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Raymond Challinor

The Balance Sheet of the Labour Government

(March 1951)

From Socialist Review, Vol.1 No.3, March 1951.
Transcribed by Mike Pearn.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

In this period of housing shortage, rising prices, and industrial discontent, with the fear of unemployment and war ever present in our minds, it is hard to recall the enthusiasm and high hopes that accompanied the return of a Labour Government in 1945. Why has this mood changed? what has happened to make so many of the Labour Party’s supporters disillusioned and pathetic? Why is the Government confronted with continually mounting discontent on all sides?

Any attempt to answer these questions makes an appraisal of the Labour Government’s policy imperative. Even assuming that the confidant predictions of the Labour leaders have been fulfilled that the “peaceful revolution” of which Herbert Morrison boasts had already been accomplished, it would still be necessary to draw up a balance sheet. The success-story of the Labour government would then be a guide to the Labour Movements elsewhere where they still needed to struggle against capitalism and colonial oppression. For social transformations are not achieved by speeches. Neither are they achieved by hard world alone. They can only occur when a party understanding the economic processes operating in society takes full control and changes them.

Without this knowledge of the economic system every attempt to change the existing social order must fail. Any such attempt is as futile as that of a quack doctor attempting to perform a major operation without the benefit of an elementary knowledge of physiology, and, usually, will produce even more disastrous results! It was no accident that Lenin often stressed that without Socialist theory there can be no socialist practice, for theory is the motor of progress. When the theory is incorrect, the machine splutters, jerks and, eventually (as in the case of both the ILP and RCP) comes to a halt.

We must, therefore, pay meticulous attention to theory. The validity of each theory must be tested and re-tested, revised and improved in the light of further information. Basically, it should perform three functions:

  1. interpret past events in a convincing manner;
  2. provide a sound basis for current activity;
  3. and, lastly, give some indication along which lines trends are likely to develop.

The working class, in the course of its long struggle for better conditions and a new social order, has accumulated a vast store of experience – Marxism and revisionism – with Fabianism as the anglicised version of the latter. As the Labour Government bases itself upon Fabian theories and attempts to apply them, it is important that Fabianism must first be discussed.

Fabianism must be considered in conjunction with the period of capitalist expansion at the end of the last century when the theory was originally developed. Monopoly capitalism was gradually superseding private capitalism, and imperialism was beginning to emerge. Colonial exploitation and the discovery of fresh markets gave capitalism a period of relative prosperity. Class antagonism seemed to slacken, capitalist production expanded, and even the working class received a few crumbs of what accrued through this increased prosperity.

It is not surprising, therefore, that doctrines originating during this period were imbued with optimism. It was during that period, for example, that Herbert Spencer postulated his theory of the “inevitability of progress”. he envisaged mankind’s struggle as one against superstition and ignorance, which would eventually succeed through the dissemination of knowledge. Final victory would be achieved when the world was populated by walking editions of the Encyclopaedia Britannica!

Fabianism, a child of this age too, was equally naïve, equally optimistic. Basing themselves on a superficial view of reality, the Fabians decided that every class conflict could be settled in an amicable drawing-room manner. Capitalism would become more and more antiquated and ineffective. At the same time, the working class, because of their newly acquired knowledge, would begin to advocate Socialism. Socialism would then be tried out in the more inefficient sectors of industry. Both the working class and the capitalists would soon realise how vastly superior it was to capitalism, and opposition to further socialist measures would slowly decrease.

In contrast to this idyllic picture of the capitalist class slowly accepting its own liquidation, Marx wrote that no ruling class relinquished power without a fight. This was true of the slave-masters of Ancient Rome, and it was equally true of the feudal landlords. Why should the capitalist class be any different? Marx considered that they would fight even more tenaciously to maintain their power because they have at their disposal more powerful means of repression and propaganda than have previously existed. Only social revolution could break their political and economic stranglehold.

What did Marx mean by revolution? He did not mean killing people, but taking over the social apparatus – in the first instance the state – and the means of production by a new class. Revolution has no necessary connection with bloodshed. Bloodshed usually occurs when the ruling class prove unwilling to part with their power without a fight. Where the revolutionaries are strong little or no armed resistance is possible, and bloodshed is avoided.

As the Labour Government’s actions are based on the ideas of Fabianism, if their administration for the last five years has been a success from the socialist point of view, then Marx and all his works can be consigned to the dust-bin. But, should we find the reverse to be true, what should we then consign to the dust-bin? It is certainly not possible for the reformists to slink behind the plea that (as in 1929) they were a minority government, condemned by necessity to administer capitalism. For the last five years the Labour Government has had complete power. How have they used it?

