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Henry Judd

Social Policies of Labor Rule

A Review of the British Labor Government

(July 1952)


From The New International, Vol. XVIII No. 4, July–August 1952, pp. 187–206.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).


The article which follows is a critical evaluation of certain social policies of the recent British Labor government and their effects upon social relationships within the nation. It forms a part of a long study and evaluation of the Labor government from 1945 to 1951 written by the author.Editor’s Note

On the surface of things, the outward relationships between the hierarchised social groups of the British population have undergone no fundamental change. The social comportment of the English “gentleman,” so often described, is unvaried; his dress, speech and manners have not changed; the British workers are perhaps more outspoken and vigorous than in the pre-war period, with a greater consciousness of their importance in the national life, but their outward behaviour has not been radically transformed by the fact that their political party held office. The same generalization may be offered for other social classes or groups of the population. But, as we know, social status and position in Great Britain has always largely depended upon property and wealth, their presence or their absence. The foundation of property and wealth consists of fixed capital, in the form of assets, landed property, stocks and bonds, etc. The mobile and dynamic aspect of property and wealth consists of revenue, income, payments, earnings, dividends, etc., that is, all that which the individual accrues as a result of his ownership of capital. A partial, but important, change has taken place in the holdings and possession of the first element of social status in England (fixed capital, wealth); a still more important and more generalized change has likewise taken place in the second element of social status (income and revenue); both of these changes will be examined below. For the moment, it suffices to point out that such changes have had their inevitable effects upon the social life and habits of great sections of the population, ranging from the landed gentry and aristocracy to the lowest and poorest workers of the oldest industrial quarters. If the landed aristocrat of West Riding no longer rides after his hunting dogs to chase the fox, the impoverished Jewish peddler of the Whitechapel ghetto now has a small business and his home in London’s Golders’ Green, while the dock worker of Liverpool’s slums has moved into a municipal housing project and earns his guaranteed minimum salary each week. These are the form that social changes assume in England: slow, evolutionary, silent and most clearly expressed in terms of concrete factors, such as income, living standards, budgets, food consumption, etc.

The incomes of the rich are, of course, heavily taxed, but it should not be believed that there are not people who live on a lavish scale in England today; the rich, if they so desire, have their capital to spend in supplementation of their income, and many are at present gradually liquidating this capital. The habit and tradition of individual saving, except among the working class and lower middle class, has gone; the attitude being that such savings will be taxed out of existence many case. Those who are rich, but not in active business, cannot possibly maintain the former standard of living on the basis of income in their possession; they spend their capital and, as a result, the inheritance of their children is too small to maintain them. They are obliged to go to work. Those with money and businesses are able to take advantage of the non-taxable expense account provided by the tax laws, as well as the fact that, under the Labor government, capital gains of business were also untaxed. The business man suffered a certain loss of income and freedom under Labor, the heavy inheritance taxes made it impossible for him to accumulate a fortune which he could pass on to his family, but in general he did quite well in terms of real income and was able to maintain a relatively high standard of living. The activities of the London Stock Exchange and the various financial organizations centered in the city of London, known as the City, remained largely untouched by Labor. As an English author remarks:

The defenders (of the CityH.J.) stand firm, their monetary belts drawn a bit tighter because of high taxation, their amusements curtailed because some former avenues of spending have been closed off; but they remain a compact and integrated body. A few citizens of note from their ranks have negotiated with the enemy, but they feel that no one who matters has gone completely over to the other side. [1]
 

The status of the middle-class individual, drawing a salary, certainly declined under the Labor regime, with the exception of that strata of professional economists, technicians, administrators, etc. who found an important place within the government’s planification and control apparatus. His monthly salary did not increase in proportion to the increase of the weekly wages of industrial workers; his importance in the national economy was granted smaller recognition than that of the coal miner or the worker who produced articles of exportation. While the total income of the middle class groups did not fall, their proportion of the national income dropped considerably, as will be indicated below. This relative decline struck the middle class worker or employer at his most sensitive point, his social pride. His living standard likewise declined: Not possessing any capital whose liquidation would enable him to continue to live as before, he also found himself unable to buy those small articles of luxury so essential to a middle class existence. Such articles were not subsidized by the government; on the contrary, the heavy purchase tax discouraged their sale. The various privileges and pleasures he desired – owning and operating his own car, buying his own home, spending his vacations outside the country, in Paris, or at Lake Annecy, etc. – all these were denied to him or restricted by various limitations or prohibitions.

As the Labor government developed its policies and the restrictions continued or grew, the “average middle class Englishman,” the clerk, the small entrepreneur, the civil service functionary, the domestics, the shop-keepers, etc. became more and more hostile towards the regime. It was our personal experience in traveling through England that whereas the conservative voter or supporter, by his social status forming a member of the bourgeoisie itself, would attack the Labor government with arguments of a political and ideological nature, defending his belief in capitalism, the doctrines of his Party and the evils, according to him, of socialism, the petty-bourgeois opponent of the government and the Labor party would express himself in much more passionate and emotional terms, bitterly describing the effects of Labor upon himself, his family and their general social status. The difference in temperament and reaction was striking.

A study of changes of income between 1938 and 1949 for salaried people, including civil servants, clerks, shop assistants, school teachers, etc., undertaken by the Oxford University Institute of Statistics [2] drew the conclusion that an important narrowing of wage differentials between the different categories was to be observed. In all cases studied, except one, the lower down the scale, the higher the increases. The highest in grade had increased its salary by less than the lowest in grade. The fall in the real income of the higher civil servants was especially noticeable. A school principal, for example, in 1949 could only afford a living standard equal to that of a clerical officer before the war; by taking tax and price changes into account, the real value of the differences between wages received by various grades of middle-class employees was estimated to be one half of what it had once been.

