The Chancellors (14): Hugh Dalton

Hugh_Dalton_HU_059487Hugh Dalton, 1945-47

Labour, under Attlee

All three of Attlee’s chancellors were upper-middle class, public school and Oxbridge. In many ways, Dalton was the poshest of the lot. The son of a Church of England canon, Eton and Cambridge, his father was the onetime tutor to the future George V. At King’s, where he read economics, his best friend was the poet Rupert Brooke: Dalton and Brooke joined the Fabian Society there. Keynes was another friend. He joined the Army Service Corps, and at the Somme; he then transferred to the Royal Artillery and was decorated by the Italian government for his role at Caporetto. Dalton was then an academic at the LSE, and his published works on economics continued to be widely read and influential until the ‘sixties. He entered parliament in 1924. Having lost his seat in 1931, he returned in 1935: by then, he was a significant figure in the Labour Party.

His politics and economics were Fabian and Keynesian. In foreign policy, as shadow foreign affairs spokesman and chairman of Labour’s National Executive Committee, Dalton led the rejection of appeasement and supported rearmament. As such, he was a key figure in Labour’s move from Lansbury’s pacifism to the embrace of a patriotism that would mean Labour was able to join Churchill’s National Government. In that government, Dalton was minister of economic warfare and, as such, oversaw the Special Operations Executive. In 1942, he went to the Board of Trade, where he had a significant role in planning for post-war reconstruction: his 1945 Distribution of Industry Act paved the way for post-war regional policy. He expected to be foreign secretary, though both the king and the Foreign Office were uneasy about him. In the end, the need to keep Bevin and Morrison apart persuaded Attlee to give Dalton the Treasury, something his ministerial experience and academic background fitted him for eminently.

He was brilliant, in the way Old Etonians sometimes are, but not much liked (the George Osborne of the Labour 1945 government?) Though one of the key figures of the Attlee government, he could struggle to carry colleagues with him, or win Attlee’s support. He soon faced formidable obstacles in public finances, and despatched Keynes to negotiate the crucial US loan. His great achievement was to fund reconstruction, nationalisation and social reform, whilst making the tax system more sharply redistributive. He famously did so ‘with a song in my heart’. He also fought to restore the Treasury’s diminished authority (it was weakened by war, and was threatened by the idea of economic planning and Morrison’s role as economic supremo). Dalton nationalised the Bank of England, though in truth the Bank had long been under Treasury control. At his peak, in 1946 especially, he was a dominant force in the government and in the House.

The Tories detested him, as did the City; both scented blood as his star fell and the ‘annus mirabilis’ of 1946 became the ‘annus horrendus’ of 1947.  Dalton was badly damaged by the crises of 1947, the winter freeze and the convertibility crisis. Underlying those problems were the weaknesses in the planning apparatus Dalton envisaged. The minister for fuel and power, Manny Shinwell, had been given plenty of warnings of a possible coal shortage: he would not be the first, or last, minister to prefer unfounded optimism over difficult policy. His failure to foresee the convertibility crisis was a product of over optimistic Treasury forecasts: economic forecasting was in its infancy, and the grown up version can hardly be said to be wholly reliable. Most of all, the notion of planning was fundamentally flawed, at the very least in 1947 (later governments, in the ’sixties and ‘seventies, of both stripes would have scarce more luck). For the first time since the landslide of 1945, there was a spring in the Conservative step. First Shinwell (see here), and then Dalton were attacked: cheap money caused the convertibility crisis ran the line against the chancellor. Both ministers were holed below the waterline.

Neither went at once. Dalton’s last budget acknowledged the impossibility of planning: it saw the adoption of Keynesianism, and the primacy of the Treasury’s authority reasserted. Unfortunately, en route to the Commons to give his budget speech, the ever-garrulous Dalton let slip one of its details to a reporter, in those days a cardinal sin rather than the normal practice it is now. Not only was Dalton damaged goods resign, more as a lightning rod: the financial crisis of 1947 had weakened him, but he had also been involved in a plot to oust Attlee. The other plotters, Morrison and Cripps, were unsackable. Attlee took the opportunity to bare his political teeth and reshuffle: Dalton was the necessary and convenient collateral damage. He had played the game, and lost. He returned to government as chancellor of the duchy of Lancaster in 1948.

For Edmund Dell, he was a disastrous appointment. That is unfair. Dalton was forced to resign before the impact of his measures could take full effect, and under Labour the British economy went from war to peace with full employment, low inflation, cheap money and an export led economic recovery. Under Dalton, policy was consistently and radically redistributive. His fall from grace in 1947 was spectacular, but there was grace aplenty to begin with.

There are some clips of Dalton and the other Attlee Chancellors, here.

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