The first thing that has become obvious is the fallacy of the “inevitability of gradualism”. returned in 1945 with one of the biggest majorities in British parliamentary history, Labour only got returned in 1950 by the barest margin. Since then there has been increasing criticism of the Government’s actions, and the greatest hostility, due to rising prices, could easily mean a labour defeat if there were a general election.

Nor are the workers particularly appreciative in those industries, where the “peaceful revolution” has occurred! For instance the General Secretary of the NUR, Mr Figgins, is reported in Reynolds News (17/12/50) as saying that

“A new dictatorship by the Railway Executive is a challenge to the fundamental principles of trade unionism ... This procedure was something we have never experienced, even in the days of the private company”.

With such outspoken complaints as those being voiced by workers’ leaders, it is hardly surprising that Labour speakers make social services their main propaganda plank. The Labour Government, they say, was responsible for the creation of the “Welfare State”, and the maintenance of it largely rests upon taxation of the rich.

The Tories, on the other hand, contend, that, besides being extravagant spending, it is also true that the social services, as Robert Boothby MP, put it, in The Times (9/4/50), “are now being paid for, not by the rich, but by the poor”.

This statement is borne out by a factual account appearing in the Economist (1/4/50). It is a reproduction of an official report of the Marshall Plan Administration entitled Report of the European Co-operation Administration to the United Kingdom. After detailed investigation, this mission found that the current “social service” income per working class family, taking into account food subsidies, national insurance, family allowances, education and current taxation paid by a working class family, both directly and indirectly, amounted to an average of 67.8 shillings per week. Therefore, for from the social services representing an addition to the workers’ income, it is entirely paid for by him. In addition, the worker pays an average of 10 shillings per week per family for the maintenance pf the military and police forces, and in respect of the national debt.

One further fact must be added; these figures were compiled before Atlee announced the new rearmament drive. This will cost at least £3,600 million over a three year period, whereas at the time the report was issued this total rested at a mere £760 million. According to the New Statesman (9/12/50) even the latest huge sum will look more like £4,200 when soaring prices and the loss of the American loan are taken into consideration. The disparity between taxation and social services must now be much greater.

Whilst rearmament for the Third World War is the principal drain upon taxes, the national debt is a close runner-up. The National Debt consists of vast sums borrowed from the capitalists since as long ago as the Napoleonic wars. It has accumulated to the fantastic figure of £25,000 million, and would take four hundred years to repay even at £1 million per week, without taking interest into account! Assuming that interest charges of 2½% were made on this capital, this figure would double every forty years.

There would be little chance of this figure diminishing, however, even if it were repaid at the rate of £1 million per week, for the labour Government has pledged itself to a continued policy of nationalisation with compensation. The staggering amounts handed out in compensation – in the case of the railways, for example, over £100 million – will simply rocket the national debt to new and even more fantastic heights.

This procedure, the payment for nationalisation on the instalment plan, cannot but adversely affect any plans for the redistribution of wealth. Here reformists are on a very thorny ground when they claim that there has been a redistribution of wealth since the Labour Government came to power. They are perfectly right – but not the way they intended. The Government’s policy of wage-freezing, coupled with a pious appeal to the capitalists “not to declare bigger dividends”, has resulted in a larger percentage of the national income going in profits than during the pre-war years under a Tory administration.

Transport House statisticians, by combining a complete laziness in collecting facts with a prodigious energy in distorting them, “prove” that rents, dividends, and interest in 1949 amounted to 28% of the national income, being reduced to 25% after taxation. Wages, on the other hand, were 45 per cent before taxation and rose to 48 per cent of the national income after.

Even assuming these figures were correct, it could hardly be said to support the contention that there has been a radical redistribution of wealth, or that there has been a “peaceful revolution” as Morrison claims. However, these figures are entirely suspect, since they are arrived at by disregarding the effect that indirect taxation has on the workers’ wages. The revenue from beer, tobacco, etc., the bulk of which comes from the workers’ pockets, has risen from £341 million in 1938 to £1,547 million in 1948.

