What is Clause IV?
The British Labour Party was founded in 1900 to seek representation in Parliament for the Labour movement including trade unions and socialist organisations. In 1918 the constitution for the party was re-written by the Fabian Sidney Webb and contained in Clause IV a commitment for "common ownership of the means of production, distribution, and exchange."
This commitment of socialist rhetoric was not acted on by the Labour leadership prior to World War II and the two Labour Governments led by Ramsay MacDonald were both minorities and unable to carry out any extensive reforms. The necessities of war brought about far greater state control of the economy, such as centralised control of the private rail industry. In December 1944 the Labour party adopted a policy of 'nationalisation' and would win a clear endorsement for their policies - the destruction of the 'evil giants of want, squalor, disease, ignorance and unemployment - in the post-war election victory of 1945 which brought Clement Attlee to power. However the party had no clear plan as to how public ownership would shape their reforms, and much debate ensued.
Nationalisation
The strategy was to take control of key industries and for the Government to use
Keynesian controls to help steer the economy. In 1945 Britain was in a poor state, effectively bankrupt and 4 million homes destroyed in the war would need to be rebuilt. It was decided that the nationalised industries would be run as a 'public corporation' following the model of the already existing
BBC whereby the Government would appoint a board which in turn would govern the corporation.
The nationalisation was led by Herbert Morrison who had experience of uniting London's buses and underground train system into a centralized system in the 1930s. He started with the Bank of England in April 1946, whereupon stockholders received compensation and the governor and deputy governor were both re-appointed. Further industries swiftly followed, civil aviation in 1946, telecommunications in 1947 along with the creation of the National Coal Board which was reasonable for supplying 90% of UK's energy needs, while 1948 saw the establishment of the National Health Service and the nationalisation of railways, canals, road haulage and electricity. By 1951 the iron, steel and gas industries had also been brought into public ownership.
All these reforms would imply that 'planning' would be needed to ensure that the Government could coordinate the activities of the many new public corporations, but the UK was hamstrung by its paucity, compounded by the breakdown of international trade and the start of the cold war and so a more pragmatic approach was taken. But Britain's infrastructure was back and working, and the compensation paid to former industry bosses from taxation was moved into more profitable (private) capital. Unemployment the great demon of the 20s and 30s was conquered by the late 40s and the creation of the welfare state provided a safety net for the vulnerable. However the socialist ideal of industries run by workers on a democratic basis for the benefit of the nation was always a non-starter and the mixed economy held sway.
The settlement
By 1951 the Attlee government was running out of steam, and the Conservatives led by Winston Churchill gained power. Road haulage and iron and steel were quickly denationalised by the new government but the remaining nationalised industries were left alone - an approach which became known as the 'postwar settlement'. Hugh Gaitskell became Labour leader but the party would spend the next decade in opposition, as the party split and argued over the direction it should take. Gaitskell proposed an amendment to clause iv which would alter the party policy on 'nationalisation' stating that public ownership should be viewed
"not as an end but as a means, not necessarily the only or most important one, to certain ends: full employment, greater equality, higher productivity. We do not aim to nationalize every private firm or create an endless series of state monopolies."
but his proposal was soundly rejected, the Labour movement was not yet ready for such pragmatism. Gaitskell died in 1962, and was succeeded by
Harold Wilson and Labour promptly returned to power. In 1967 Wilson
did renationalise steel, but this was inspired more by an aim to protect the industry from more efficient foreign competitors and to appease his left-wing critics than any socialist principles.
By the 1970s the British economy's growth had slowed and entered recession and it was clear that many of the nationalised industries were inefficient and bureaucratic and unable to respond to the high inflation ushered in by the oil shocks of that time. Labour Chancellor Denis Healy announced large increases in prices in his 1974 Budget to attempt to reduce the need for subsidies in the nationalised industries, and was forced to seek loans from the IMF. This and many other difficulties brought Margaret Thatcher to 10 Downing Street.
Privatisation
The Conservatives remained in power throughout the 80s and they slowly hit on the idea of raising revenue by returning the public corporations to private ownership, a process which became known as privatisation, a term coined by the Economist magazine. In 1981 British Petroleum (first nationalised before World War One by a certain Winston Churchill) and part of British Aerospace were privatised. However the process really took off in 1984 when British Telecommunications became British Telecom, with shares of ownership being sold to over 2 million citizens, many of whom capitalised on an instant profit by immediately selling their shares off for a windfall and spending the proceeds, actions which resulted in a mini-boom. Needless to say these windfalls became very popular with some voters, and the privatisation programme advanced onwards albeit in an ad hoc manner.