Even more striking are the illustrations cited in the series of articles published by Le Monde to which reference has been made. We quote at length from the text of the article of March 15, 1952:

The group most affected is that of the liberal professions, whose annual income is not more than 2 or 3 thousand pounds. According to the Economist, professors, local functionaries, salaried doctors, technicians, journalists, accountants, architects, clergymen and military people rarely earn more than 1,200 pounds per year. This, for a family having three children, leaves them a net income of 992 pounds, against 530 for a miner and 380 for an average worker. And the Economist is able to write: “The winds of austerity are tempered for the salaried person, and the capitalist is protected by his fur coat, but the liberal professions can only shiver.” From this follows the incapacity of this later category to give to its children the education which it itself received and which conditions its social position. How can a judge of the High Court who, with three children has a net income of 2,554 pounds, find the 700 pounds each year indispensable for the education traditional of a “gentleman” from the age of 5 to 18? The reduction of his economic standing inevitably results in the lowering of his children’s social standing.

As for the British bourgeoisie itself, much can be understood about its new social position within British society as a whole by grasping the fact that, confronted with the process of being socially expropriated from its ownership of large masses of productive capital, it chose acceptance of this expropriation rather than resorting to extra-parliamentary means of preventing it, or at least attempting to do so. Who would say that the British bourgeoisie of the 1920’s or 1930’s would have limited its opposition to expropriation from 20 per cent of its national capital to parliamentary debates? This was a risky choice in the sense that the inner dynamic of the Labor nationalization program pushed it onward to the decisive point, as in the case of the steel industry, and a third electoral defeat for the Conservative party would have been an almost fatal one. The most spectacular aspects of the general decline of the British bourgeoisie are those represented by its aristocracy and its section devoted to government and political life. These aspects, certainly the more dramatic and interesting, are often taken for and confused with the bourgeoisie as a whole. But, important as they may be, the real power of the British bourgeoisie, its remaining social power, is represented by its ownership of 80 per cent of the national economy, by British industry, by the network of trusts, monopolies and corporations to which reference has been made.

The decline of the landed aristocracy is an old story in Great Britain, and the dispossession of the political caste of the bourgeoisie by the victory of the Labor Party was neither decisive nor definitive. Under the Labor regime, there was a further consolidation of the remaining private sector of industry, and a strengthening of its capital resources and funds. But it is doubtful whether the British industrialist received much encouragement from these facts. More important, it would appear, was the fact that he saw The establishment of a juridical and administrative procedure, including a social justification in the national interest, by which he could be expropriated from social ownership of his property; he saw, further, the self-expanding tendency of nationalization, the “silent” and "creeping” characteristics of this nationalization; he saw the power of the working class, its organizations and its political party. All this cannot be measured in precise and quantitative terms; it consists of a loss of social confidence and an uneasiness which has been transmitted to all groups within the bourgeoisie.

Finally, there is the question of the British working class in general, and of its trade union organizations. It is impossible to dissociate the two, since the British working class is probably the best organized in the world today, and the outlook and mentality of the British workers has long been conditioned by his membership in the trade-union movement which, for him, has a fuller and more important significance than for workers of other nations. His whole history has been an organic part of the history of the trade unions, and his political activity, expressed by the Labor Party, which in its social composition, structure and functioning is the politicalized consciousness of the 8-million strong trade union movement, took on flesh and blood in the form of the third Labor government from 1945 to 1951. The responsibility of the British Labor Party leader and the trade union chief before the ordinary members – the rank-and-file – of his party or trade union, while far from attaining an ultimate perfection, has always appeared more real, concrete, less bureaucratic than in most working class parties or trade unions.
 

The British worker had many criticisms of his Labor government, but even when certain of its activities which affected him most directly, such as the nationalization of the industry in which he worked, appeared to him remote, abstract and beyond his power to control or influence, he nevertheless persisted in his belief that it was his government in power, and that it had come about through his efforts, his party and his trade-union movement. A coal miner of Wales, for example, whom we spoke to concerning his grievances against the government, explained that he was a surface worker, that he had earned that week £9/3s./11d. for having worked 10½ shifts, or a total of 66½ hours! He could take home with him, after deduction of taxes, etc. £8/17s/2d., which would cover, modestly, the expenses of himself and his family. He was dissatisfied with the last wages reward of the government arbitration tribunal which had arranged a settlement between the union and the Board; he had pension grievances; he wanted a two week holiday instead of one week; he wanted establishment of sick pay equal to a normal minimum wage, etc. But he did not attack the government, as such; he had complaints against its specific methods of operation, and the details of handling affairs, but there was no bitter denunciation of the government, such as one could find widespread among middle-class and professional groups. Other conversations, in 1950 and 1951, indicated that an attitude of criticism, disappointment and deception, and often of apathy, were growing in working class circles toward the end of the Labor regime; the initial enthusiasm had clearly gone.

The international situation weighed heavily upon these attitudes, and often workers questioned in different industrial centers of the Midlands or London areas felt that the government and the Labor leadership had “done their best,” but that circumstances and factors beyond their control had largely liquidated these efforts. The solid achievements of the Labor regime, measured in terms of its social security program, full employment, housing, food subsidies, etc. were already accepted and integrated in the average worker’s life by 1950; what interested him were the new problems posed by the change of events: above all, the decline of his real wages, the soaring of prices and the tendency for all of Labor’s carefully constructed economic structure to fall apart toward the end of 1950. The electoral campaign of that year, emphasizing past achievements and defensive in tone, had not stimulated any response on his part. He remained still loyal to his Party – “A worker who votes Labor will never vote Tory; he may not vote, but he’ll never vote Tory,” we were informed by a young trade-union secretary – but doubt, disillusion and much scepticism had crept into his thinking; the ground was becoming ripe for an internal crisis within the Labor movement and the Party itself.
 

