gaulle also claimed that Britain was too close to America. This last claim contained some truth because Britain’s application by Macmillan in 1962 was made in the aftermath of the negotiation of the Polaris deal with President Kennedy. The 1967 application came in the wake of a secret deal by which the Americans agreed to support sterling, thus enabling the Wilson government of the time to stave off devaluation of the pound, in return for Britain retaining its East of Suez commitment.

President de Gaulle in 1970, the same year as the europhile Conservative, Ted Heath, came into power. Heath finally managed to negotiate Britain’s entry to the EEC in 1973, although on rather disadvantageous terms. Britain provided about one-fifth of community income, while at the same time, because the EEC’s payments were skewed towards farm support in the Common Agricultural Policy, we only received back under one-tenth of EEC spending.

However, a major change had occurred in Britain’s external relations which had become increasingly more European orientated.

The consensus on the welfare state between the two main parties continued after 1955, although it was becoming increasingly expensive. The consensus between the two parties in education and housing was especially strong. Labour was moving towards comprehensive schools, a policy which was continued under the Conservatives after 1970, even though their preference for selectivity made them unlikely pursuers of such a policy. In fact, Margaret Thatcher closed down more grammar schools than any other Education Secretary since the war.

Both parties moved increasingly towards means testing in their social security policies, although for Labour this was a regrettable move from universality. Resources became more focused upon the people that really needed them.

There was little change in the balance of the mixed economy. Although road haulage and steel had been denationalised by the Conservatives in the 1950s, and Labour had returned steel to public ownership in 1967, these were only minor changes and there was a broad consensus between both the Labour and the Conservative parties. After 1970 Labour nationalised aerospace and shipbuilding and formed the British National Oil Corporation in order to influence the exploitation of North Sea oil. The nationalisation of Rolls-Royce by the Conservatives in 1971, and the acquisition of a majority share-holding in British Leyland in 1975 by Labour, were prompted b the desires of governments to ensure the survival of major ailing companies.

However, by the 1970s the economic consensus between the two parties was failing badly. Inflation had risen from between 2-3 per cent in the 1950s, up to between 4-5 per cent throughout the 1960s, to 7 per cent in the early 1970s, reaching a staggering 23 per cent by 1975, after the quadrupling of oil prices by OPEC. Unemployment, which had averaged 335,000 in the 1950s and 447,000 in the 1960s, increased sharply after 1970 to reach an annual average of 1.25 million between 1974-9. Economic growth, which had averaged about 2.8 per cent per annum throughout the 1950s and 60s plummeted to a mere 1.4 per cent per annum between 1973-79. The term ‘Stagflation’ was coined to describe the combination of slow growth with both rising inflation and unemployment, something which Keynesian economists had said was impossible.

The response of the government was to co-operate with employers and unions through corporatism, to introduce incomes policies, and to increase government intervention, in order to control inflation Employers were represented by the CBI, and employees through the TUC. The demands by workers for pay increases were highlighted as being the main reason for the high levels of inflation. This approach was symbolised through Labour’s ‘social contract’ with the unions, in which the unions agreed to voluntary restraint on wages in return for favourable government social and industrial policies. However, there was a distinct disadvantage in politicising industrial relations. The Heat government’s clash with the miners, and the Callaghan government’s battle with the public sector unions helped to bring about their downfall. The trade unions were very powerful throughout this period.

The consensus on economic management came under increasing strain, with new directions in economic policy being proposed by the Conservative New Right, and the Labour Left which developed the Alternative Economic Strategy. The welfare state was also coming under strain. In the 1950s it was expected that growth of the economy would enable welfare spending to rise without any need for an increase in taxation. As growth stagnated the government became under increasing pressure, and were desperately trying to fill the deficit in the PSBR. People still demanded more from the welfare state, and were increasingly angry about how much they had to pay in taxation. In 1955 the average family had paid only 3.3 per cent in direct taxes. By 1975 this had risen to about 25 per cent.

Rapidly rising inflation and unemployment, slowing economic growth and high and increasing levels of public expenditure and taxation led the Labour government to move away from Keynesian methods in the late 1970s.

Denis Healy refused to increase spending in his 1975 budget, instead initiating a new emphasis on the control of inflation as a new government aim rather than the maintenance of a high and stable level of employment. Dennis Kavanagh called this policy shift “a historic breach with one of the main planks of the post-war consensus.”

During the sterling crisis of 1976, the government adopted formal targets for the growth of the money supply as a way of reducing inflation. Labour also began using cash limits methods after 1976, to keep spending programmes within their budget. By restricting the money supply there is less money available to spend, and therefore less inflation. These monetarist policies were a radical shift from post-war consensus Keynesian methods of managing the economy, which had lost their credibility.

The late 1970s saw the end of the consensus. People had lost faith in the government’s ability as they became increasingly disillusioned. The decline in the persuasiveness of the post-war consensus was evident in the growth of anti-consensual ideas within both parties. The centre of British politics was in retreat, in the Conservative Party because of the failure of the Heath government, and in the Labour Party because of dissatisfaction with Labour’s record on welfare and the economy, and the rise of radical single issue groups representing feminists, blacks, gays and CND.

Governments had lost their political authority because of their apparent inability to reverse national decline. The public perceived that the government was controlled by interest groups, and was unable to deal with Britain’s long term problems of low productivity, outdated industry and over powerful unions. Wilson’s attempt at trade union reform in 1969 had been blocked by his own party while Heath’s industrial relations legislation had collapsed in a wave of industrial militancy. The breakdown of union reforms engendered a feeling of ungovernability, chaos and mounting public turmoil, resulting in the ‘Winter of Discontent’ in 1979.

The full range of policies known as Thatcherism were not in their entirety by 1979, they emerged during the course Thatcher’s administrations, but the economic project of ‘rolling back the frontiers’ of the state was there. Mrs Thatcher had no truck with consensus politics, and she set about to turn the post-war consensus on its head.

The reason for the decline of the British economy, and of the post-war consensus was explained by Cornelli Barnett in his book, ‘Audit of War.’ Barnett explains that the British economy and manufacturing industry were out of date. Our practices and our equipment were also superseded. Initially this was hidden because some of Britain’s main competitors, Germany and Japan, had been devastated in the war. As Germany and Japan began to re-equip their industries, with equipment far superior to that of British industry, our manufactures began to lose their appeal. Britain was no longer competitive. The failings of the post-war consensus had been hidden by the lack of competition, which had allowed Britain to become complacent, outdated and inefficient.

Barnett also communicated that education in Britain was too focused on Arts subjects. He claimed that the key subjects that are essential for a successful economy are science-based subjects.

Throughout the post-war consensus Britain had delusions of grandeur. Britain was arrogant to believe that she could recover her export markets which had been lost during the Second World War. She tried to spend too much to protect her precious Empire, and could not afford the consequences. Britain was no longer the great world power that it thought it was.