The Robert Hall Diaries 1954-1961 (Routledge Revivals)

Alec Cairncross

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317811152
• Edition: 1
• Topic: Business
• Subtopic: Government & Business
• Index: Business

Lord Roberthall was economic adviser to a succession of Labour and Conservative governments from 1947 to 1961. During that time, he served under eight Chancellors and exercised more influence on economic policy than perhaps any other official. Fortunately – though it was contrary to Civil Service rules – he kept a diary in which he documented and reflected on day-to-day events. This second volume, published in 1991, covers the years between 1954 and 1961, after Robert Hall's appointment as Economic Adviser to HM Government. The book includes details of conferences and negotiations in Australia, the United States and Canada, as well as accounts dealing with the struggles to contain inflation and moderate wages. This is a highly readable and fascinating account of what went on inside government in the post-war years. The book provides a unique picture of the relationship between Whitehall and Downing Street, and those people who shaped this challenging period in British economic history. Edited by Sir Alec Cairncross, who succeeded Lord Roberthall as Economic Adviser to HM Government in 1961, this reissue will interest any student researching policy and decision-making in the post-war period.

I

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Butler’s last years as Chancellor,

1 January 1954 to 20 December 1955

Friday, January 1st 1954

My KCMG was announced this morning, and when I went to Bernard Gilbert’s Friday Forum meeting, they were all very nice indeed.¹ I got a good many notes from Civil Servants during the day but as I am off early tomorrow, Miss Whitby will have to deal with most of them. As people always tell me, one of the nicest things about Honours is the letters one gets, in which one’s friends and acquaintances are more forthcoming than usual.

The Commonwealth Conference in Sydney is very much a routine one although it has not been routine to have them in the past; there was one in January 1952 and one (of Prime Ministers) in December 1952 so that the interval is roughly a year. Great labours have been going on in Whitehall for quite a long time to get ready for this one. Although there have been mild runs on the old lines, they have been much less violent than they were, and the question of what to do if there were a recession in the US was treated far more amicably than I thought possible. We agreed that if it got at all bad, there would be a strong case for increasing credits available both in EPU [European Payments Union] and in the sterling area, and approaches to the US and Canada for the same reasons. Most of the other stuff was fairly routine but on development the influence of William Armstrong, who took Martin Flett’s place, is already showing in that he has attempted both to quantify what is happening and to relate it to the [Economic] Survey Target: and the whole approach is more liberal. I tried to get the question of the £300–£350 mn [balance of payments] target re-examined before we left but did not succeed.² However Arnold France has promised to have it looked at when we get back.

The size of the US recession, or rather what size we should plan for, has also been interesting. My people, and Fred Atkinson in Washington, have been predicting a rather more serious down-turn than seems to me to be likely on political grounds. The recession has certainly been going on for some months now but in a very gentle and orderly way, and I find it hard to think, after all that Hauge [President’s Assistant for Economic Affairs] says, that they will let it go very far. This is the line we are going to take in Sydney, i.e. that the most probable hypothesis is that it will be ‘moderate and short’ and that our best line is to try to see it through. If it gets worse then we will think again. I don’t believe that our own position is so weak that we will not have time to think as we go along, and it wouldn’t be very sensible to act now as if there were going to be a serious slump, particularly as we have dismantled so many controls in pursuit of Tory policies: but I haven’t objected strongly since if we are going convertible we ought to make these first steps in good time – the policy of taking the temperature I tried unsuccessfully to get H.G. [Gaitskell] to adopt.

Actually I think that we are very much nearer to being able to go convertible, if there is no bad US slump, than we were two years ago. Commodity prices are low and show little sign of getting much higher, and even food which until recently seemed to be perpetually scarce, is getting more plentiful. There is almost a glut of wheat, and British agricultural policy has become all a question of subsidies, since imports have become so much cheaper.

On the collective approach [to convertibility], there is very little to say, since the US have given no indication of what they will do, and European countries dislike either convertibility, or the floating rate, or both.

