The Chancellors (22): Reginald Maudling

Reginald-Maudling-196_466Reginald Maudling, 1962-64

Conservative, under Macmillan and Home

Reginald Maudling came from a solidly upper middle class background. He won a scholarship to Merchant Taylor’s school and then won a first in Greats at Merton College, Oxford. Having served in intelligence in the war, he became prominent in the new Conservative Research Department, playing a part in framing the Industrial Charter that repositioned the Conservatives after the landslide defat of 1945 and kick started the career of a number of the new generation of Tories. It fitted his political temperament: he was a natural Keynesian and adherent of Macmillan’s Middle Way; he was a member of the One Nation group; once again, the launchpad of many a career of the new generation. He entered parliament in 1950, and made an immediate mark. By 1952, he was a junior minister and was rapidly promoted later that year to be economic secretary to the Treasury: he had supported ROBOT (see the article on Butler as chancellor, here). In his case it was for different reasons to the Treasury mandarins: he believed it would take away the brake on economic growth that the balance of payments acted as under the Bretton Woods system. He then held went to the ministry of supply (which he helped abolish) and then served as paymaster general. As such, he entered the cabinet when he was put in charge of Macmillan’s Plan G, the negotiations to create a European Free Trade Area, which would include the members of the EEC.

Maudling was deeply skeptical about the EEC. Unfortunately, the EEC were even more skeptical about EFTA. Significantly, given what was to come, de Gaulle vetoed EEC involvement in EFTA, seeing it as an American Trojan Horse. Maudling was left to build the EFTA of the seven from the ashes. It was not a success. Indeed, its failure would help explain Macmillan’s decision to apply for EEC membership later on. Its failure was hardly Maudling’s fault, though. Nonetheless, it might be argued that he had failed to see what many would come to see as the only viable alternative: to wit, that EEC membership was in Britain’s economic and geopolitical interest.

EFTA’s failure did not interfere with Maudling’s career. Macmillan sent him to the Board of Trade in 1959, and then made him colonial secretary. As a rising star, and a progressive, he seemed ideally suited to put forward as a fresh new face of a refreshed cabinet: thus, Macmillan made him chancellor in the Night of the Long Knives.

As Chancellor, Maudling is remembered for his ‘dash for growth’. In fact, he arrived at it in stages. At the Board of Trade, he had inevitably remained involved in economic policy, nor had his brief time at the Colonial Office dulled that interest. Maudling faced two related sets of problems. One was long term: the underlying underperformance of the British economy. The extent of the British disease, as it would come to be known, was perhaps overdone at all times. Certainly, it could be greatly over-exaggerated in the early ‘sixties. Nonetheless, Maudling recognised, just as his predecessors had done, that Britain did have long-term problems.

Britain’s growth rates were sluggish, its productivity weak, its industrial relations poor and the feeling that Britain was living beyond its means was now commonplace. Inflation was a threat, and sterling was vulnerable. None of this was new, however, and at first Maudling was cautious. What changed everything was a more short-term economic issue, and politics. Unemployment was rising sharply: it would peak at 873,000, in 1963. The government’s political position was worse. The game changer was meant to be entry to the EEC, but de Gaulle vetoed that in early 1963 (you can read about that here). Meanwhile, the famous Orpington by-election of 1962 was followed by six by-elections in which Labour took formerly Conservative seats. Meanwhile, a single-digit Labour lead in the polls in 1962 became a double-digit lead in 1963. The other hoped for game changer, the cabinet reshuffle that saw Maudling become chancellor had clearly failed: the ultimate victim of the Night of the Long Knives was Macmillan himself. Thus, by October 1963, Maudling was serving a new prime minister of a government staring defeat in the face the following year.

The Dash for Growth was, naturally, deeply political. But it also had some economic logic to at least parts of it. Maudling cut purchase tax on motor cars.  Car production was the engine of economic growth in the western world: to stimulate car sales in the UK made economic sense. There were measures to encourage industrial investment and training. Most of all though, there was a simple injection of cash: tax cuts and spending increases. By the time of the April budget of 1963, Maudling had reflated the economy to the value of something like £460m, leaving a borrowing requirement of £700m.


Politically, it almost worked: Labour only had a majority of four in 1964. In many ways, it stole Labour’s ground from under them. Harold Wilson’s famous pitch for the ‘white heat of technology’ and a National Plan were in part an acknowledgement that Maudling had stolen Labour’s expansionist Keynesian clothes. Even the growth target of 4% came from the would-be planning of the NEDC (a body Maudling had little time for).

If it was economically reckless, it could have been worse. Macmillan had wanted more, not less. It was still reckless, though. By April 1963, the unemployment rate had just begun to fall. Maudling was injecting demand into an already recovering economy. It was inflationary, and the income tax cuts were directly so, even more so in the absence of an incomes policy. Most of all, though, Maudling was playing with fire when it came to the balance of payments. By July 1964, a deficit of £600m forced an increase in the Bank Rate. But, with an election looming, nothing else was done.


Maudling had gambled, and nearly won. But his party lost, and so did he. He had often been spoken of as Home’s successor, but the Conservative party was not to be placated: he expected to win, but lost to Heath by 150-133, in 1965. He would then serve on Heath’s front bench, before being home secretary under Heath until a financial scandal saw his downfall. Maudling was one of ten chancellors to also be home secretary (seven of them, like Maudling, never got the top job). He was certainly not the only post-war Conservative chancellor to have played fast and loose with the fiscal strings and leave a Labour chancellor with a fiscal mess to clear up. The temptations of Stop-Go and the looming noose of a general election proved a temptation too far, once more. Arguably, he was the most irresponsible of the six Conservative chancellors of this era, though Anthony Barber (1970-74) would be worse. Labour may have exaggerated the black hole he left them, claiming an £800m balance of payments deficit: incoming chancellors tend to. The economic and financial problems that would bedevil the Wilson governments were undoubtedly made worse by their own failings, but they had their origins in Maudling’s roll of the fiscal dice. Famously, whilst still clearing his desk, he said to his successor and friend, Jim Callaghan, ‘sorry, old cock, to leave it in this shape’: he was, in fact, summing up his record as chancellor pretty well.

You can read about Maudling’s career after 1965, here.



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