|
It
is December 1973 and the finance minister has privately warned
the cabinet of Edward Heath that the country faces its gravest
economic crisis since World War Two, according to classified
records that are now publicly available.
The papers shed light on the debate at the heart of government
during a crisis that bears similarities to that facing current
Prime Minister Boris Johnson's cabinet.
Like almost 50 years ago, Britain today faces double-digit
inflation driven by soaring energy costs that will financially
cripple the most vulnerable households.
Unlike then, Johnson is in caretaker mode after being forced
from power over a string of scandals, leaving the parliamentary
party to divide into warring factions over how best to respond.
On both occasions there were few good options, with media
reports on the current government's private "worst case"
planning documents outlining a return to the energy rationing
that marked Heath's tenure.
Reuters footage from December 1973 shows how workers in darkened
stores on London's main shopping street clutched camping gas
lamps to light the way for customers.
"It was pretty dark, but you found a way of coping with it,"
political analyst Peter Kellner said of the power cuts, who in
the early 1970s was a Sunday Times journalist.
While Britain is unlikely to face such prolonged blackouts,
anything that threatens a world of contactless payment systems
and computerised tills will add to anxiety over Britain's
ability to withstand repeated social and economic shocks.
"There is potentially a double parallel between Britain today,
and Britain in 1973," Kellner said, citing a combination of
domestic and global factors that drove inflation higher in both
periods.
Historian Alwyn Turner agreed there were similarities - but also
big differences, such as the background of top politicians.
Heath and his Labour opponent Harold Wilson were moulded by war
and mass unemployment -- which gave them a historical
perspective on crises even if they struggled with new threats to
Britain's economy.
"I think our problem now is a lack of knowledge. We don't have
anybody around in politics who can remember what it was like
with inflation - certainly not in office," Turner said.
Britain's next prime minister will be in their 40s.
Johnson has overseen billions of pounds of support to help with
soaring energy bills, but, even as prices keep rising, he says
any future measures are for his successor, due to be named on
Sept. 5, to decide.
Consumer price inflation peaked in 1975 at 24.5% and it was not
until the 1990s that it fell sustainably into low single-digits.
The Bank of England expects sees inflation exceeding 13% this
October, which would be the highest rate in 42 years. It said
earlier in August that inflation would take around two years to
return close to its 2% target.
Turner said the resulting decline in living standards now under
way harked back to the 1970s.
"It's a kind of grinding down. And at some point people do lose
their patience," he said.
The issue of Europe represents another difference with the
mid-1970s. Whereas Heath pinned hopes for an economic
renaissance on membership of the European Economic Community,
Johnson's flagship policy was to leave its successor, the
European Union.
Official data shows Brexit has yet to yield the promised boost
in trade and investment and divergence from EU rules is still
only just under way in many areas.
EXTREME PROPOSALS
The papers from December 1973 show how an escalating energy
crisis, caused by the Organization of Arab Petroleum Exporting
Countries declaring an oil embargo, forced Heath's government to
consider some extreme proposals.
One was limiting the use of electrical heating in every
household to one room - although the leader of the House of
Commons at the time, Jim Prior, said this would be "harsh, and
in practice unenforceable".
By early 1974, coal miner stoppages forced a three-day working
week across the economy.
The cabinet papers show Heath flirted with removing state
benefits from the families of striking men - a "powerful weapon"
but one that was dismissed as "extremely dubious".
In the event, Heath announced swingeing cuts to public sector
investment, but his government did not last long enough to see
through its plans.
Heath - like Johnson today - had aspirations to shift Britain's
economy into a higher gear.
In 1972 his government announced a budget to double the rate of
economic growth, which stoked inflation. Today's leadership
frontrunner, Foreign Secretary Liz Truss, 47, has been accused
by rival candidate Rishi Sunak, 42, of making a similar mistake
with her vow to slash taxes.
"Potentially the Liz Truss approach to growth can also ...
unleash inflationary forces," Kellner said. Truss says the plans
will not fuel inflation, and that cutting taxes is better than
raising them and handing the money back as benefits.
While Truss has promised a bright future and dismissed economic
warnings as "declinist talk", the Bank of England this month
warned of a long recession.
Sunak has called for tax cuts only once inflation has been
brought under control and promised to spend more to fulfil a
"moral responsibility" to help struggling citizens.
In the end, Heath paid the price for his handling of the economy
and worker relations.
After announcing a snap election for February 1974, Heath
narrowly lost to the opposition Labour Party. Truss or Sunak are
expected to face voters in 2024, with polls showing the
Conservatives trailing Labour.
(Editing by Kate Holton and Alison Williams)
[© 2022 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