A more correct table, making allowance for these factors, was published in the Daily Worker Educational Commentary No.28, entitled Rich and Poor in Britain: An analysis of the National Income, and showed the following results:–

Division of Income after Taxation








Wages and Forces Pay




Rents, Interests and Profits




According to these figures, the Labour Government has in fact restored the balance, not in favour of the workers, but of the capitalists. However, whilst the war-time figures appear to reveal a shift against the capitalists, it must be borne in mind that an enormous amount of war profit took the form of augmented capital, and did not appear in any income returns.

In 1938, about £1,535 million, after taxation, went to rent, interest and profit: in 1948, the figure, again after taxation, came to £2,922 million. Since 1948, there has been a rapid increase in profits. The Observer (7/1/51) quotes the latest analysis of industrial profits compiled by The Financial Times, which says that “the gross profits of 2,757 industrial companies in 1950 were £1,146 millions, an increase of £96 million, or 9 per cent over the previous accounting period”.

This leads inexorably to the conclusion that little has changed since a Labour MP made the following statement in the New Statesman (30/10/48):–

“despite death duties, great wealth is concentrated in a few hands ... If in 1947 there had been a 1005 death duties, the revenue would have totalled over £600 million and a third of it would have been contributed by less than a third of one per cent of those liable for death duties. Faced with these facts, the class-conscious worker is easily convinced that Marx’s theory of the class struggle is true”.

At a later stage, we intend to deal with the Labour Government’s claim to have maintained full employment, and to prove that the high level of unemployment experienced since the war has been primarily due to circumstances over which they had little or no control. However, before arguing this contentious point, it is interesting to note that Mr Strauss, Minister of Supply, is reported by The Manchester Guardian (29/12/50) as saying, when announcing new economy measures, that “this will mean redundancy or unemployment in certain areas, the full amount of which cannot at present be judged”. How are other Government spokesmen reacting to the unpleasant reality that linking Britain’s destiny with the United States inevitably means war? Here is the Minister of Works, Mr R.R. Stokes, one of Bevan’s “left-wingers” during the war, brazenly giving a Christmas message to some of the unemployed in his constituency at Lowestoft:–

“There are two useful ways in which some of the unemployed could occupy themselves. There is great need for men in the Armed Forces, and the Civil Defence needs recruits.” (Daily Worker, 17/12/50)

Perhaps it would be too much to expect Mr Stokes to remember the typical socialist argument during the inter-war years to the effect that poverty and unemployment, caused by a Tory administration, were the real recruiting sergeants for the Army. Mr Stokes would also probably be suffering from convenient amnesia if asked whether he remembered the boasts of the Labour party in its 1929 election manifesto. Labour and the Nation:–

“We can conquer unemployment ... We claim full and complete maintenance for those who cannot find work”.

Within a few months of being returned on the basis of this programme of work or full maintenance, George Thomas was reported as saying:–

“Durham, Northumberland, Lanark, and many other places, like South Wales, have got this great mass of unemployed, and, as far as one can see, there is no hope of dealing with these people unless we get them out of these districts.”

In other words, the promises of the Labour leadership in 1929 were as baseless as they are to-day. The differences between the Ramsey MacDonalds and the Attlees are of dress, habits, appearance but not of political ideology.

* * * *

Having dismissed the crude and hypocritical claims of Transport house apologists, we can now get down to the task of drawing up a balance sheet of the Labour Government, and of assessing the effects its measures have had on the structure of British capitalism.

As a result of the war, the decline of British capitalism, discernable since the turn of the century, has been greatly accelerated. Whereas during the nineteenth century Britain held undisputed naval supremacy, her ships traversing the seven seas and bringing back untold wealth t the capitalists in this country to-day the United States has ousted her from this favoured position.

British capitalist wealth was seriously depleted during the war. Overseas investments had to be sold to pay for vital food supplies and raw materials; overseas markets went by default sine Britain had little time to trouble about them whilst engaged in a gruelling war with Germany; India and Burma were lost, thus depriving her of a large arena of colonial exploitation. In other words the structure of British capitalism had been undermined to a critical degree.

It was not feasible to meet this desperate need to compete by slashing working class standards of life, for there was no sizeable fascist party capable of ruling by iron fist methods, nor was there much chance of one being created in the immediate future as the war had discredited fascism.

The situation seemed hopeless from a capitalist standpoint. It is ot surprising that they were reduced to a state of jitters upon the return of a Labour Government. Democracy is a luxury that capitalism can ill afford in its period of decline.

Ironically, the Labour Government turned out t be the saviour of British capitalism. It succeeded in diverting the demands of the working class for the reconstruction of society on a socialist basis into harmless channels, and in nursing the dying capitalist society back into some semblance of health.

