Bevan at this point is Minister of Labour

After the Chancellor of the Exchequer had explained his Budget proposals the Cabinet reverted to the question, which they had discussed at their meeting on 22nd March, of the level of Government expenditure on the social services. One of the assumptions on which the Chancellor had constructed his Budget was that, in pursuance of the Cabinet’s decision of 22nd March, expenditure on the National Health Service would be subject for the time being to an upper limit of £400 million. Before that decision was taken expenditure on the Health Service in the financial year 1951/52 had been estimated at £423 million; and, in order to keep it within the upper limit approved by the Cabinet, the Health Ministers had agreed to effect economies in the hospital administration totalling £10 million and to introduce charges for dentures and spectacles which, in the coming year, would produce £13 million. In a full year these charges would produce a much larger revenue; but the saving on the hospitals’ service was non-recurrent and the revenue from charges would be needed in future years, if the total expenditure was to be kept below the upper limit of £400 million, in order to offset increasing costs in all parts of the Service.

The Minister of Labour said that he had always been opposed to the introduction of charges for dentures and spectacles. In his view it would be undesirable in principle, and politically dangerous, for the Labour Party thus to abandon the conception of a free Health Service. Now that he was aware of the details of the budgetary position he was able to add the further argument that this step was not financially necessary. In a Budget of over £4,000 million it should not be difficult to find so small a sum as £13 million in some other way which would not breach the principle of a free Health Service. He was specially disturbed at the prospect that this inroad on the Health Service would be justified by the argument that the money to be saved was needed for the increased defence programme. He himself believed that shortages of raw materials and machine tools would make it impossible in practice to spend effectively all the money which was to be allocated under this Budget to the defence programme; and in this view he had the support of the President of the Board of Trade and the Minister of Supply. The Defence Estimates for the coming financial year totalled £1,250 million; and of this the estimated cost of defence production amounted to £510 million. These were large figures and must be subject to a substantial margin of error. He believed that, within that margin, the Chancellor could have found the savings which he proposed to secure by introducing charges under the Health Service. The Minister reminded the Cabinet that such charges could not be imposed without fresh legislation. Believing, as he did, that such charges would involve a serious breach of Socialist principles, and having on numerous occasions proclaimed in public speeches his opposition to such a course, he did not see how he could be expected to vote in favour of such a Bill. If the Cabinet reaffirmed their decision that these charges should be imposed he would be obliged to resign from the Government.

The Chancellor of the Exchequer said that it was his special duty, in framing the Budget, to determine how the necessary revenues should be raised to meet essential Government expenditure and also, in present circumstances, to form a judgment on the figure of the Budget surplus at which the Government should aim in order to keep inflationary tendencies in check. The Budget which he had outlined to the Cabinet was a carefully constructed and integrated plan for regulating the national finances over the coming year; and it would be difficult for him to modify at the last moment any essential feature of that plan. The Cabinet should, in particular, be content to leave it to his judgment to determine the size of the Budget surplus at which he should aim. He believed that the estimates of defence expenditure were as reliable as any such estimates could be: he could not accept the suggestion that he should frame his budget on the assumption that the out?turn of this expenditure would be something less than the estimate. He had taken the view from the outset that some part of the rising cost of the defence programme must be met by reductions in other Government expenditure; many of his efforts to secure such reductions had been frustrated; and he had now reached a point at which he could not make any further concessions. The Cabinet had agreed, on 22nd March, that expenditure on the Health Service should be subject for the time being to an upper limit of £400 million; he was satisfied, from his consultations with the Health Ministers, that the cost of the Service could not be kept within that limit without the imposition of charges; he believed that, of the various charges which might be made, these would be the least unpalatable politically; and in all the circumstances he felt obliged to ask the Cabinet to maintain their earlier decision.