One of the institutions carried over from the war period by the Labor government and by means of which it hoped to assure industrial and social peace within the country was, we have seen, the establishment of the Joint Production Committees in the nation’s industries, including those nationalized. The government encouraged their development, and such an eminent Labor leader as Sir Stafford Cripps had wanted to make their establishment obligatory in every factory. In view of the importance attached to their activity, it would seem possible to evaluate at least partially, the workers’ attitude toward Labor by seeing what his attitude toward these committees were. In his preface to a study largely devoted to these committees, André Siegfried writes:

This is not a minor revolution that England is experiencing in its internal structure. This revolution consists essentially of the fact that the aristocratic England of yesterday has become democratic and, above all, egalitarian. Therein lies the real novelty. It is rapidly liquidating its rich class. [3]

It would appear to be M. Siegfried’s opinion that the institution of joint committees was one of the most important manifestations of the ‘revolution” of which he speaks, but this was hardly the case as the text of the work prefaced by him itself indicates. Waline defines the committees, which he compares favorably, from the standpoint of a conservative, with the Comités d’entreprises in France, as: “an organ of collaboration working in a climate of mutual confidence,” and he cites the words of Mr. Isaacs, minister, who, addressing the Confederation of Management Associations toward the end of 1947, stated:

Sainly understood, the joint committees in no sense contain any usurpation of management functions, no more than an attack upon the normal mechanism for negotiating working conditions. [4]

The fact is that precisely their limited and purely consultative character was responsible for the failure of these committees to develop, and their rapid decline after the war; in visits to coal mines, shipyards along the Tyne, small factories in London area, textile plants in Birmingham, etc., we were unable to find any serious evidence of their activities, beyond occasional routine committee meetings. The workers on the whole had lost their interest in these bodies, and were indifferent. The Conservative Party’s “industrial charter,” edited by Richard Butler and adopted at its party congress in October 1947, categorically pronounced itself in favor of these committees, granting of course that the authority of the head of the enterprise was not questioned, which were to be the means for the workers to participate in consultation, sharing, and partnership in management, as well as to develop a personal interest in their work. However, if the Labor leadership and the Tory Party saw eye to eye on the value of such committees, they did not convince either the trade unions or the masses of workers of their merits; the abundant literature which exists on the subject is overwhelmingly devoted to the mechanics and the academic details of this conception, with a minute proportion to its realization and the citing of examples and illustrations. The committees simply never took on any real life. Writing in the Tribune of October 31, 1947, Ian Mikardo was able to state, with truth on his side, that most of the committees created during the war have ceased to exist; the rest have no more real activity and management has clearly lost interest in them. Mikardo considers that the decline of the committees was due first of all to their purely consultative character, secondly, the fact that the workers had no right to examine the company’s books or no possibility to carry out any direct action in relation to management. This prevented the development of new ideas in the workers’ movement as to its role within the framework of private economy, as well as within that of the nationalized industry. The structure for such a possible evolution was, in part, created by the establishment of such committees, but the inner content was lacking.
 

Why had the government failed, on the whole, in its effort to make the joint committees function effectively? This raises the question of the relations between the trade union movement itself, its leading organism, the T.U.C. and its General Council, and the government. As we have seen, the government proposed that the unions accept a new relationship with it, one in harmony with the government’s industrial policy of auto-regulation for industry and restraint of workers’ demands. Labor proposed that the unions drop their former way of thinking, and their former relationship with the industrialists, in the national interest. It asked the unions not to take advantage of their position under full-employment, and to hold back efforts by their membership to start another cycle of temporary wage gains; it asked, in reality, the unions to share the responsibility of governing with it by adapting itself to a new relationship within the national economy. We have seen how, in general, the T.U.C. and the General Council accepted this policy, and persuaded the large majority of affiliated unions to follow it, until the inflationary pressure in 1950 became too great to hold back wage demands.

As a consequence of these policies, certain conservative trade union circles, as well as a large number of socialist “intellectuals,” economists, technicians and specialists, developed the point of view that the government must, in effect, establish a national wage policy, applicable to all industries, and which would form a part of its planification. Norman McLaren, in an article entitled Les trade-unions au tournant, poses the dilemma of British trade-unionism in the following terms:

Closely linked with the party mandated to govern the country, the TUC decided to do all that lay within its power to favor the success of the experience it itself had helped to set upon its feet. And this is where the trade union movement found itself confronted with the most crucial of problems. The essential function of a labor union is, of course, to struggle for the interests of the working population. English political tradition requires, in turn, that the essential function of a political party be to represent the interests of the whole of the population. By associating itself closely with the Labor Party while it was in power, the TUC ran the risk of being hampered in the pursuit of its labor demands and the party, for its part, risked giving into an excessive care in order to keep those supports necessary to maintain itself in power. [5]

This dilemma was accentuated by the fact that not only did the Labor government desire to represent the interests of the nation as a whole, but its entire policy of economic redressment – in terms of its export program, its investment program, its industrial planification program, etc. – depended primarily upon holding in check that proportion of the national revenue destined for wages and salaries. Those proposing state intervention to fix wage-rates, however, thought they had the answer to this problem. A State wage policy – that is, a centrally coordinated wage policy between government and the trade unions, which would modify, if not terminate, traditional forms of autonomous collective bargaining in each industry – could be, according to its supporters, geared to a national production policy already begun in part with the State ownership of certain industries and the planning of capital investment. This, of course, did not exist in Great Britain, where the General Council of the T.U.C. functions only as a coordinating body which makes recommendations of policy without enforcement powers, and where each trade union continues to be an autonomous body engaging in collective bargaining for its particular industry. The advocates of a national wage policy, made enthusiastic by the prospects of their proposal, recognized it would have to be accompanied by a more stringent price control, control over excess profits, and that the tying of the movement of wages to increased productivity would also mean that the government would have to determine what share of value represented by this increase in total output would have to go to an increase in wages. In a word, the functions and responsibilities of the government would enjoy an enormous expansion. Certain Labor members of parliament were even more specific: they suggested that the government should be able to determine a global figure for “that part of the national wages bill which is fixed, directly or indirectly, by trade union negotiation ... It would then be the function of the unions, acting in concert under the direction of the General Council, to allocate the total, and any increases in it, among the various categories of workers.” [6] Such a proposal would, of course, require the conversion of the trade union movement into a completely federated body, with the central federal authority having the power to negotiate on behalf of all the workers it represented; it would mean that British trade unionism had fundamentally changed its character.

