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Denis Healey, a chancellor of standing

Denis Healey, a chancellor of standing

Rumbustious character who survived 1976 crisis

by William Keegan

Tue 6 Oct 2015

As the years have gone by, I have found my admiration growing for Denis Healey, British chancellor of the exchequer in 1974-79, who died at the weekend at the formidable age of 98. When asked the familiar question – who was my favourite Chancellor? – at a King's College, London, policy group the day before Lord Healey died, I found myself singling out his chancellorship with uncanny timing.

One admires various chancellors for various reasons. Unfashionably, I am a great supporter of Gordon Brown. And although I regret what he did, one cannot help noting that Nigel Lawson had a huge impact on taxation policy in the UK and elsewhere when he lowered the top rate of income tax to 40% in his 1988 Budget, severely restricting the freedom of subsequent Labour chancellors.

Healey, however, stood out. Over the weekend the media were replete with genuine praise for the great man. Much was made of the difference between his generation, who had served in the second world war and amassed much real-life experience before entering parliament, and modern politicians who often enter politics as low-level researchers straight from university.

The obituarists emphasised Healey's intellect, and wide range of interests outside politics, as well as covering his fascinating career in great detail – for which there was plenty of material in his brilliant autobiography The Time of My Life.

I first met Denis when he became shadow chancellor before the February 1974 election which unexpectedly brought Labour back to power and Healey to the chancellorship, after he had been defence secretary from 1964 ̶ 70 in the first governments of Harold Wilson.

Those were troubled times. The Conservative opposition under Margaret Thatcher made the most of the problems Healey encountered. These included 25% inflation, a balance of payments crisis and a run on sterling that led to the notorious 1976 ‘turn back at the airport' episode; he had to miss a flight to international monetary meetings in Manila and instead face a hostile Labour party conference to explain the need for emergency IMF help.

His relationship with James Callaghan, who had beaten him to the Labour leadership when Wilson resigned in April 1976, was sufficiently close that, despite the fraught atmosphere, they kept the Cabinet together while accepting IMF- and US Treasury-imposed cuts in public spending.

What was missing from the obituaries was recognition that, as chancellor, Healey had to live with the consequences of arguably the worst-timed post-war economic policy decision. This was the move, albeit well intentioned, of the 1970 ̶ 74 government of Edward Heath to link wage increases to the cost of living, on the verge of the 1973 quintupling of oil prices. This, plus the intransigence of the trades unions, intensified the impact of the oil crisis.

Although Denis maintained almost to his dying day that Britain had to resort to the IMF only because his own Treasury's economic forecasts were wrong, my own view is that he protested too much. Indeed, his senior civil servant at the time, Sir Douglas Wass, devoted the best part of a book (Decline to Fall) to arguing that, to coin a phrase, there really was no alternative.

Ever rumbustious, Healey survived the worst. When the economy was manifestly on the mend in 1977, he made great play with the prospect of what he termed 'sod-off day’, when he would no longer be constrained by IMF conditions. He then revelled in being able to preach to other countries as head of the IMF's key policy committee for a year.

Some obituary-writers say Healey was a disappointed man, because he never became foreign secretary – his greatest ambition – or prime minister. The last time I saw him, earlier this year, I had the firm impression that, although he regretted not having tried harder to become Labour leader and prime minister, this regret did not keep him awake at night. He was a well-rounded character, and great family man. He was proud to have influenced Harold Wilson's refusal in the 1960s to send British troops to Vietnam, and to have warded off a potential extreme left-wing takeover of the party in 1981, by 'a hair ' of his substantial eyebrows in an election for the deputy Labour leadership.

That victory was over the leader of the extreme left at the time, Tony Benn. Now, with Labour’s election of Jeremy Corbyn as leader, the left – after all Healey fought against in the early 1980s – is back in town.

William Keegan is senior economics commentator at The Observer and a member of the OMFIF Advisory Board.

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