Inside the Treasury in the Swinging Sixties

Sir Alec Cairncross was head of the Government economic service when Harold Wilson came to power in October 1964 and remained in that position until he resigned at the end of 1968. Defying civil service rules, he kept a diary. For anyone interested in the inner workings of the Wilson government, the diary presents a picture which has the kind of immediacy which only a personal diary can offer. It is very readable and often vivid and entertaining.

The parallel with the present, as Labour again returns after a long period of Conservative rule, is obvious, but God forbid that the early years of Tony Blair's government should be anything like Wilson's. One of the vivid impressions that emerges is of the sheer chaos of economic policy making in the Wilson government, especially from 1964 to 1966 when George Brown was at the department of economic affairs, with responsibility for producing a national plan for the economy. Like Blair's ministers, the Wilson team were inexperienced in government. Beside this, the triumvirate of ministers dealing with economic policy - Wilson at No. 10, Callaghan at the Treasury and Brown at the DEA - was constantly at war with itself. Under the previous government Cairncross had been the main source of professional economic advice, but in 1964 he found himself one of no less than five senior advisers - three at the Treasury, one at No 10 and one at the DEA - of whom three, including the two famous or infamous Hungarians, Nicky Kaldor and Tommy Balogh, were very much political appointees.

The Cairncross diaries present a picture of a government in perpetual crisis. Worry about the balance of payments and the pre-occupation with the pressures on the pound in the markets, continued recurrently from 1964 right through 1968, more than a year beyond the devaluation to which the government was finally driven. The confusion in the processes of policy-making was accentuated by the tensions about the exchange rate, an issue on which Harold Wilson, as is well known, tried to suppress discussion. (Despite that, I, as a middle-level Treasury official, was secretly entrusted in 1966 by William Armstrong, the permanent secretary, with the task of preparing the contingency plan for devaluation eventually put into operation in November 1967.) How much has changed. The issues and language of economic debate in the 1960s seem a world away from where we stand now. Alec Cairncross is a highly respected mainstream economist with no ideological bent, but, along with everyone else, he was deeply involved in the debate about economic measures which are unheard-of these days: import deposit schemes to deal with the recurrent balance-of-payments problem, incomes policy in its various forms (norms, capping, freezes) and price and dividend controls.

The diaries record a point in 1966 at which the chancellor, James Callaghan, told his officials that he would accept a strategy based on an assumed rate of unemployment as high as 2 per cent, which was regarded as politically daring. It was of course a world of fixed exchange rates and one in which sterling was the second reserve currency. The United States, whose currency was also under pressure, was deeply uneasy about a possible pound devaluation. Another world indeed.

But no one should embark on this book expecting a comprehensive economic history of the Wilson years. Rather, it is a personal account of those events, meetings and discussions in which Cairncross was personally involved, and, although he was in an important position inside the Treasury, he was not involved in all the important discussions, especially those between politicians.

There were many times when, as his diary records, he did not see the chancellor for a month or two at a time. And the diary bypasses many of the significant events of the period.

So this is not really a book for the general reader. Anyone unfamiliar with the subject is not given much help. The diaries were apparently written mainly as a kind of memoir for himself and are presented now with very little editing. There are occasional passages to explain the background of events, but at many points the reader is left floundering. Sudden references appear, without explanation, to particular meetings of Cabinet committees or papers prepared for the chancellor, or to meetings at Chequers (who took part and what were they about?).

At one point we are offered "some gossip about Bonn" - a reference to an infamous Group of Ten meeting about exchange rates, and the French franc in particular, chaired undiplomatically by the German finance minister Karl Schiller in November 1968. But what happened at the Bonn meeting is not explained. And of course the book is full of references to people in the Treasury and outside it. They are often identified by no more than initials or even just a single initial, and unfortunately the footnotes provided to help the reader through this are inadequate and sometimes inaccurate.

I enjoyed this book very much, but then I was a Treasury insider at the time. For me it evokes many memories - including tagging along with Cairncross, as bag-carrier and note-taker, to meetings at the Organisation for Economic Cooperation and Development in Paris, which are often mentioned in the diary. To many like me, who were involved in the issues and battles of the 1960s, and who know many of the dramatis personae, it is all very fascinating. PhD students and other historians of the times will no doubt find the book valuable and interesting. But its appeal to the general public of today seems likely to be limited, which is no doubt why, as Sir Alec tells us with engaging frankness in his introduction, it was turned down by six well-known publishing houses, and was eventually published, very appropriately, by The Historians' Press.

Sir William Ryrie is vice chairman, ING Barings Holding Company Ltd; he was a Treasury official from 1962-82.