Such proposed schemas – and many partial or complete versions were common during the period of Labor in power – rarely were heard among trade union officials or those responsible for the actual running of the trade union movement; they were the conceptions of socialist intellectuals and administrators who, made enthusiastic and partly blinded by the vision of national and long-range planning which several years in power had given them, were no longer able to think of the British worker as a worker, or the trade unions as the elementary protective organizations of these same workers. The concrete worker, with his demands and needs, had been transformed into an abstract “economic man” who must be fitted into the schema of planification. Professor Maurice Dobb, commenting upon the difficulty of enforcing minimum wage laws and other elementary legislation to protect workers, remarks: “It is a principle which is now fairly well established by experience that a law for enforcement contrary to the workers’ own initiative is almost invariably a dead-letter.” [7] There was no possibility of persuading the British worker to accept such a policy, in variance with his tradition and the concrete and immediate interests which have, until now, determined his line of action. Those responsible for trade union policy, including the General Council, opposed any national wages policy, or any restraint on the rights of individual unions to carry on their century-old activities.

The dilemma remained, of course, and no clear-cut solution was ever reached, nor, given the increasing difficulties of the government as its tenure came to a close, could a solution be reached. The British trade-unions would never consent, without resistance and internal upheavals, to what has taken place in other countries; that is, becoming mere servants of the State. If their functions must change under a government for which they are largely responsible, that part of their function which relates to the protection of the worker does not change; on the contrary, it seems more important than ever in a planned economy. The government, recognizing this, placed the problem before the trade union movement, made its series of recommendations, and left the unions to work out their own solutions. This encouraged the unions to look at wage issues in their full economic context, and to relate them to general fiscal policy as well. A coordinated trade-union policy on wages was out of the question, since trade union congresses have opposed any effort to strengthen the powers of the General Council of the T.U.C. No general formula or solution was put forward, but a typically British trade unionist policy of compromises, partial concessions, adaptations, etc., was worked out, in the concrete. The results of this adaptation we know, and they may be sumarized as follows: (1) A trend toward the levelling of wage differentials during the periods of full-employment; (2) a narrowing of relative differentials in wages according to the skill and quality of work performed within a particular industry, accompanied by the raising of wages for unskilled occupations; (3) the formulation of ambiguous, vague and unclear wage policies on the part of both government and the T.U.C., with the tendency for affiliated unions to take matters in hand by specifying their own wage demands; (4) a growing apart of union leadership and union membership, with the leaders engaging in negotiations at a remote distance from the workers themselves, with the possible exception of the miners’ union; (5) a greater freedom for workers in choice of their job, giving a greater mobility to manpower; and (6) a serious confusion within the trade union movement as a whole as to its precise role in the new situation which, together with the fact that workers came to depend less upon the concerted initiative of their unions than upon their own isolated initiative, forces the observer to conclude that despite the growth in membership and the basic solidity of the trade unions there was a loss in confidence and inner strength of a kind which is difficult to measure precisely. If we consider, briefly, the constructive and positive demands put forward by the trade union movement as a whole during the years of the Labor regime, we shall have a picture of this loss of vitality and drive, if only because of the limited and conservative nature of these objectives.
 

The proposals of the T.U.C. during the years 1945 to 1951 were of the following order: First, to lift the wage standards of the lower-paid workers (the T.U.C. demanded wage increases only for this particular category of workers until June 1950, when it recognized the need to end the blockage of increases in general); second, to adjust those differentials in wages which were considered unjust and inadequate, including the question of equal pay for women, etc. This was the extent of its propositions on the wages front. It considered its ideas relating to production, which aimed at increasing productivity, as being more important and urgent; this, of course, in agreement with the government. In addition to the program of joint production and consultative committees, the T.U.C. advocated the employment of production engineers by management, as well as the establishment of union production departments by the important national unions. The purpose of such a production department would be to advise the different units of the national union, the shop stewards and the joint production committees as to ways and means of solving specific problems of productivity. [8] It cannot be said, however, that these propositions met with a warm reception on the part of the unions or their membership. In reality, production efforts were limited to the participation of top union officials in various investigations, commissions (Working Parties), production groups which visited the United States, etc., together with the limited activity carried out by those joint consultation committees which continued to function after the war. The desire on the part of certain union leaderships to transplant an Americanized conception of the role of the union in the process of production met with such obstacles as to quickly render this suggestion illusory.

At the end of the Labor experience, no fundamentally new viewpoint had developed within the trade union movement, and the multitude of often contradictory tendencies and doctrines still existed, with perhaps a renaissance of purely syndicalist and guild socialist ideas to be noted in the unions concerned with the nationalized industries. The conclusion of Norman McLaren is that:

The very diversity of those currents which express themselves within the British movement, their fluctuations, the absence of apathy thanks to the existence of a still chaotic structure on the whole; all this indicates that the English trade unions still have a long road to travel. [9]

But it is undeniable that the British workers’ movement, as represented by its 8 million organized workers and their unions, retained its full freedom of action and independence, both with respect to the government and to those political views in favor of its integration into the State apparatus that had been proposed.

This brief examination of the social status of the three principal sectors of Britain’s population – workers, bourgeois and middle-class – bring us to a consideration of the more difficult and important question of their interrelationship. If the relative status of the three major social groups was not changed by revolutionary and violent means, such as often accompanies the overthrow of existing property relationships and the substitution of new ones, then what changes could be observed in Britain under the rule of the Laborites? Such changes are generally grouped together under the heading of social levelling which, as we have seen, is the consequence of a particular policy of wages, prices and taxes. The important details of such policies as they were carried out by the Labor Party have already been noted. What can be said as to their results?

The distribution of national income among the different social categories is certainly one of the most familiar and effective ways of judging the process of social levelling, particularly in a hierarchized nation such as Great Britain. This is a complex concept, into which many factors enter, and subject to much disagreement in interpretation. “The distribution of national income,” writes François Sellier in the revue Esprit [10]:

Depends upon three distinct elements: the spread of the remuneration received by the different social categories, the price structure of the different goods, taking into account that the different social categories, even if monetary income is equal, don’t make use of their income in the same way; and the distribution of the tax burden according to the different social categories. The real distribution of income is the complex result of the combination of these three elements.

