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Tale of two chancellors

by William Keegan

Tale of two chancellors

What a remarkable turn of events! At a time when the economic policies of UK Chancellor George Osborne were commanding a lot of attention, two of his distinguished predecessors died within a week of each other.

Denis Healey was chancellor from 1974‒79, and Sir Geoffrey Howe from 1979‒83. In life, as in death, the one followed the other, although they were very different characters, belonged to very different parties and differed on all the major economic issues of the day.

When public figures such as Healey and Howe live to a ripe old age ‒ Healey was 98 and Howe 88 ‒ you can be sure the obituaries in the serious press have long been prepared. Indeed, it is not unknown for the author of an obituary to predecease his subject.

In both cases, there were common themes: these were big men, political giants, who had seen something of life outside before becoming immersed in politics. Healey had been at Oxford before the war, and during the war was a beach master in the Allied Landing at Anzio. Howe did military service from 1945‒48, and was at Cambridge. Healey was a classist, Howe a lawyer.

Dead sheep and cricket bats
Books have been written, both by them and about them. What tends to come up in the media coverage of great politicians when they die are ‒ surprise, surprise ‒ the most memorable moments.

In Healey’s case, it was the time that, on the way to an International Monetary Fund conference in Manila in 1976, he got no further than Heathrow before he had to ‘turn back at the airport‘ to face the unpleasant music. The UK was the last big industrial economy to apply for an International Monetary Fund loan before the third-world debt crises of the 1980s, and the humiliation associated with that necessity haunted the Labour Party for decades after.

In Sir Geoffrey’s case, what is remembered most is the way that, as Thatcher’s longest-serving and most loyal minister (after the Treasury, he was foreign secretary and then leader of the House of Commons), he finally snapped over differences to do with Thatcher’s hostility towards ‘Europe‘. He made a dramatic resignation speech which indubitably set off the chain of events leading to Thatcher’s resignation.

Given his prime minister’s truculent attitude towards Europe, Howe made the following comparison: ‘It’s rather like sending your opening batsmen to the crease, only for them to find, in the moment the first balls are bowled, that their bats have been broken before the game by the team captain.’

Recalling this in an interview with me in 2007, Howe chuckled and said that, years later, a passer-by had turned to his companion and said: ‘Isn’t that the chap who attacked Thatcher with a cricket bat?’

There was the famous occasion when Howe was shadow chancellor and Healey chancellor, and the latter said that being attacked by Sir Geoffrey was ‘rather like being savaged by a dead sheep’. Healey later admitted he had said this to divert attention from some ‘telling points’ being made by Sir Geoffrey.

In fact, the two were good friends – a friendship that developed strongly in their old age, when they went to the theatre together with their wives. As Healey quipped, ‘After the age of 80, your enemies become your friends.’

But if dead sheep, cricket bats and trips back from the airport capture the public imagination, they are not what those two elder statesmen would have liked to be remembered for.

In Healey’s case, what mattered from the chancellorial point of view was that, in conjunction with Prime Minister James Callaghan, he managed ‒ in spite of all the difficulties with the IMF and its demands for public spending cuts ‒ to keep his cabinet colleagues together during that crisis. He was also proud that only half the IMF loan had to be drawn on.

Healey subsequently became chairman of the IMF’s key political committee for a year, and was even offered the managing directorship, which he turned down for family reasons.

Economic epitaphs
Howe would have liked to be remembered not so much for his part in Thatcher’s downfall as for two particular aspects of his chancellorship. One was the abolition of exchange controls in 1979; the other was his 1981 budget, which famously produced a hostile response from 364 economists. The criticism was that cutting public borrowing at a time of recession and rising unemployment was likely to make things worse. The response of Howe and many others was that the economy recovered after that deflationary Budget.

My own view is that the economy recovered as a result of policy changes that were not apparent to the 364 at the time ‒ namely, a decision to aim at a devaluation of the pound and the complete abolition of credit controls.
Howe was a decent, kind, civilised man. But he presided over the worst recession Britain had experienced at that stage since the second world war. He once said to me, when I expressed concern at the way things were going, ‘I am just an old-fashioned Welsh fundamentalist. I believe in cutting public-sector borrowing, come what may.’

Howe wanted to be prime minister, but never realised that ambition. Healey was not that ambitious, although with his phenomenal knowledge of and connections with interna-tional affairs, he did want to become foreign secretary, and never did. Late in life, he expressed regret he had not tried harder to become prime minister, although he did not lose sleep over this. But he did express satisfaction that he had (just) defeated the left-wing candidate Tony Benn for the deputy leadership in 1981.

Howe never forgot that ‘dead sheep’ remark. Indeed, on the coat of arms designed for him when he became a member of the House of Lords, there is a wolf in sheep’s clothing.

William Keegan is Senior Economics Commentator at the Observer.