Financial aid and union support

American aid

The economic circumstances of the late 1940s tested relations between the unions and the Labour Party. Financial assistance through the American lend-lease system ended in the autumn of 1945. Although a further loan was negotiated in 1945 (approved by the US Congress in 1946), it was apparent that a great increase in production and exports would be necessary to prevent a balance of payments deficit. In the winter of 1947, a coal shortage produced an energy crisis, which threatened to undermine production.

In July 1947, the Chancellor, Hugh Dalton, returned the pound to convertibility against the dollar (as required by the terms of the American loan). However, as dollar reserves rapidly flowed out of the country, a full-blown economic crisis followed and in August of the same year Dalton was forced to suspend the move.

Union support

It was now vital that production costs were minimised to keep exports competitive. Since 1945, some ministers had believed that wage restraint was necessary under conditions of full employment. A memorandum by Dalton towards the end of 1947 proposed reductions in food imports and further rationing. In January 1947, the government's 'Statement on the Economic Considerations Affecting Relations Between Employers and Workers' argued that wage restraint could not be enforced, and urged unions to exercise restraint.

Despite the suggestion being contrary to traditional trade union objectives (protecting wages, conditions and standard of living for workers), the leaderships of the 'big three' - Transport and General Workers Union (TGWU), the General and Municipal Workers Union and the National Union of Mineworkers (NUM) - supported the government.

Order 1305

Immediately after the war, the General Council (TUC) of the Trades Union Congress (TUC) agreed to the continuation of Order 1305, which suspended the right to strike. In February 1948, Attlee called for the voluntary stabilisation of wages and prices (effectively a 'wage freeze'), which the TUC also agreed to endorse.

The government was successful in holding wages throughout 1949, but the TUC found it increasingly difficult to maintain what was essentially voluntary restraint because close involvement with government distanced it from its 'rank and file membership'. Unsupported by the TUC, there were increasing numbers of unofficial strikes towards the end of the 1940s. During 1947, dockworkers and road haulage workers held strikes, which were followed by further industrial dock disputes between 1948 and 1950.

In 1949, due to aid under the Marshall Plan, prices began to rise and the economic outlook generally improved. In May 1950, the NUM voted against the pay policy. Others unions followed and, in June 1950, the TUC decided to abandon its policy of wage restraint. The government's failure to prosecute striking dockworkers in 1951 led to the withdrawal of Order 1305.