To these three elements in the distribution of national income must be added the additional element of wealth in the form of capital, or property, the maldistribution of which – from the socialist viewpoint – is the most reprehensible of all of capitalism’s evils since not only does it add to the income of those already receiving the highest proportion but it arises generally from no effort on the part of those who possess such wealth. Yet the importance of this element has often been underestimated in examining the social redistribution which has taken place in Great Britain. We shall see that the method of an increasingly progressive direct taxation employed by the Labor government, and by its predecessors, as a means of levelling incomes has about reached its uttermost limits; as a means of amassing taxes it was exhausted by the Labor regime. If a greater equalization of incomes is to be achieved in Great Britain by a future Labor government, it would have to recognize that the effects of its taxation policies have partly been blunted by the spending of capital, as well as by the general stimulation of accumulation of capital, to yield revenue and income at a future date. The weapon of redistribution of income by taxation has worn away its cutting edge; further distribution and levelling would require an attack upon the source of unequal incomes which derive from such sources as inheritance and which are unearned. This, of course, involves the basic question of the distribution of property and wealth, rather than that of income. What is the present situation in Great Britain with respect to property distribution?

The studies of H. Campion, Public and Private Property [11], still remain the basic works in this field although they cover only the pre-war period. His general conclusion as to property distribution has been cited elsewhere. What has happened since 1936, the last year covered in the work of Campion? At that time, a slight tendency toward a redistribution of capital wealth by comparison with the period before the First World War was noticeable, but 75 per cent of the total adult population of the nation still possessed only a little more than 20 per cent of its wealth. We must first observe that it is difficult to obtain contemporary information and statistics, because very little has been done to continue the studies of Campion. Kathleen M. Langley of the Oxford University Institute of Statistics, who has made the most recent studies, up through the year 1947, states that: “It is possible to make reasonably correct calculations of the distribution of property in private hands for the years 1936-1938, but serious difficulties arise when an attempt is made to make similar estimates for the post-war years,” largely because the annual reports of the Inland Revenue authorities and the Estate Duty returns for the deceased no longer give sufficiently detailed information according to age, sex distribution, etc., since the war. [12] Nevertheless, certain tendencies can be described. Death duties have been further increased since 1936, except on estates leaving under £2,000, on which they have been abolished. The trends noted in the studies of Campion have continued since 1936, but not at a greatly increased rate. The top 1 per cent of the population over 25 years of age now (as of 1947) owns under 50 per cent of the total privately held wealth of the nation as against 55 per cent in 1936, a decline of a little over 5 per cent; the share of the top 5 per cent has dropped by the same amount to now possessing 70 per cent of the wealth. The former proposition that three-quarters of the people own only 5 per cent of the wealth must now be amended to read “more than three- fifths of the people.” But it must be borne in mind that this change is due above all to the fall in the value of money rather than to any significant change in distribution. [13] Clearly no sensational change in the distribution of property took place between 1936 and 1947, and in the 4 years subsequent to 1947 no new measures were undertaken which would have affected the distribution in any serious manner.

The one favorable development is the fact that although capital is still very unequally distributed, there was a substantial increase in the number of capital owners since 1914, with 7,750,000 people owning between £100 and £1,000 in 1947 and 2 and one-half million between £1,000 and £5,000. A levelling-up process has ben going on over many decades, but at a slow rate which was not accentuated by the Labor government. Income, never so unequally distributed as property, has tended to level out and to be more evenly distributed at a much faster rate than has property. This has created a paradoxical situation which has yet to be resolved, and which is often ignored by those who make much of the “silent and bloodless revolution” which has unquestionably taken place so far as personal incomes are concerned. Formerly, gross inequality in property ownership went hand-in-hand with an almost equally gross inequality in the receipt of incomes. This was once accepted as a part of the British way of life and the country’s social ethos. But just as the hereditary monarchy of Great Britain lost its most important support when the House of Lords ceased to exist on a purely hereditary basis, so did gross inequality in property holdings lose its principal support as a result of the striking development toward equalization of private incomes. Personal wealth and capital holdings stand exposed today, morally and socially without serious defenses if a determined attack should be made upon them. [14]

This anomalous situation was not touched upon by the Labor government which centered its efforts around the matter of personal income and taxation policy. Another paradoxical situation exists in the field of property ownership which, at some eventual date, will present a problem whose solution raises fundamental principles. We refer to the fact that while the public sector of ownership has expanded to an enormous extent, as a result of the nationalizations, from a juridical and technical point of view this public or statified property is mortgaged to private individuals because of the compensation policy of the government which took the form of interest-bearing state bonds. Strictly speaking, it would be possible to deduce from this situation that the state property represented by the nationalized sector of the economy is “owned” by private persons, but this is a legal fiction without social import, and the really important question involved in this relationship is that of annual interest payments of a considerable sum to the holders of these obligations.
 

On returning to the original three elements which determine the distribution of national income, according to M. Sellier, it is necessary to add certain details to those previously cited before attempting to draw up a balance of the whole picture. The progressive redistribution of the national income began forty years ago, and was carried out in turn by conservative, liberal and, finally, Labor governments. Its principal weapon has been that of the income tax, and the rate of tax imposed upon income has mounted steadily until it reached its height under the Labor government. J-H. Huizinga, in his studies in Le Monde, cites some of the more sensational aspects of this policy: five-sixths of the population, with an annual income of less than £500 now possesses a purchasing power of 25 per cent above that of prewar; the other one-sixth of the population has seen its living standard drop by 30 per cent; a rentier, with an income varying between £1,500 and £1,900 between 1938 and 1949 has seen his real income reduced by 53 per cent by comparison with the pre-war period; a millionaire with an annual income of £100,000 in 1913 (£91,700 after taxation), saw this reduced to £23,000 in 1928, £2,459 in 1945 and £2,097 in 1950. Innumerable other examples of this kind could be cited, but their significance is more sensational than anything else since they do not indicate the situation with respect to the mass of the population, nor that of the distribution of income among the different social groups.