Monday, January 4th (Singapore)

I have been on time so far: spent a night at Beirut and dined at Karachi last night with Gilbert Laithwaite, the High Commissioner. He talked about Trinity all the time, being so glad to see someone who was closely connected with it.³ The only local thing he mentioned was that the Paks were now building a big dam on the lower Indus which would develop a great deal of country there. We flew on to Calcutta that night and at about 2 a.m. picked up both Deshmukh, the Indian, and Mohammed Ali, the Pakistan, Finance Ministers. The latter looks a most engaging person. I do not remember having seen either of them before but both have high reputations. We got to Singapore about 1.30 and I had a sleep. Malcolm MacDonald, the High Commissioner, invited me to a dinner he was giving for the Chancellor. A lot of local bankers, Federation senior officials and so on were there.

After dinner we sat in the open and they asked questions of the Chancellor, who as usual handled them very well. Nearly all about rubber, where the planters, etc., are worried because if the price falls much lower it will not be profitable – and the Federation Government because most of their income depends on the export tax which falls off rapidly as the price falls. They think that if the price goes much lower they will have to borrow for, or stop, their development programme for schools, hospitals, etc. The Chancellor was not too well up in rubber. I tried to explain that I did not think the US could do much about synthetics and that the industry would have to struggle. On the Government side, I felt pretty clear that it would be cheaper for the UK to lend or give them enough, than for us to try to support rubber prices. However I think the US might be a little more helpful on their synthetic policy.

Wednesday, January 13th (Sydney)

I felt very much exhausted when I arrived – four days flying is too much, or rather the change of 10 hours so quickly. The Conference is nearly over now and it seems to me and I think to most others to have been very successful. Leslie Rowan and Roland Wilson [Secretary, Australian Treasury] did a very good job on the official meetings and produced a good report for the Ministers, who began on the 8th. Menzies [the Australian Prime Minister] is obviously a very able man and he has held himself in and been a first-class Chairman. The Chancellor has had to do all the work and has done it well – all his speeches have to be prepared carefully as he is asked to open every topic, and he speaks at lunches and so on, so that the UK Del. has had a tough time. But I have not done very much, nor has Frank Lee who is also here. The main load fell on Leslie [Rowan] himself, William Armstrong and Matthew Stevenson. Also Louis Petch, the Chancellor’s Secretary.

We are all in the Australia, for accommodation as well as Conference, which is a great help. The Australians have been extremely hospitable and done a first-class job on arrangements, including the Conference Secretariat. In the best Norman Brook style, which is not surprising as the Australians have sent several people to the Cabinet Office Secretariat as well as to the Economic Section.

There has not been anything unexpected or dramatic but I think the Conference is none the worse for that and one gets the feeling that the sterling area really has some coherence, much more so in this context than the Commonwealth, since the Canadians almost ostentatiously take very little part except to give everyone else rather sanctimonious advice.

The part of the discussion which I thought most useful was on the trade prospects and especially in relation to US business conditions. Here the UK line – (a) that as a working hypothesis we should assume that any recession would be moderate and short, (b) that it might be worse than this and that, if so, the general object should be to keep up the level of trade and not to have any more restriction than could be avoided, (c) that Commonwealth countries should keep in touch, and be prepared to concert measures if things got bad – was adopted by general consent. This gives us a very useful beginning – the Official Report spoke of credits between sterling area and OEEC countries and the possibility of collective discrimination. As this seems to me to be the principal thing to worry about on the horizon, I was very glad to have got so far, especially as in London a few months back OF had been nervous about opening the subject at all.

As might have been expected, development got most publicity. The Chancellor in his early public utterances talked about taking risks and the need for a bold policy, and the Australian press and politicians naturally took this to mean that there would be much more money. Partly to counteract this at home and partly to help Menzies, who was afraid he would lose his grip on the State Treasurers, the Chancellor then began to talk not only about the limits to UK resources but about the sacrifices this would mean. The Press then played this up and even talked about the need to return to rationing in the UK and to cut the housing programme. This was just as bad domestically for R.A.B. as the previous line – he tried to show that we could increase our loans without suffering, by diverting some of our increased production. This was the right line but I don’t know if it stuck. Incidentally, all RSA [rest of the sterling area] countries realized that we could lend much more easily if they provided a fairly good market for our goods.

