Stuart Holland - Political Experience in The UK

Political Experience in The UK

In 1963 he came to the attention of Harold Wilson, then Shadow Chancellor, who invited him on graduation to be his assistant, but Holland declined in order to ‘do economics’ properly in order to be able better to critique it. His graduate thesis was in regional theory and policy and he was asked to draft papers for the Department of Economic Affairs which became the analytic basis of regional planning in the 1965 National Plan. He later was to draft the case for the Welsh, Scottish and Northern Ireland Development Agencies on the committee for the 1975 Industry Bill, and the English regional development agencies, with John Prescott, who later introduced them while Deputy Prime Minister.

In December 1965 he was invited to become an economic assistant in the Cabinet Office by Thomas Balogh, economic adviser to Wilson, and accepted. Holland saw the case for joining the EEC as accepting De Gaulle’s veto on qualified majority voting and proposed also a European Technology Community as the basis for doing so.

Balogh was initially delighted by Holland's knowledge of what was happening in Europe to the issue whether or not the UK should join the then European Economic Community (EEC), but fell out with him when he made the case to join it. Holland assisted Wilson in getting through to De Gaulle via Pierre Joxe. Joxe saw De Gaulle on Holland’s behalf, and then gave Holland the answer the next morning, in Paris, that the reply was ‘Yes’ to the 2nd application to join the EEC.

When De Gaulle accepted this, Wilson wanted Holland to become the first economic adviser to the Foreign Office, but was blocked by Sir Paul Gore Booth and Sir Con O’Neil, permanent and deputy secretaries at the FCO.

Wilson then invited Holland into the political office in 10 Downing Street handling relations with the Labour Party outside parliament, trades unions and those members of the public who declared to be or have been Labour Party supporters. He decided to resign from No. 10 for policy related reasons including on Europe, where he believed Wilson could have succeeded with the 2nd application to join the EEC, and done so in a manner which, with a new Technology Community, and a block on qualified majority voting, could have transformed it. Also on the failure to re-launch the 1965 National Plan through planning agreements with leading firms, which the French were adopting with success since 1966. He had passed a paper on this to Wilson, which he in turn passed to Peter Shore, who had succeeded George Brown as Secretary of State for Economic Affairs. But Wilson did not follow through. There was no National Plan re-launch. Holland then accepted a fellowship at the Centre for Contemporary European Studies at the University of Sussex and continued as an economic advisor to the Labour Party.

The case for state holding companies had been based on a study (The State as Entrepreneur, 1972) of the Italian Industrial Reconstruction Institute (IRI), and arguing the case in its opening chapter that both the private sector and Keynesian macroeconomic policies needed to be supplemented by State holdings in leading firms to ensure long-term innovative investment, extend a national innovation frontier and offset negative externalities such as regional imbalance. He combined this with the case that such holding companies could countervail multinational companies threatening to locate in lower labour cost countries by offsetting such lower labour cots through technical progress and innovation and, by direct operations in sectors, gain information on the degree to which they were transfer pricing and evading profits through tax havens (Holland et al., Fabian Society, 1971). Much later, this became a major agenda item for the first summit of the G20 heads of state and government in Washington in 2008.

The first person in the Labour Party to show interest in the case for state holding companies was Bill Rodgers, then chair of the Expenditure Committee of the House of Commons, who appointed Holland an adviser on the use of public money in the private sector. At the invitation of Rodgers, Holland wrote a paper on the case for state holding companies and planning agreements for a conference organised by the Centre-Right Socialist Commentary journal. He then was invited to present the same case to the National Executive of the Labour Party, and wrote two papers for it.

After he had presented the first, the then chairman of the Labour Party, and president of the boilermakers union John Chalmers, thanked him and was ready to move to next business, But Ian Mikardo, an influential member of the national Executive intervened. He declared that he did not know whether the case was right or wrong. But that, if it was right, the whole basis of what the Labour government had claimed in a National Plan based incentives to business to invest and sector working parties as talkshops was wrong and that the Executive should establish at east two committees to examine this, one on public ownership and the other on planning. This then ensued, with both chaired by Judith Hart, and the outcome became Labour Party policy in its 1972 and 1973 programmes.

Initially, this gained consensus without any of the internal dispute within the Labour Party that thereafter ensued. The case for the State as entrepreneur and gaining value for public money in the private sector through planning agreements had resonance in what already was a multinational economy, and why the Keynesian macro-micro synthesis, including the 1967 devaluation, had failed in the 1960s either to accelerate investment and innovation, or gain export-led growth. From the spring of 1972 through to the summer of 1973, at varying levels of commitment, both the Right and Left of the Labour Party had agreed the same agenda. There was a serious prospect of consensus not for an ‘Old Labour’ commitment to nationalisation, as the media and the Right later parodied the case, but for new public ownership and selective planning through the leading firms which were coming to dominate both the national and global economy.

Concerned to gain as broad based an approach as possible for the case, Holland accepted to write a paper on the same lines as for the Labour National Executive for Roy Jenkins whose chapter on ‘The Needs of the Regions’ in his What Matters Now (Fontana, 1972) reflected this in claiming that the State should have a shareholding in at least one leading firm in all the main twenty plus sectors of manufacturing, and in banking, mortgage finance and insurance.

When Labour came into government on a minority basis in the election of February 1974, Judith Hart appointed Holland as her special adviser on overseas development cooperation (see further Background Experience – Global). In the interim Tony Benn co-opted him into the drafting committee for the government’s new Industry Act on a committee chaired by Eric Heffer and including Michael Meacher and Tony Benn’s economic adviser Francis Cripps.

In 1975, Holland resigned as an economic adviser when it became plain that the Industry Act would make public shareholdings and planning agreements ‘voluntary’. The Labour Governments from 1974 nonetheless introduced two major state holding companies. The first, modelled on the Italian Industrial Reconstruction Institute (IRI) was a National Enterprise Board. The other was the British National Oil Corporation, modelled on the Italian State Hydrocarbons Corporation (ENI). By 1979, before being abolished by the Thatcher government, the NEB was employing a million people in British manufacturing. The BNOC’s own operations also made it possible to identify transfer pricing and tax avoidance by private sector oil majors in the North Sea.

In The Socialist Challenge (Quartet, 1975) Holland argued that new dimensions to a mixed economy including selective shareholdings in some leading firms and planning agreements with them and others would enable national governments to countervail the already emerging trend to unaccountable multinational companies, offset transfer pricing between their subsidiaries through tax havens and avoid a fiscal crisis for welfare expenditures. He also warned that a conservative neo-liberal alternative to this would be de-industrialisation, as echoed also in much of his writing in the press, and also in his contribution to a 1978 conference by the National Institute of Economic and Social research (Blackaby, De-Industrialisation, NIESR, 1979).

What followed then has been chronicled by Mark-Wickam Jones in his Economic Strategy in the Labour Party 1970-83 (Macmillan, 1996). Holland was elected a member of parliament when the Conservatives regained office in 1979. During the early Thatcher period, he argued the case with others, including Jacques Delors whom he had met in 1975, for a European dimension to an alternative economic strategy to that of neoliberalism and worked also with Willy Brandt, Bruno Kreisky and others to extend this at a global level through the Socialist International.

This was strongly supported by Neil Kinnock when he became Leader of the Labour Party in 1983, who appointed him shadow minister for International Cooperation. Kinnock supported a far more positive approach to European cooperation, and also extending the case for planning agreements with leading firms not only as an ‘alternative economic strategy’ to monetarism, but also for Europe, which also was supported also by Delors.