The conclusions of M. Sellier, which are based upon statistics of government reports and the Economist, and which are concerned with the spread of individual revenue and income as a whole, must be cited to give a firmer picture of the general movement of social levelling. He distinguishes individual incomes according to the following categories: earnings of workers, salaries of employees, incomes drawn from capital (profits, interest and rent); distributed profits of companies in the form of dividends and, finally, rents. Taking 1938 as a base year equal to 100, M. Sellier concludes that earnings of workers had increased by 158 per cent, salaries by 125 per cent, income on capital by 68 per cent, non- distributed profits of companies by 48 per cent and rents by 19 per cent. And, taking into consideration the real value of this income, in terms of changes in the value of money, he concludes that purchasing power of the working class increased by 28 per cent, that of functionaries and employees by 8 per cent, while that of holders of income from capital decreased by 20 per cent, non-distributed profits by 29 per cent and that of landlords by 54 per cent. These conclusions which appear too optimistic and which seem not to have taken other factors into account at first glance, must be examined further.

For the tax year 1938–1939, taxable incomes numbered 9,800,000, with a global income of £2,970,000,000 subject to taxation. Approximately 11 per cent, or £306,500,000 of this was taxed away, leaving £2,663,500,000 net income after taxes. Compare this with 1948–1949, to illustrate the new scope of both taxable incomes, the degree of taxation and the revenue in taxes yielded [15]:

Number of incomes taxes in 1948–1949:

  

20,750,000

Gross income before taxation:

£7,800,000,000

Taxation imposed:

£1,057,000,000 (13%)

Net income after taxation:

£6,743,000,000

The range and distribution of these personal incomes are shown in the following table which indicates the enormous growth of those earning incomes of between £250 and £1,000 per year in 1949 by comparison with 1938; note also the effect of the progressive taxation as indicated by the column showing the proportion of income before tax retained after taxation:

In general, the above table indicates the continuation of a process by the Labor regime rather than any radical innovation, so far as fiscal policy is concerned. The workers were conscious of the fact that the raising of taxes by means of heavy taxation of large incomes is a decidedly limited method, whereas the augmentation of the average income of the mass of the population is a much more fruitful way of obtaining results. This policy was pursued with much success.

Distribution of Personal Income by Ranges of Income**

 

Proportion of Income before tax
retained after taxation

Range of Income
before tax

Number of
Incomes

at 1938–39 rates

at 1949–50 rates

£250 to 499
1938:
1949:

 
  1,890,000
10,310,000

 
96.8%
95.7%

 
95.7%
94.7%

£500 to 999
1938:
1949:

 
     539,000
  2,443,000

 
89.2%
88.9%

 
83.4%
85.2%

£1,000 to 1,999
1938:
1949:

 
     183,000
     545,000

 
81.8%
82.1%

 
70.9%
74.0%

£2,000 to 9,999
1938:
1949:

 
       98,000
     219,000

 
70.9%
72.0%

 
53.5%
57.4%

£10,000 and over
1938:
1949:

 
         8,000
       11,000

 
42.3%
45.8%

 
20.2%
23.2%

** National Income, op. cit., page 22.
NB: Incomes not subject to taxation such as certain government certificates, cooperative dividends, investment incomes of charities, etc., are not included; they would not, however, change the comparative figures between 1938 and 1949.

According to official government statistics, the distribution – in terms of percentages – of personal incomes after payment of taxes changed in an important fashion under the influence of the Labor government. The Times of April 18, 1950, stated that: “The main changes since before the war have been the increase in the share going to wage earners ... and the fall in the share going to profits, interest and rent.” The claims of the Labor government may be summarized as follows:

Distribution of Personal Incomes from Work and Property,
after Taxation
[16]

 

1938
Per Cent

1946
Per Cent

1949
Per Cent

1950
Per Cent

Wages

39

43

48

47

Salaries

25

22

22

25

Armed Forces Pay

  2

  8

  5

  3

Profit, interest and rent

34

27

25

25

 

 100%

 100%

 100%

 100%

Expressed in monetary terms, the figures regarding national income and its distribution after taxes, for the same period, are as follows [17]:

National Income
(£ Millions)

 

  

1938

  

1946

  

1947

  

1948

  

1949

  

1950

Wages

1,682

2,857

3,295

3,700

3,862

4,096

Salaries

1,054

1,507

1,702

1,904

2,021

2,164

Armed Forces Pay

     77

   512

   324

   227

   228

   233

Profit, interest and rent

1,448

1,969

1,989

2,049

2,100

2,197

Total personal income
derived from work or
property, after taxation:

4,261

6,845

7,310

7,880

8,211

8,690

M. Sellier, who follows a slightly different system of estimation developed by the Economist (June 16, 1951), arrives at substantially the same proportions of the national income which go to the different social categories. He concludes,

The share of income from work (wages plus salaries) in the sum total of income enjoyed by all physical persons after payment of their direct taxes is therefore respectively 65 per cent for 1938 and 74 per cent for 1950.” [18] He concludes further that the proportion going to wages had increased from 39.5 per cent in 1939 to 47 per cent in 1950, adding the important remark that this does not take into account “gains derived from incomes which were transferred (social services, family allowances etc.

