Also in 1946, the National Insurance Act was passed, giving social insurance. This gave benefits to all whom for whatever reason could not work. This was set up using the Beveridge report as its inspiration. Unlike the NHS, it was not free for all, the amount of money given to an individual, depended upon his/her employment history and how much they had contributed to social security. This however was only the beginning of a major plan, and in 1948, the Assistance Act aimed to help those who fell through the national insurance net.
However, there were problems with this scheme. Benefit levels that had been agreed could not support people as much as they needed. This was due to the flat rate contribution system which kept the benefit level to that of the lowest paid. However, this was not instantly noticeable and other plans did make up for this failing.
Labour also promised the people of Britain a new housing scheme to rebuild those cities that had been blitzed in the war. They set a five-year target to build a million houses. This project was quickly started but soon hit problems. The first one being that to build lots of houses, one needs a large workforce. However Britain's labour was being concentrated upon the coal and textile industries. They also needed lots of wood, which at that time was being exported and imports were not welcome. Unfortunately for the new government, the building industry was uncooperative and they focused on more profitable ventures and before the end of 1946 it was apparent that Labours target would not be reached, this was not blamed on Labour as they had started to resolve a situation that had been desperate for a long time.
School and hospital building was cut back as the iron and steel needed for such tasks, were desperately needed for exports and home investment. The result being that little improvement was made in the physical standards. Worse, no hospitals at all were built under the labour government.
This first year in parliament was a great one for Labour, promising a bright future. All early policies had been carried out and the public felt that Labour were delivering their promises and were trustworthy. Labour seemed strong as they capitalised on the conservative's successes, which were often forgotten. The conservatives offered Labour a coalition government before the election, Labour turned this down and ran a successful campaign, which made them appear strong and capable. They were also optimistic and looked to the future creating a new society, which contrasted to the conservatives as they were always looking in the past.
Atlee also gained independence for Burma and India. This was a success as it showed a reforming Britain moving away from traditional values and warming towards freedom and independence. It also freed up a considerable amount of money, as they no longer needed to support their economy and pay for diplomats. It also freed up the military for use in Korea, although that may be looked upon as a disaster!
Independent historians, generally agree that Atlee's government was the most successful Labour government, and possibly one of Britain's most influential governments. At that point in time, even left and right wing historians believed that Labour had been successful in this first year.
However, Labours success was short lived. During the winter months of 1947, the newly nationalised pits suffered a coal shortage. Many industries were shut down, as generating stations were not receiving enough coal. This had detrimental effects on morale and production. The government could do nothing about his and it turned into a public relation fiasco and doubt was placed upon the government's economical abilities. This problem was eventually solved when the spring arrived. But more followed in its wake.
A major crisis was to hit the Labour Government. After loans taken from the USA, they promised to allow the pound to float on the stock market and be able to be converted into international currencies. This however was not as successful as it was thought it should be. Due to the weakness of the British economy, people poured all their money into American dollars, this caused the value of the pound to plummet. Labour realised this was due to their balance of payments, and the supplies didn't equal the production.
To combat this, the government set up the Ministry of Economic Affairs to be controlled by Cripps and also reshuffled the central government. This however didn't solve the problem, and later in that year, Labour started to use the national budget stringently to reduce overall demand in the economy. But the government was wary, and started to take more out of the economy through taxation than put back in with public expenditure. Labour started to take the keynsian approach, which meant total consumption, and the government tightly controlled investment. The second of these methods slowly became dominant and faith was lost in their planning skills.
From 1947, it was felt that a crisis was around the corner and a massive campaign was designed to persuade the public that exports needed to dramatically increase. The government also set up the Anglo-American council, which brought on the adoption of American methods, which were seen as superior in producing more from less. This method was effective, but many people wanted to concentrate on their own business rather than national effort. The government justified this as an improvement to the balance of payments that had been set out incompletely in the economic survey for 1947. It was an accurate portrayal of the problems, it just didn't give relevant details. The problems were not just a result of imports or necessities, other factors such as military ambitions and overseas politics were also relevant. These led to massive expenditures world over. Atlee was committed to Britain's world status, so he believed it was justified.
He also determined that Britain needed to lose its dependence on America to become economically strong on their own merit. He wanted to raise investment so consumption fell in its priority. To keep consumption low, wartime measures were still enforced. This was managed, as consumption only rose as third as fast as the output of the British economy. However, part of his crack down on consumption meant rationing, and this was unpopular with the public. Many illegal responses were made, by the black market and stealing. But more worrying was the political response made by the women's groups, especially the British Housewives League who held marches and rallies which gained much public attention forcing the government to constantly defend themselves, instead of concentrating on other issues. Also many companies were hit by rationing of goods and raw materials as it affected their profit margins.
After the crisis of 1947, the government's confidence and reputation was never fully regained. The main reason another external crisis didn't occur was due to the Marshall aid received from America. But not all was well, this measure was only temporary. The government still had the problem of balance of payments. This caused a new and serious external crisis in 1949. High levels of exports and controls on imports meant the balance of payments had improved. Britain was able to compete in dollar markets as they could devalue the currency, however uncertainty and quarrels within the party meant this took longer than necessary and the devaluation was larger than it needed to have been. However, improvements were seen in North America, but this was created by cuts in government expenditure which affected public spending making the government seem incompetent to deal with economic affairs.
Labour achieved all of their 1945 manifesto aims by 1950, such as nationalisation, NHS, welfare state and a rise in industrial investment. Austerity was still in place, this made the government unpopular, especially as the conservatives used it to their advantage and called it an example of 'socialist mismanagement.' For the 1950 election no major changes were made to their manifesto. Labour gained huge majorities in industrial and urban heartlands and they retained their working class voters, only losses in marginal seats occurred.
The Korean War, which the government only entered to pacify America, and internal squabbling about socialist directions overshadowed the governments last year in power. Gaitskell made a point about limiting NHS expenditure, especially due to the Korean crisis, this was not well received by Bevan, who eventually lost the argument and resigned in a public fervour. Two other members resigned and a split emerged in the cabinet, most wanted another election so they didn't have to deal with internal problems.
Overall, these failures and successes need to be weighed up to determine whether Labour were successful. It can e said that Labour was generally successful, as they achieved the major aims that had been set out in 1945. Nationalisation was in place in major industries, the NHS, although not hugely successful, was running and benefits had improved. Labour had not achieved their goal for housing, although the project had been started and the reason for its failure was the economic situation in Britain. They had just finished a costly war that had nearly financially crippled them and they were financially dependent upon America for loans. Which also caused the pound to devalue significantly as they allowed it to float in 1947 and it crashed. This was to have major repercussions as Labour struggled to rectify that mistake. Labour was incompetent economically, they made many mistakes and had to reduce benefits and public spending to try and improve the situation, which went against their policies. However, it is possible that Labours failings were due to a poor economic state when they came into office, and a weakened world economy made it hard for a total recovery, however some ground was made. At a time when the world was weak anyway, due to war costs, Britain would struggle anyway to recover, and only the help from America made survival possible. Atlee had not succeeded, in the sense that Britain was on its feet and economically stable, however, the state of Britain had improved, and it can be said that had Labour had another five years, they might have achieved their aims.
