Why Welfare and Nationalisation Worked After 1945

Labour & Trade Union Review Statement

How did Labour “afford it” in 1945?

Speaking at the Scottish Labour conference Tony Blair explained to delegates that they had to realise that the renationalisation of the utilities could not be afforded and that the ‘resources’ would be better spent on education or health. This has been the chief Blairite argument for failing to back up attacks on the privatised utilities with action that would convince the public that a Labour administration would be significantly different in its approach, as details of a different regulatory regime had not yet emerged

The plea “we can’t afford it” affects all areas of New Labour’s thinking. It must do. It is the low tax party. It is the party of balanced budgets.

At the time of writing there is an internal debate between Blair and Prescott and Clare Short and Brian Wilson about what practical effect the commitment to “public ownership and public accountability” for the railway system has. Brown and Blair have both said in the past that this does not amount to nationalisation. Prescott has said that Labour will buy back a controlling interest in Railtrack. They have had years to decide what their position on this is. Why did the great Clause 4 debate not result in a policy emerging?

A principled stand would have permitted them to influence the conduct of the sell-off, as many people in the Labour Party realised. Some months ago Angela Clifford (L&TUR no. 46) attacked New Labour for their lily-livered approach to the fragmentation of what was previously one of the most efficient railway systems in the world. She demonstrated that the talk about not being able to afford nationalisation was the specious nonsense of people who did not know the difference between a household and a society; people who did not know how to behave either as socialists or capitalists. They talk about wanting “investment” but regard public ownership of utility and railway assets as a simply a “cost”. She went on to suggest that if a principled stand was taken before the franchises were sold potential investors could have no cause for complaint if their shares were replaced with interest bearing bonds. It is now too late for that.

In what sense will having a railway system which is a paradise for lawyers and accountants and management consultants “save money”? Is it really only a question of money? This lack of courage (and sense) is made all the more galling by the fact that Labour mounted an extremely effective campaign against the absurdities of railway privatisation led by Brian Wilson.

Britain is three times richer than it was in 1950. It was Attlee and Dalton and Bevin and Bevan who couldn’t afford it. Having recklessly got Britain into a war which it was ill prepared to fight Churchill was willing to do anything to cling on until the Russians and Americans were able to come to his rescue. Six years of total war left Britain devastated and mortgaged up to the hilt to the U.S.

Britain had acquired overseas debts of £3.5 billion. The ’45 government was faced with a chronic shortage of dollars. It was faced with a chronic shortage of fuel. 1947 was one of the coldest winters this century. 500,000 houses were destroyed in the Blitz. 250,000 were badly damaged. Rebuilding them was hampered by the lack of manpower. It took time to demobilise thousands of soldiers and sailors and airmen. The economy had to be shifted from a war to a civilian orientation. Britain still had major overseas commitments. It was responsible for governing part of occupied Germany. It had troops in Egypt Libya Cyprus, Somaliland, Sudan, the Far East and Jamaica. Britain was a superpower and had a global Empire

The ’45 government nationalised the railways when there were tens of thousands of miles more track than there are now Obviously a more clear thinking Prime Minister than Atlee would have realised that we couldn’t’ afford it. In 1945 the Bank of England was nationalised. In 1946 the first health system in the Western society to offer free medical care to the whole population on demand was introduced. We definitely couldn’t t afford that. 35 000 new teachers were trained and 928 new primary schools were built to accommodate the baby boom (who when they grow old and retire the country won’t be able to afford ) In 1946 the Industrial Injuries Act freed working people from the arbitrary and tightfisted compensation of private insurers. In 1949 Legal Aid was introduced. We couldn’t afford either of these. In 1948 the electricity industry was nationalised. In 1949 the Gas Industry was nationalised by Pete Mandelson’s grandfather.  (I won’t even suggest that these should be returned to the state because it’s pretty obvious what the response would be.)

In 1946 the National Insurance Act was passed. Without the humiliating means tests of the 1930s.  This mainly provided for the old since there were very few unemployed people. This continued to be the case for the next 30 years. But we arc wiser now and realise that it was but a foolish delusion.  Last year Tony Blair stated it was self-evident that combating inflation is the number one priority.  Last month on Question Time, John Prescott seemed to have a different view. Mass unemployment is not inevitable he said.  The ’45 Labour government had brought full employment. Malcolm Bruce intervened.  It is not possible to create a new party and then take credit for the achievements of the old one he argued.  Prescott had nothing to say to that.


This article appeared in April 1996, in Issue 53 of Labour and Trade Union Review, now Labour Affairs.  You can find more from the era at https://labouraffairsmagazine.com/very-old-issues-images/ and https://labouraffairsmagazine.com/very-old-issues-images/m-articles-by-topic/.