However, an important qualification must be made before it is possible to accept the conclusions toward which these statistics seem to point. A change was introduced by the government economists into the last two White Papers concerned with the question of national income. The tables relating to distribution of national income now shows the distribution of personal income, excluding undistributed profits, whereas formerly it showed the distribution of private income, including them. Successive White Papers have given undistributed profits – which may be defined legally as being income which belongs to the shareholders of a company, but which are not immediately spendable – a more and more inconspicuous place position in their accounts; the point of view of the Laborites seemed to have been that in the given situation they represented nobody’s income, but strengthened the general financial position of industry, thus reinforcing the national economy as a whole. The amount of undistributed profits retained by companies after payment of dividends, interest and taxes on earnings is equal to the amount available to provide for stock appreciation, and reserve funds, out of which dividends can be maintained if normal earnings fall. The role of undistributed profits is therefore undetermined and depends upon the activity of the government and its policy toward such profits. Some critics of the Labor government have automatically attributed undistributed profits to company, as well as attributing amortization and depreciation to the national income of the capitalist class thus presenting – it goes without saying – a completely different picture of the distribution of national income according to social groups; one much less favorable to the working class and to the claims of the Labor government. This, however, strikes us as an unjustified attribution since it ignores the use to which undistributed profits were put, in relation to the Labor government’s program of encouraging the formation of capital for purposes of expansion and reequipment of industry, as well as to the fact that depreciation cannot possibly be classified as income, but clearly belong under the category of formation of capital. Gross domestic capital formation, which is subdivided between fixed capital formation on the one hand and the physical increase in stocks and work in progress, on the other hand, does not include expenditure on the maintenance and repair of plants. Its development during the years of the Labor regime are given in the following table:

Gross Domestic Capital Formation, 1946 to 1950*
(£ Millions)

Capital expenditure on fixed assets:

  

1946

  

1947

  

1948

  

1949

  

1950

Public service vehicles

     14

     25

     34

     42

     41

Road goods vehicles

     72

     75

     71

     75

     75

Railway rolling stock

     22

     26

     30

     31

     30

Ships

     77

     83

     75

     75

     81

Aircraft

     16

     14

     25

     12

Plant and machinery and passenger cars

   350

   440

   531

   603

   641

Buildings and Works

   865

1,030

   605

   631

   697

Repair expenditure on buildings and works:

   560

   600

   585

Total fixed capital formation:

1,400

1,695

1,920

2,082

2,162

Value of physical increase in stocks and work in progress:

−165

   140

   200

   215

   115

Gross domestic capital formation:

1,235

1,835

2,120

2,292

2,277

* National Income, op. cit., page 43.

We note here not only the government’s active support of domestic capital formation and expenditure, by the transfer of its surplus on current accounts and other transfers, but also – and this, it would seem, testifies as to the role of undistributed profits and depreciation allowances on the part of private industry – the role of capital accumulation in terms of its reactivization in industry, by way of the capital expenditures described in the preceding table. This was, of course, entirely in accordance with the policy of the Labor government, much concerned with expansion and re-equipment of industry. Those who attack the Labor government on the grounds that it contributed, directly and indirectly, to the formation of private capital, thereby unquestionably strengthening the position of private capital in financial terms, forget not only that such was its open policy, but, more importantly, planification as undertaken by the government was based upon a mixed economy concept which assumed a harmonious relationship between public and private sectors of the national economy; the development of one sector would favor the development of the other. It is true, of course, that such was not always the case and a competition between the two sectors over a division of the new capital accumulated had developed toward the end of the Labor government. But, here again, it must be pointed out that the solution of this competition depended upon a series of complex social and political factors, including the international situation; or, in a word, the orientation and tendency of the Labor regime itself. There was no abstract or mechanical division of capital investment funds under Labor; the division took place according to the interplay of the internal forces which operated within the government and the Party, a state of affairs which, it would appear, reflects not only the democratic content of the regime, but the possibility for various viewpoints to exert their influence in a democratic fashion.

We note, in passing, that the rate of formation of capital came to a halt and began to decline from 1947 onwards, but what is of greater importance is the source of this capital formation and expenditure almost all of which was devoted to the development of private industry, the government’s housing program, etc. What is, otherwise stated, the financing of capital investment as carried out by the Labor government? The table which follows gives us the answer to this question for the years 1948, 1949 and 1950.

The Finance of Capital Investment, 1948 to 1950**
(£ Millions)

 

  

1948

  

1949

  

1950

Global domestic investments

2,120

2,297

2,277

Foreign excess or deficit

     30

     30

−229

Total amount required

2,090

2,327

2,506

Surplus on current account of the central government

   310

   313

   481

War Damage payments and other transfers of central government to private capital account

   204

   238

   145

Less: Inheritance and other taxes on capital

−214

−253

−188

Surplus of local authorities and of national social insurance

   135

   189

   195

Depreciation and amortization

   845

1,027

1,124

Increase of taxes on business

   154

  −15

   118

Non-distributed profits

   524

   487

   569

Less: Provision for the evaluation of stocks of companies and public holdings

   185

  −17

−270

Total, less personal savings

1,773

1,969

2,174

Personal savings

   317

   358

   332

Total:

2,090

2,327

2,506

The productivity of British industry increased, we have already seen, by approximately 7 per cent for each year of the Labor regime through 1950, when it began to fall. This increase did not benefit the consumer, but went to the formation of capital. “The real consumable product was more equitably distributed,” writes M. Sellier, “but it diminished considerably.” “The accumulation of capital increased by the amount which had been deducted from consumption through taxation and the increase in prices, in spite of the rise in productivity. If the accumulation of capital can become a form of exploitation in numerous instances by its very exaggeration, it is equally incontestable that the survival of the British economy was permitted only by the large accumulation which took place between 1949 and 1950.” [20] The truth of this statement is incontestable, and is the fundamental justification of the Labor government’s policy; to which must be added that any criticism of this accumulation must also deal with the question of its orientation and its use: namely, for the program of public housing, for the export program, for the development of the nationalized industries, and for the re/equipment and modernization of private industry.