The only awkward subject was connected with Imperial Preference and trade restrictions. The Chancellor was most anxious to persuade Australia to relax further on the [import] restrictions she had imposed on inessentials early in 1952, and which had borne very heavily on the UK. The Australians are prepared to make some changes, probably in February, but did not want to seem to make them as a result of pressure at the Conference itself. R.A.B. wanted to take back something tangible, to console his supporters for the inability to get any further with Imperial Preference, so he pressed the Australians in a way which they thought would give him less tangible results than would have followed if he had said very little. In the end the reference in the communiqué was very guarded. On preference itself, the new Central African Federation people were very forthcoming and said they wanted as much Imperial Preference as they could get.

Sir O. Goonetilleke [Finance Minister, Ceylon], who was the bad boy of the Conference, made several impassioned speeches to the effect that the sterling area was buying things from outside the area and thus causing surpluses to accumulate within it. Menzies was rather keen on this ‘buying from one another’ as it was called, and seemed to think that it was an alternative to written preferences, which indeed it could be if there was state trading or at least import licensing. But there is a lot of difficulty about price, especially now when the US is so near to dumping its agricultural surpluses.

Tuesday, January 19th (Silver Spur)

The Conference ended about 12.30 on Friday, Jan. 15th. The main trouble at the end was of course the communiqué. After a great deal of trouble and rewriting, the officials produced a very good one but with no peroration, which they felt should be provided by Ministers. Menzies, who was drinking very heavily during the latter stages, produced at a late hour on Thursday a very flowery and unsuitable peroration, and an introduction as well. About 10 p.m. I found a meeting going on in the Chancellor’s room, with all his senior officials telling him very firmly that these would not do. He was in an obstinate mood as he did not want to offend Menzies, and kept on saying that it was not too bad; however he did a draft that cut out the worst parts of the epilogue, but then the prologue was produced and he could not bear any more and went home.

Next day Ministers passed the main part, which had been redrafted on their instructions during the night. They then shut themselves up alone to consider the beginning and end, and soon after emerged with the great part of the Menzies draft. So it is still there, for all to read. It is however very unsuitable for a Finance Ministers meeting and is disapproved of by all the senior officials. But Ministers did not seem to mind and most of them thought it was the kind of stuff the Press would like.

On the Conference as a whole, Menzies was a very good Chairman indeed. He is a large and commanding figure, with a first-class voice and a ready command of language. As Chairman he was clearly the man in authority, he pushed on the discussions and made good summaries when needed. We were told that he had risen to the occasion and was not always so good, but I felt sure that he was outstanding and the next best Australian Minister, Sir A. Fadden, the Treasurer, was a long way behind. The main load fell on Mr Butler who was marked off to open, or occasionally to conclude, all the meetings. He was well served by his officials (we wrote him speeches for each meeting and these were continually worked over) but he was good enough to be worth working for and showed great adaptability in discussion. He has a very bad habit, however, of working on papers during discussion, and though he was able to keep an ear for any points that needed comment, it produced a bad impression.

The Australians ran the Conference very well indeed, under the direction of Allen Brown [Secretary, Prime Minister’s Department] who has no doubt used his people who had experience of the UK Cabinet Office. They had also borrowed F. A. Bishop, but B. told me he had very little to do. Everyone was hospitable, and the Australia itself is in almost all respects a good hotel.

I got the evening plane to Brisbane and stayed at Lennon’s Hotel, which has become a first-class international hotel. But Brisbane itself seemed little changed. Since then I stayed two nights in Toowoomba and am now at Silver Spur, where I came when I was two and which has been the home of the family ever since. There isn’t much left of the old township, and our house was burned down in 1943 – mother lives in what was the combined Post Office and Company Office. The surroundings are of course unchanged, and the view one of the best in the world.