British Gas followed in 1986, British Airways and British Airports Authority in 1987, British Steel in 1988, the water boards of England and Wales in 1989 and the electricity boards in 1990. Other companies to be sold off by the Government in this period were Cable and Wireless, Britoil, the Trustees Saving Bank, the National Bus Company and the Government owned car manufacturers, Jaguar, Rolls Royce and Rover. The sale of millions of council houses to their tenants was also underway.
Once Thatcher had been knifed by her party, John Major became Prime Minister, and leading a seemingly directionless Government, the privatisation continued, with the proceeds handily allowing some spending power after the debacle of Black Wednesday. So British Coal, British Energy (responsible for maintaining Britain's nuclear power plants] and most infamously British Rail were allowed to be privatised. The former has seen the decimation of mining jobs throughout the company whilst British Energy and Railtrack have both proved to be severely dysfunctional companies, eating up millions upon millions of Government money to stave off bankruptcy.
New Labour
Meanwhile the Labour party had not been idle and after their 'longest suicide note' election manifest in 1983, which promised further nationalisations, and a series of further election defeats, Tony Blair became leader in 1994. His goal was to make the Labour party electable again with the help of his New Labour rebranding. One of the first tasks Blair took was to re-write Clause IV, which had long held a dear place in the heart of many a party activist. The document was to be updated for a modern audience, in an attempt to persuade the rest of the country that Labour were now a serious threat. A special conference was held in the spring of 1995 and despite opposition from some members, the party membership voted in favour of re-writing Clause IV. At the time of the vote, the exact wording of the new document was unknown, but after several drafts a version favourable to the party leadership was written. Crucially any references to nationalisation or common ownership were omitted.
By 1997 the state-owned sector of public industry had been reduced by two thirds, and millions of manufacturing jobs had disappeared as the UK began to reposition itself as a service based economy. Tony Blair won a mammoth election victory in May of that year. With the new Labour party constitution in place, the idea of public private partnerships was amended from the Conservative Private Finance Initiative, which would assist in the building of schools and hospitals and the running of the London Underground and some privatisation was experimented with (National Air Traffic Control). The Labour party has been under attack by many of its traditional supporters for such endeavours but it is unlikely that such criticism will prevent the gradual 'creeping privatisation' or that the party will rethink its relationship with Clause IV in the future.
For the purposes of comparison the pre and post 1995 versions of Clause IV are included below.
Post '95
Labour's aims and values
- The Labour Party is a democratic socialist party. It believes that by the strength of our common endeavour, we achieve more than we achieve alone so as to create for each of us the means to realise our true potential and for all of us a community in which power, wealth and opportunity are in the hands of the many not the few, where the rights we enjoy reflect the duties we owe, and where we live together, freely, in a spirit of solidarity, tolerance and respect.
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To these ends we work for:
- a dynamic economy, serving the public interest, in which the enterprise of the market and the rigour of competition are joined with the forces of partnership and co-operation to produce the wealth the nation needs and the opportunity for all to work and prosper, with a thriving public sector and high quality services, where those undertakings essential to the common good are either owned by the public or accountable to them;
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a just society, which judges its strength by the condition of the weak as much as the strong, provides security against fear, and justice at work; which nurtures families, promotes equality of opportunity and delivers people from the tyranny of poverty, prejudice and the abuse of power;
- an open democracy, in which government is held to account by the people; decisions are taken as far as practicable by the communities they affect; and where fundamental human rights are guaranteed;
- a healthy environment, which we protect, enhance and hold in trust for future generations.
- Labour is committed to the defence and security of the British people, and to cooperating in European institutions, the United Nations, the Commonwealth and other international bodies to secure peace, freedom, democracy, economic security and environmental protection for all.
- Labour will work in pursuit of these aims with trade unions, co-operative societies and other affiliated organisations, and also with voluntary organisations, consumer groups and other representative bodies.
- On the basis of these principles, Labour seeks the trust of the people to govern.
Daniel Yergin and Joseph Stanislaw, The Commanding Heights, Simon & Schuster
www.spartacus.schoolnet.co.uk
www.labour.org.uk
Parkin, Powell and Matthews, Economics, Third edition, Addison-Wesley-Longman