With respect to taxation policy, it has been pointed out that between 1938 and 1950, the percentage of increased taxation imposed upon wages which, it has been stated, increased by no less than 10,850 per cent! [21] Whereas the 1938 government took a mere 2 million pounds in taxes from workers, that of 1950 took 219 million pounds; or stated otherwise, the conservative government only took £2 millions from gross earnings of £1,735 millions in 1938, whereas the Labor government took £219 millions from gross earnings of £4,470 millions. This, of course, still left the wage-earning class with a net income of two and one-half times more than in 1938, without repeating the previously described details regarding the enormous increase of those whose earnings were raised to taxable levels, as well as the important changes within the income tax structure itself in favor of families and those with low incomes. But it is important to give a picture of the tax system itself, as it relates to direct taxes, according to the following table:

Direct Taxes Paid on Different Types of Income and Property*
(£ Millions)

 

 

1938

 

1946

 

1947

 

1948

 

1949

 

1950

Tax on income
Surtax

  59
    7

   122
       8

   108
       8

   113
     10

   115
     11

   114
     11

Interest and Profits
Tax on income
Surtax
Taxes on profits and excess profits
Social security contributions of self-employed workers

 
207
  43
  15

 
   657
     52
   391
  —

 
   604
     55
   286
  —

 
   664
     67
   283
     10

 
   791
     75
   300
     26

 
   821
     79
   277
     26

Wages
Tax on income
Surtax
Social Security Contributions

 
  43
    9
    8

 
   262
     15
     31

 
   228
     18
     33

 
   233
     22
     79

 
   250
     24
   105

 
   254
     26
   108

Salaries
Tax on income
Surtax
Social security contributions

 
    2

101

 
   205
  —
   135

 
   179
  —
   197

 
   202
  —
   238

 
   210
  —
   292

 
   219
  —
   296

Total:

494

1,878

1,716

1,921

2,205

2,231

* National Income, page 40.

From this table we see that whereas all taxes on salaries and wages in 1938 made up one-third of the taxes imposed in 1938, the same source provided 40 per cent in 1950; while private industry provided 52 per cent of taxes in 1938 and 54 per cent in 1950. Wages taken alone were 21 per cent in 1938, and 23 per cent in 1950. This would appear to be the correct and objective way of stating the situation with respect to the comparative evolution of the British tax structure as it affected the various social groups and in relation to unearned and earned income. At the same time, this gives the true indication of the Labor government’s tax program which emphasized the heavy taxation of wages and salaries, in order to eliminate as much buying power and pressure on the consumer’s front as was possible, with a relative easing up on the income of private industry in line with the expressed policy of stimulating the accumulation of capital.

*

On the basis of the material presented, what general conclusions may be drawn with respect to the distributive and social leveling tendencies of the Labor government, First of all, the Laborites did not introduce any strikingly new or sensational measure in this field, but simply continued and deepened the process already begun. The possibilities of a further leveling of the national income were small and no important measure could have been taken, in the circumstances, which would not have tackled the more fundamental issue of the distribution of property ownership itself. This, as we know, the Labor government was not prepared to do.

Secondly, as we move downwards from property income to social income, passing through the categories of distributed and undistributed profits, professional earnings, income from farming, merchants’ profits, etc., through wages and salaries and on to social security benefits, pensions, etc. (social income), the percentage income increases are larger for each major group of incomes the closer we approach the bottom; or, as we move from the income of the rich to that of the poor. Our general conclusion is that all the main, historic tendencies toward income equality continued to operate during 1946-1950, but that the general leveling tendencies have been less rapid than in the past, largely because of a faster rise in living costs for the working class than for others. Since before the war, the net effects of income, tax and price movements have all been egalitarian, but between 1946 and 1950, this egalitarian force shifted to changes in income alone. The rate of change slowed still further in 1948, largely because of the government’s wage stabilization policy, and the real value of property income rose proportionately. Beginning with 1949, there was a reversal of the previous tendency for wage earners to gain at the expense of those with incomes from property; a tendency which was related to the government’s attitude toward private industry and the accumulation of capital. This seems to summarize those processes which, both in the concrete and in the general, took place under the Labor government.

* * *

Footnotes

1. B. Watkins, The Cautions Revolution, page 148.

2. Bulletin of the Oxford University of Statistics, 1950, article The Levelling of Incomes, by D. Seers, pages 281–2.

3. P. Planus, Comité d’Entreprtae en Angleterre, Pion, Paris, 1946 gives an account of their extent, technique, system of organization, etc.

4. P. Waline, Les Relations entre Patrons et Ouvrlers dans l’Angleterre, d’aujourdhui, Riviere, Paris, 1948, introduction by André Siegfried.

5. Esprit, No. 188, March, 1952, pages 439–440.

6. A. Flanders, National Wages Policy, page 16.

7. M. Dobb, Wages, pages 208–9; for an excellent presentation of the national wage policy case, see article by A. Flanders, Wages Policy and Full Employment in Britain, Bulletin of the Oxford University Institute of Statistics, vol. 12, 1950, page 225.

8. This idea is largely borrowed from those American unions which actively participate in the campaign for more production, even to the point of accepting the principles of so-called scientific management, including time-and-motion studies, etc. It should be added that American unions consciously attempt to raise the efficiency of below-standard factories and spend much money for employing highly-paid officials, and educational work by running schools, lecturers, films, radio programs, etc.

9. Esprit, No. 188, page 446.

10. Ibid., No. 188, page 358–9.

11. H. Campion, Public and Private Property, Oxford University Press, 1939; also Daniels and Campion, The Distribution of National Capital, Manchester, 1936.

12. K.M. Langley, article on The Distribution of Capital in Private Hands in 1936–1938 and 1946–1947, The Bulletin, December 1950, page 339–340.

13. Ibid., pp. 348–350; also R. Jenkins, M.P., Fair Shares for the Rich, Tribune brochure, 1951.

14. The left-wing of the Labor Party has long cherished the notion of a progressive capital levy-tax on wealth and private property as such.

15. Annual Abstract of Statistics, No. 87 (1938–1949), page 242.

16. [There appears to be no note for this anchor. – Note by ETOL]

17. National Income, op. cit., page 19.

18. P. Sellier, Esprit, No. 188, pages 377–8.

According to National Income, pages 26–7, the total personal expenditure on consumers’ goods and services, at 1948 prices, was as follows: 1946 – £7,946,000,000; 1947 – £8,187,000,000; 1948 – £8,204,000,000; 1949 – £ 8,360,000,000; 1950 – £ 8,610,000,000.

This negligible rate of increase (9% in 5 years) is far below the rate of increase of the national income (13%) during the same period; this is the economy of austerity.

19. Economic Survey for 1951, Command 8195, page 44. [There appears to be no anchor for this note.]

20. P. Sellier, op. cit., Esprit, pages 379–380.

21. Ch. Bettelheim, Cahiers Internationaux, No. 34, mars 1952.


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