To understand why the Labour Government administration led to the preservation of capitalism, it is first necessary to analyse the nature of the nationalisation measures that they have enacted. Nationalisation measures are not intrinsically socialist, despite the popular belief that this is so. In fact, the first nationalisation bill put through Parliament was brought in by a Tory Government in 1857. This was immediately after the Indian mutiny. The motive of the Tories was certainly not to improve the living standards of the Indian workers, let alone to introduce socialism! No, they were only concerned with efficient railways, needed to transport troops quickly to the scene of uprising, thus ensuring the continued exploitation of the Indian masses.

To return to the situation in 1945. As we have noted above, if British capitalism were to survive at all, major adjustments had to be made in the economic structure. Those industries which had old and obsolete machinery had to be modernised. In cases where these industries were not only in a position to attract the requisite new investment, the only alternative was for the state to take over, and to set about the modernising process itself, milking more profitable concerns in order to do so.

In the case of both the railways and the mines, nationalisation was absolutely essential, since the British economy rests on cheap coal and cheap transport.

Another way in which the Labour Government was able to assist the capitalist class to regain its balance was by the maintenance of labour discipline. The workers, having certain class loyalty to the Labour Party, restrained, albeit somewhat grudgingly their demands for improved conditions and higher pay. Their loyalty was somewhat bolstered by a series of reforms that the government carried through. Why, during a period of capitalist decline, was this possible?

The world had experienced a war eight times more destructive than the 1914-18 war. Consequently almost every country in the world was crying out for goods with which to reconstruct their battered economies. Even the United States, with the greatest industrial capacity yet known to man, almost twice as great as she possessed in 193, was unable to fully satisfy the unprecedented demand. Britain, therefore, was also able to cash in upon the world market.

The capitalist class of this country, amassing more profits than at any other time in their history, were willing to permit, without much opposition, some concessions to the workers, thus allowing the labour government to maintain the guise of being progressive, of creating a “welfare state”, and also to retain the mass support of the workers.

By 1948, however, conditions had gradually began to change. The world markets were being replenished, and countries which had been buyers of British goods rapidly became competitors in the dwindling market. The basis for further reforms had gone, and the labour government commenced the process of stripping off, layer by layer, its progressive pretensions, and undermining the reforms that had already been introduced. This trend can be traced right through from the imposition of wage-freezing to the present campaign for an increased working week. As for full employment, its continuation has become more and more dependent upon expanding the armament programme on the production of non-consumer goods.

The New Statesman noted this trend (16/9/50) and commented:–

“The Labour leaders have accomplished all their plans. As their Policy Statement (i.e. Labour Believes in BritainRC) showed clearly, they have nothing constructive to offer the British people except the smoothing of the rough edges of the welfare economy that has emerged since 1940. It looks as though the impetus of British Socialism has nearly been exhausted and the Labour Party has become the defender of the status quo.”

Daniel de Leon, with far greater political acumen than the neo-liberal New Statesman, more correctly analysed the Labour Government’s actions – but over forty years before they took place! In his classic Two Pages from Roman History, he shows that Labour leaders of the social-democratic variety are ideologically supporters of capitalism, and, accordingly, in a class-divided society, are the enemies, active or potential, of the working class. However, since they depend upon the working class for their support they must always appear to be enemies of the capitalist class, or lose their support. If in power during a period of acute class conflict such as that which Ramsey MacDonald found to exist in Britain during the term of the second Labour Government, they are forced to slash the workers’ living standards in the same way as the Tories. And yet each repressive measure undermines their own basis! No wonder that social democrats deny the existence of the class war, for its very existence is necessarily fatal t their careers.

The period of relative calm is almost over for the Labour Government. The soaring cost of living is being seriously faced by the working class. This will ultimately lead to mass criticism of the Labour leadership from within the Labour Party itself, although during the initial period, it will mainly be confined to the industrial sphere.

It is time for those elements within the Labour Movement who genuinely want an end to policies of class collaboration and subservience to American capitalism, to make themselves more clearly heard. Only by applying the socialist ideas fathered by Karl Marx can we finally ensure an end to all wars and the beginning of socialist reconstruction.

Support for American capitalism is a blind alley that can lead to nothing but destruction. Support for Soviet totalitarianism is not whit better. It is our task to see that the British Labour Movement changes its policy, and gives leadership in the creation of a world third force, equally opposed to both systems of capitalist exploitation, the force of international socialist revolution.

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Last updated: 17.3.2011