A Pound of Flesh
Once in office, things were not at all rose as they had once seemed with £800 million deficit. To add insult injury. Callaghan found a note in treasury written by Reginald Maudling simply stating ‘Good luck, old cock.... Sorry to leave it in such a mess’. Needless to say, this didn’t endear the previous administration to Wilson and Callaghan and they came up with what was dubbed by Callaghan as the 'pound of flesh'approach.
For years the pound had been heavily overvalued and coupled by Britain’s lack productivity and just general uncompetitiveness this didn’t help at all. Government of all stripes had tried to avoid devaluation of pound sterling due to the political ramifications of it. Yet to Callaghan and his team all other options seemed to be temporary and mealy delaying something that was bound to happen. Wilson though was initially sceptical as with such a small majority he was hoping on a short parliament and to come back in a more sizeable majority. Yet he was eventually convinced that this was the strategy to go with.
Meanwhile the affects of the 1964 election were still being felt by the Conservatives, who were opposition for the first time in over a decade. There was growing calls for Sir Alec Douglas-Home to resign and for a fresh face to take over the party in opposition and lead the party back to government. Many in the press speculated on who would take over. These ranged from former Chancellor Reginald Maudling, Foreign secretary Ted Heath, and over young members like Iain Macleod. On the right of the party Peter Thorneycroft and his former apprentice Enoch .On Monday 1st March, former PM did what many had speculated and resigned and caught the first train up to Scotland and retreated to his estate while the first Conservative leadership election happened. In the end only three put themselves up for the role Maudling, Heath and Thorneycroft. Powell stated later he missed to run but the former chancellor persuaded with to wait and as one last favour to him.
The following day however the Labour government announced the devaluation of Sterling. Going from £1 = $2.80 to £1 = $2.45. There was a certain shock from all sides of political sphere as it hadn’t been a secret on a need to know basis and people unsure how it would be taken. That night the Prime Minister appeared on Television and on the radio and talked about the decision.
‘ My government has not acted lightly we have been but in this situation by a Conservative government who as mismanaged our economy. We are all in this together and there will be challenges ahead but we will weather them. We will fix the deficit rather ignoring it. The Pound is still strong under a Labour government and we will deliver where the Conservatives have failed’.
Labour planned to create a narrative where they would blame the economy situation and deficit on the Conservatives. It seemed that this approach was working and with no Conservative lead in place, The Conservatives failed to counteract this narrative of Tory misrule. The next Conservative leader had his work cut out.
After the First round Heath had the edge with 303 votes with only one abstention. Heath had been better at mobilising MP's and campaigning and Thorneycroft did better than people thought. Although he hadn't reached a majority +15% and many felt that Maulding was better placed to gain the Thorneycroft, Maulding was requested by senior party figures to withdraw as it was felt there needed to be a Tory leader ASAP. Maulding reluctantly agreed and Heath was sworn in with a less than stellar mandate and began to lead a Tory fight back. It wouldn't be too long till the backbench muttering began.