Thursday, April 8th

I came back by Washington and enjoyed my visit very much. Leslie Rowan was there also and we had long talks with [Arthur] Burns [Chairman of the Council of Economic Advisers] and [Gabriel] Hauge about the recession, and with various people about the Randall Report, convertibility and so on.⁴ I found Burns very confident about the economic situation and about his ability to get the US Administration to take the necessary steps to check it if he thought this necessary. Win Riefler [Federal Reserve Board] was obviously in a much stronger position than when I was there before – he has continued to establish his position with Bill Martin [Chairman of the Board of Governors], who told me that he had made Win the Secretary of the Open Market Committee and that he was in a very strong position on policy. My general impression was that the Administration was still fairly weak and that they were not doing any work on our Memorandum.⁵

Since then the main interest has been the Budget, which was announced two days ago. The NIF [National Income Forecasts] Working Party came to the conclusion that there would be a little slack in the system towards the end of this year, and that if the US recession got any worse this might lead to a stock run-down here which would produce rather more slack.⁶ I had been rather worried by last year’s events as they seemed to show that we had over-estimated the slack last year – there ought to have been more unemployment, having regard to the small increase in production compared to the trend line.⁷ So I rather modified the picture and said I thought there was only a little room for concession. At that time a Budget surplus of about £60 mn was forecast. The main changes since last year were that some of the tax concessions, especially Initial Allowances, came in and that the agricultural subsidies were much more expensive than was expected a year ago.

However about three weeks before the Budget, the Inland Revenue announced that their sample of profits showed that the revenue would be about £90 mn less than had been forecast before. They also reduced their estimate for 1955/56 by about £150 mn, showing an expected above the line deficit in that year of about £300 mn or more. This produced a sudden reversion to pre-war principles: the Chancellor seemed to think that we were on the verge of ruin and must never have an above the line deficit: Bridges, Gilbert, Brittain and Rowan took more or less the same view. I had quite a struggle to get them to realize that the principles of the Budgets since 1948 made the surplus or deficit accidental. For a while it seemed likely that we should actually put on new taxes to avoid a deficit this year. As for next year, the drop was largely due to Inland Revenue having taken the NIF forecast of a slump here due to the US recession – so the moral would have been an easier Budget this year.

In the end we managed to avoid any new taxes this year, though the accounts were shaded a bit to produce a surplus. For next year, there is to be a campaign against Government expenditure which is all to the good though I do not suppose it will produce much. I managed to get the Chancellor to play down the loss of revenue expected because of a hypothetical US slump.⁸

Thursday, August 12th

It seems hardly worth going on when I write so rarely and yet I am reluctant to give up something I have been doing since I began this job. I am on leave at present but had to be in London and I was reminded of the diary because a young man from The Observer came to see me to talk about Edwin Plowden, of whom they are doing a profile. He wanted to know what I thought Edwin’s main contribution had been, and I felt no doubt that it was getting the planning machinery going for a full employment economy: the Investment Programmes Committee, the Programmes Committee and the Budget Committee as it has been since the end of 1947. The first is now the TIC [Treasury Investments Committee]; the second is getting less and less to do as controls are being given up; but the main structure is going well and will or at least should continue – in some form it will, just because full employment will remain a major object of policy.

He also asked me questions about why E.P. was so successful, a subject I have often considered. I feel pretty sure that it is because he has so much courage and tenacity, and because Cripps felt in him a similar spirit, wanting to get on with the job and not thinking about his career. Edwin worries a great deal about a decision after it is taken, and he thinks a great deal about his career when that is the principal thing he has to think about. But when he is in a struggle he concentrates on that and would be willing to throw his career and everything else away rather than concede anything substantial on a point he felt strongly about. Oliver Franks used to say that Cripps felt that E.P. would resign rather than give up a point of principle, whereas the ordinary Civil Servant is trained to do anything rather than resign. I have often wondered how this view squares with the state of mind E.P. got into after he learnt that R.A.B. had no real confidence in him. But I think they are compatible – when E.P. heard this, the main battle about convertibility was over and there was no struggle on so he was able to concentrate on his personal difficulties. If there had been another battle he would have gone into it unaffected b...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Table of Contents
• Preface
• Robert Hall remembered:
• I. Butler’s last years as Chancellor, 1 January 1954 to 20 December 1955
• II. Macmillan’s Chancellorship, 20 December 1955 to 9 January 1957
• III. Thorneycroft’s Chancellorship, 9 January 1957 to 6 January 1958
• IV. Heathcoat Amory’s first year, 6 January 1958 to 31 December 1958
• V. Reflation under Heathcoat Amory, 1 January 1959 to 27 July 1960
• VI. Selwyn Lloyd’s first year, 27 July 1960 to 21 April 1961
• Notes
• Appendices
• Bibliography
• Index