The Chancellors (21): Selwyn Lloyd

Selwyn Lloyd, 1960-62

Conservative, under Macmillan

You can read about Lloyd’s career up until 1962, and as foreign secretary, here.

As Macmillan’s third chancellor, Lloyd was being handed a poisoned chalice, after Derick Heathcoat-Amory’s pre-election splurge in 1959, and he knew it. One of his first questions to his permanent secretary was ‘how soon are we going bust?’ Lloyd had told Macmillan that he intended to be an orthodox chancellor. For him, Macmillan’s belief that unemployment was the greater evil than inflation was mistaken. The question would be, how could the two men square the circle?

The problems were hardly new: inflation, the fear of rising unemployment and pressure on sterling. Lloyd’s approaches were often innovatory. Like all the post-war chancellors (bar Butler’s brief dalliance with floating the pound), Lloyd was implacably opposed to devaluing the pound. The crunch came in July 1961, when fears of a run on sterling led the government to draw $1.5bn in loans from the International Monetary Fund. As the IMF do in such circumstances, they extracted their pound of flesh in the form of deflation. There were £300m worth of spending cuts, some tax hikes and interest rates went up to 7%.

Lloyd also sought to innovate. The National Economic Development Council (Neddy) sought to gain tripartite agreement between government, industry and the trade unions about growth rates and within that, it was hoped, improvements in productivity and realism in wage demands. Lloyd also took the first steps towards a national incomes policy, through his National Incomes Council, (Nicky) never really got off the ground, and Neddy never amounted to much.

As far as wage restraint went, the nearest the government got to it was Lloyd’s pay-pause, a freeze on public sector incomes. The problem with that was its unpopularity, as public sector employees saw prices go up, private sector wages go up and their wages frozen. At this time, many public sector employees, such as teachers, were natural Conservatives. At the same time, deflation had its effect: unemployment was rising. The government felt the political chill. In March 1962, the Liberals had a sensational by-election victory in Orpington; on 6^th June, Labour took Middlesbrough West. Labour were ahead in the polls. The likes of Rab Butler, Iain Macleod, Lord Home and cabinet secretary Sir Norman Brook thought Lloyd’s time had come.

Lloyd didn’t see it coming. When he was still foreign secretary, Macmillan had given him the use of the prime minister’s country house, Chequers. Lloyd saw himself as Macmillan’s trusted friend and confidant: Macmillan had even assured him that his position was secure. As Macmillan would say, there are no friends in politics. Thus, Macmillan decided to sack his chancellor; that became the sacking of seven of his cabinet in the Night of the Long Knives.

In 1951, Lloyd had married a young woman half his age, a friend of the family: they divorced in 1957. As such, he was deeply lonely man, who guarded his private life. Macmillan’s betrayal meant he lost his homes, his career and even his much-loved dog.

Ironically, the betrayal did Macmillan at least as much harm in the end. Lloyd was hurt, but not bitter. He knew that Macmillan had privately referred to him as the ‘middle class lawyer from Liverpool’, and even suggested that as a title for his memoirs. He led an inquiry into Conservative Party organisation, which would help the party win in 1970, and played a key role in helping Home succeed Macmillan. He returned to cabinet as lord privy seal and leader of the House of Commons, in which role he won universal respect. He returned to the backbenches in 1966, and in 1971 was elected speaker.

As chancellor, Lloyd had something close to an impossible job. For all that, Lloyd was a more responsible chancellor than either Amory or Maudling. His tenure may have seen the greatest economic difficulties of the Macmillan years, but much worse was to come by the time Wilson and Heath took office. Undoubtedly, Macmillan treated him shabbily: for Edmund Dell, ‘a chancellor betrayed’. Still, Lloyd remains one of nine men to have been both chancellor and foreign secretary, albeit with the misfortune to hold both in uncertain times.

This documentary on The Night of the Long Knives tells Lloyd’s story well.