A long discussion ensued. The following is a summary of the main points made in it:-

(a) The Minister of Labour and the President of the Board of Trade thought that the Government would find great difficulty in persuading their supporters in the House of Commons to accept departure from the principle of a free Health Service. They considered that some Government supporters would abstain from voting in favour of the legislation authorising the imposition of these charges; and they pointed out that, if only a few Government supporters abstained, the Conservative Opposition, by voting against the Bill, could bring about a major Government defeat. In that event the Government would face a General Election in circumstances which would enable the Conservative Party to pose as the champions of a free Health Service. The Home Secretary also feared that there might be considerable Parliamentary difficulty in securing the passage of this legislation.

On the other side it was pointed out that, so far as concerned legislation, the principle of a free Health Service had already been breached by the National Health Service (Amendment) Act, 1949, which authorised the imposition of a shilling charge for prescriptions. This legislation, which the present Minister of Labour had himself introduced, had encountered no substantial opposition from Government supporters. It was not until it had been passed into law that the Government had decided not to proceed with their plan for making a charge for prescriptions.

The preponderant view in the Cabinet was that the Government, if they remained united on this issue, would have no substantial difficulty in persuading the Parliamentary Labour Party to support legislation authorising charges for dentures and spectacles supplied under the National Health Service.

(b) The Minister of Labour said that, in a Budget totalling over £4,000 million, there must be tolerances which would allow the Chancellor, if he wished, to forego his insistence on a saving of only £13 million on the Health Service. By the exercise of ingenuity, means could surely be found to avoid having to impose these charges. Thus, for the coming financial year, the relatively small amount required might be obtained by increasing the contribution made to the Health Service by the National Insurance Fund. Alternatively, the Chancellor might reduce by £13 million the Budget surplus at which he was aiming.

The Chancellor of the Exchequer said that he was not prepared to adopt either of the courses suggested by the Minister of Labour. They would both be inflationary in effect. Moreover, if he had such a sum at his disposal, he would certainly wish to consider to what purpose it could most usefully be applied. He was by no means satisfied that, even within the social services, the Health Service had the first claims on any additional money that might be available.

(c) Several Ministers expressed the view that, if the Minister of Labour resigned from the Government on this issue, an acute political crisis would develop. With their present Parliamentary majority the Government could not afford any diminution in their voting strength in the House of Commons. And, if the Government fell, as a result of divided counsels within the Cabinet, the Labour Party’s prospects at the following General Election would be very gravely prejudiced.

After a prolonged discussion the Foreign Secretary said that it seemed clear that the Cabinet would not be able to reach an agreed conclusion at that meeting. He therefore proposed that the discussion should be resumed at a further meeting later in the day. In the interval he would see the Prime Minister (who was in hospital) and would report to him the course which the discussion had so far taken.

The Cabinet agreed to resume their discussion at a meeting later in the day.

The Cabinet resumed their discussion of the level of Government expenditure on the social services.

The Foreign Secretary said that during the afternoon he and the Chief Whip had seen the Prime Minister in hospital and had given him a full account of the Cabinet’s discussion at their meeting that morning. The Prime Minister had asked him to convey to the Cabinet the following expression of his views. First, he had pointed out that in all Cabinet discussions of Budget proposals there must be a substantial measure of give and take between Ministers. The Chancellor of the Exchequer had particular responsibility for the national finances; and no other Minister ought to claim that any particular estimate should be treated as sacrosanct. It would be a most unusual thing for a Minister to resign on a Budget issue: so far as he was aware, the only Minister who had ever taken this step was Lord Randolph Churchill, whose political fortunes had never recovered thereafter. Secondly, a Minister who found himself in disagreement with a particular part of the present Budget proposals should consider, not only his personal position, but the effect which his resignation would have on the present and future fortunes of the Labour Party, Thirdly, the Prime Minister had said that it would be folly for any Minister to provoke a political crisis at the present time, for there could hardly be a worse moment for a General Election. As the summer went on, the conditions might become more favourable – the meat ration might be increased, the weather might improve and there might be some change in the international situation. But a General Election at the present time with a Labour Party torn by divided counsels, would prejudice the fortunes of the Labour movement for years to come. Fourthly, if the Government were forced to face the electors in these circumstances, they could hardly hope to win the election; and, after such a debacle, the Conservatives might remain in office for a long period. If the situation arose, the responsibility for bringing it about would rest with any Ministers who resigned from the Government at the present juncture. For all these reasons the Prime Minister urged his Cabinet colleagues to give solid support to the Budget proposals put forward by the Chancellor of the Exchequer; and, in particular, to adhere to the decisions which they had taken, as a Cabinet, on 22nd March regarding the future level of expenditure on the National Health Service.

