Utopian idealism gives way to economic reality

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Labour came to power in 1964 with a blithe faith in the power of economic planning. But the loss of innocence at the heart of government was rapid. On 18 January, Jim Callaghan, the Chancellor, told the Cabinet that the 25 per cent target for growth by 1970 was for the purposes of "industrial planning and public presentation". For internal government purposes, the assumption was "slightly lower", 22.5 per cent.

The needs of "public presentation" were also at the front of Mr Callaghan's mind when he planned his first Budget. On 8 March, he wrote to the Prime Minister, Harold Wilson, proposing a new format for the Budget. "The existing form of Financial Statement might present the Budget in an unfavourable light, particularly internationally," he said.

His proposed format "directs attention away from the old overall deficit or borrowing requirement". Mr Wilson approved and the change was made, but international investors were unimpressed.

In July, there was a minor sterling crisis, which Mr Wilson used as a pretext for dropping "certain schemes of social importance", such as the abolition of National Health Service charges. "If the Government intended in any case to postpone these projects for a time, it would be well to announce this now in the context of the economic difficulties," he told the Cabinet on 28 July.

By the time the draft of the first five-year National Plan was discussed at full Cabinet on 3 August, the utopianism of "scientific planning" seemed out of touch with the harsh realities of the economic situation.

The draft was subjected to withering criticism by Sir Burke Trend, the Cabinet Secretary, writing to Mr Wilson the day before the Cabinet meeting.

"Will this be credible and convincing?" he asked, of the 5.25 per cent annual export growth target. And he described the idea that "an encouraging start has been made" to the Government's incomes policy as "surely optimistic". But the Cabinet seemed to have lost interest in the Plan.