The Minister of Labour said that he was not surprised to hear that the Prime Minister took this view. He had, however, discussed the matter with the Prime Minister before 22nd March; and he had then made it clear that he would not be able to share collective responsibility for a decision to abandon the conception of a free Health Service. This was, for him, a question of principle. He had given five years to building up the Health Service; he had proclaimed it on many public platforms as one of the outstanding achievements of the Labour Party in office: he had, in particular, upheld the conception of a free Service as the embodiment of Socialist principles. It was too much to ask him now to go into the division lobby in support of a measure authorising the imposition of charges for dentures and spectacles provided under this Service. In saying that he must resign from the Government if the Cabinet persisted in this decision, he was not speaking lightly or without consideration of the possible consequences which the Prime Minister envisaged. But a Minister must be free to resign if he felt that he could not conscientiously share collective responsibility for decisions which his Cabinet colleagues wished to take. This Cabinet had taken many decisions which he had not wholly approved; but, when it became clear that these represented a preponderant view in the Cabinet, he had been prepared to take his share of responsibility for them. But, latterly, he had come to feel that he could bring more influence to bear on Government policy from outside the Cabinet than he could ever hope to exercise within it; and, when a Minister reached that position, it was time for him to go.

The President of the Board of Trade said that he wished at this stage to make his own position clear. In the Cabinet’s earlier discussion that morning he had said that he supported the view of the Minister of Labour that it would not be possible to persuade all Government supporters to vote in favour of legislation authorising the introduction of charges under the Health Service. He now wished to make it clear that, if the Cabinet maintained their decision to introduce these charges, he would feel unable to share collective responsibility for that decision and, like the Minister of Labour, would feel obliged to resign from the Government.

In the course of a long discussion Ministers dwelt upon the grave consequences which would follow if resignations from the Cabinet caused a serious division in the ranks of the Labour Party. This might well precipitate a General Election, at a moment most unfavourable to the fortunes of the Party, and in circumstances in which the Party’s chances of success must be rated very low. But worse than that, it might undermine the authority of the Party’s leaders and weaken the electoral prospects of the Party for many years to come. From a wider point of view it was also argued that the Labour Party had given an example to the world of stable and progressive Government in the difficult period of transition after the end of the war and in the dangerous period of international tension which had followed it; and it would be a tragedy if at this juncture the inspiration of its leadership in world affairs were cast away.

The Minister of Labour said that he could not accept responsibility for these consequences, even if they turned out to be as serious as some of his colleagues had feared. It was not he who had taken the initiative in proposing charges under the Health Service. The political crisis, if one developed, would have been provoked by those who had made this proposal. Other Ministers, on the other hand, held that any Ministers who resigned from the Government at the present time would be responsible for the political consequences which were likely to follow; and, in their view, this was a very heavy responsibility.

Beside these grave consequences, the issue which now divided the Cabinet seemed relatively small. Was there not some compromise on the basis of which agreement might still be reached? The Cabinet then discussed various possibilities. Thus, would it be possible to postpone for six months the introduction of charges under the National Health Service? During the interval Ministers should be able to resolve their doubts on the question whether the money allocated to the increased defence programme could in fact be profitably spent; and they would then be able to see more clearly whether the proposed economies on the Health Service were in fact essential. Postponement would also have the advantage that the discussion could be resumed at greater leisure under the Chairmanship of the Prime Minister himself. Alternatively, would it suffice for the Chancellor in his Budget speech to say merely that expenditure on the Health Service would be kept for the time being within an upper limit of £400 million, and that the Government were considering what steps would be necessary to ensure that this limit was not exceeded? Would it not be possible to secure economies in the administration of the Service without resorting to charges? Or could necessary savings be secured by imposing a charge for prescriptions, and abandoning the proposed charges for dentures and spectacles? This would have the advantage that no fresh legislation would be required. And in 1949 the present Minister of Labour had accepted the view that a charge for prescriptions would not involve a breach of the principle of a free Service.

The Chancellor of the Exchequer pointed out that none of these alternative courses would give him a sufficient assurance that the necessary savings would in fact be secured. Other Ministers testified that the Cabinet Committee on the National Health Service had exhaustively considered ail practicable alternative methods of reducing expenditure on the Service, and had satisfied themselves that this expenditure could not be kept within an upper limit of £400 million without recourse to charges. They were also satisfied that the charges now proposed, for dentures and spectacles, were the most practical and the least unpalatable of any which could be introduced. The Cabinet reluctantly came to the conclusion that no compromise solution could be found along these lines.

In the course of further discussion The Minister of Labour indicated that, if he resigned from the Government, he would feel obliged to make it clear that his differences with his colleagues had not been restricted to this question of charges under the National Health Service. He was also gravely concerned about the economic consequences of the increased defence programme. While he supported the policy of rebuilding the armed strength of the western democracies, he was concerned about the pace and volume of their rearmament programmes. He believed that, by trying to do too much too quickly in response to United States pressure, the western democracies were in grave danger of undermining their economic strength. The United Kingdom Government would in his view make a double mistake if they allowed the increased defence programme, not only to distort the national economy, but to do this at the expense of the social services.

Further appeals were then made by a number of Ministers that the solidarity of the Government and the Labour Party should not be breached by resignations on this issue. The Minister of Education, in particular, made it clear that in his view Ministerial resignations were too high a price to pay for an economy of £13 million on the Health Service. He felt sure that it must be possible to resolve the differences within the Cabinet by some means which would not involve Ministerial resignations; and he hoped that the majority would not press their view to a point which would make these resignations inevitable.

After further discussion The Foreign Secretary said that he must bring the issue to a decision. He read out the conclusions reached by the Cabinet at their meeting on 22nd March, viz., that for the time being expenditure on the National Health Service should be subject to an upper limit of £400 million; that charges should be imposed for the supply of dentures and spectacles under the Health Service; and that the Health Ministers should draft the necessary legislation and make such advance preparations as were required to bring the scheme of charges into operation on 12th April. He asked each member of the Cabinet to state whether he was still prepared to adhere to those decisions. The Minister of Labour, the President of the Board of Trade and the Minister of Education said that, for the reasons which they had indicated in the course of the Cabinet’s discussion, they were not in favour of re-affirming those conclusions. The remaining members of the Cabinet all indicated that they favoured re-affirming those conclusions.

The Minister of Labour said that in these circumstances he would have to resign from the Government. He would submit his resignation to the Prime Minister in the course of the following day; and he presumed that he would thereafter make a personal statement in the House of Commons, possibly on 11 th April.

The Cabinet –

(1) Reaffirmed their decisions of 22nd March regarding the limitation of expenditure on the National Health Service and the introduction of charges for dentures and spectacles supplied under that Service.

(2) Authorised the Chancellor of the Exchequer to announce these decisions in the course of his Budget speech.

(3) Invited the Minister of Labour to reconsider his position, and expressed the earnest hope that he would not find it necessary to resign from the Government on this issue.

Source CM(51) 25th mtg., 9th April 1951, PRO CAB 128/19

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