The United Kingdom was one of the victors of the Second World War, but victory was costly in social and economic terms. Thus, the late 1940s was a time of austerity and economic restraint, which gave way to prosperity in the 1950s.
The Labour Party, led by wartime Deputy Prime Minister Clement Attlee, won the 1945 post-war general election in an unexpected landslide and formed their first ever majority government. Labour governed until 1951 and granted independence to India in 1947. Most of the other major overseas colonies became independent in the late 1950s and early 1960s. The UK collaborated closely with the United States during the Cold War after 1947, and in 1949 they helped form NATO as a military alliance against the spread of Soviet Communism.
Following a long debate and initial scepticism, the United Kingdom joined the European Economic Community along with the Republic of Ireland and Denmark on 1 January 1973. Immigration from the British Empire and Commonwealth laid the foundations for the multicultural society in today's Britain, while traditional Anglican and other denominations of Christianity declined.
Prosperity returned in the 1950s, reaching the middle class and, to a large extent, the working class across Britain. London remained a world centre of finance and culture, but the nation was no longer a superpower. In foreign policy, the UK promoted the Commonwealth (in the economic sphere) and the Atlantic Alliance (in the military sphere). In domestic policy, a post-war consensus saw the leadership of the Labour and Conservative parties largely agreed on Keynesian policies, with support for trade unions, regulation of business, and nationalisation of many older industries. The discovery of North Sea oil eased some financial pressures, but the 1970s saw slow economic growth, rising unemployment, and escalating labour strife. Deindustrialisation or the loss of heavy industry, especially coal mining, shipbuilding and manufacturing, grew worse after 1970 as the British economy shifted to services. London and the South East maintained prosperity, as London remained the leading financial centre in Europe and played a major role in world affairs.
Substantial educational reform took place in this period with developments which included raising the age at which students could leave school, the introduction of the split between primary and secondary school and expanding and eventually dismantling the grammar school system. Liberalising social reforms took place in areas such as abortion, divorce, LGBT rights and the death penalty. The status of women slowly improved. A youth culture emerged from the 1960s with such iconic international celebrities as The Beatles and The Rolling Stones.
Post-war era Age of Austerity
In May 1945 the governing coalition dissolved, triggering the long-overdue 1945 general election. Labour won just under 50% of the vote and a majority of 145 seats. The new Prime Minister Clement Attlee proclaimed, "This is the first time in the history of the country that a labour movement with a socialist policy has received the approval of the electorate."
During the war, surveys showed public opinion moving to the left and in favour of a wider social reform. The public associated the Conservative Party with the poverty and mass unemployment of the inter-war years. Historian Henry Pelling, noting that polls showed a steady Labour lead after 1942, points to the usual swing against the party in power; the Conservative loss of initiative; wide fears of a return to the high unemployment of the 1930s; the theme that socialist planning would be more efficient in operating the economy; and the mistaken belief that Churchill would continue as prime minister regardless of the result. The sense that all Britons had joined in a "People's War" and all deserved a reward animated voters.
As the war ended and American Lend Lease suddenly and unexpectedly ended, the Treasury was near bankruptcy and Labour's new programmes would be expensive. The economy did not reach prewar levels until the 1950s. Due to continued and increased rationing, the immediate post-war years were called the Age of Austerity, (not to be confused with the 21st century United Kingdom government austerity programme).
The war almost bankrupted Britain, while the country maintained a global empire in an attempt to remain a global power. It operated a large air force and a conscript army. Without Lend Lease, bankruptcy loomed. The government secured a low-interest $3.75 billion loan from the US in December 1945. Rebuilding necessitated fiscal austerity in order to maximise export earnings, while Britain's colonies and other client states were required to keep their reserves in pounds as "sterling balances". An additional $3.2 billion – which did not have to be repaid – came from the American Marshall Plan in 1948–52. However the Plan did require Britain to modernise its business practices and remove trade barriers. Britain was an enthusiastic supporter of the Marshall Plan and used it as a lever to more directly promote European unity.Rhiannon Vickers, Manipulating Hegemony: State Power, Labour and the Marshall Plan in Britain (2000) pp 44–48, 112–30 Britain was an enthusiastic co-founder of the NATO military alliance formed in 1949 against the Soviets.
Rationing, especially of food, continued in the post-war years as the government tried to control demand and normalise the economy.Ina Zweiniger-Bargielowska, Austerity in Britain: Rationing, Controls, and Consumption, 1939–1955 (2000) Anxieties were heightened when the country suffered one of the worst winters on record in 1946–47: the coal and railway systems failed, factories closed, and a large proportion of the population suffered due to the cold.
Rationing Wartime rationing continued and was for the first time extended to bread in order to feed the German civilians in the British sector of occupied Germany. During the war the government had banned ice cream and had rationed sweets such as chocolates and confections; all sweets were rationed until 1954.Richard Farmer, "'A Temporarily Vanished Civilisation': Ice Cream, Confectionery and Wartime Cinema-Going", Historical Journal of Film, Radio & Television, (December 2011) 31#4 pp 479–497, Rationing was beneficial for many of the poor because their rationed diet was of greater nutritional value than their pre-war diet. Housewives organised to oppose the austerity. The Conservatives gained support by attacking socialism, austerity, rationing and economic controls and returned to power in 1951.
Morale was boosted by the wedding of Princess Elizabeth and Philip Mountbatten in 1947, and by the 1948 Summer Olympics held in London. Reconstruction had begun in London but no funding was available for new facilities.
Welfare state
The most important Labour initiatives were the expansion of the welfare state, the founding of the National Health Service and nationalisation of the coal, gas, electricity, railways and other primary industries. The welfare state was expanded by the National Insurance Act 1946, which built upon the comprehensive system of social security originally set up in 1911. People of working age had to pay a weekly contribution (by buying a stamp) and in return were entitled to a wide range of benefits, including a pension, health and unemployment benefits, and widows' benefits.
The National Health Service began operations in July 1948. It promised to give cradle to grave free hospital and medical care for everyone in the country, regardless of income. Labour went on to expand low cost council housing for the poor.
The Treasury, headed by Chancellor of the Exchequer Hugh Dalton, faced urgent problems. Half of the wartime economy had been devoted to mobilising soldiers, warplanes, bombs and munitions; a transition to a peacetime budget was begun while attempting inflation. New loans from the US and Canada to replace Lend Lease were essential to sustain living conditions.
Housing There was a critical shortage of housing. Air raids had destroyed half a million housing units; upgrades and repairs on undamaged units had been postponed.Catherine Flinn, Rebuilding Britain's Blitzed Cities: Hopeful Dreams, Stark Realities (Bloomsbury Academic, 2019) online review Three-quarters of a million new dwellings were needed. compared to the maximum prewar rate of 350,000. However, shortages of builders, materials, and the lack of money limited progress. Not including 150,000 temporary prefabricated units, the shortage reached 1,500,000 units by 1951. Legislation kept rents down but did not lead to an increase in the number of new homes. The ambitious New Towns project did not provide enough units. The Conservatives made housing a high priority and oversaw the building of 2,500,000 new units, two-thirds of them through local councils. Haste made for dubious quality and policy increasingly shifted towards renovation of existing properties rather than the construction of new ones. Slums were cleared, opening the way for gentrification in the inner cities.
Nationalisation
Martin Francis argues there was Labour Party consensus by 1945, on the National Executive Committee and at party conferences, on a definition of socialism that stressed moral as well as material improvement. The Attlee government was committed to rebuilding British society as an ethical commonwealth, using public ownership and controls to abolish extremes of wealth and poverty. Labour's ideology contrasted sharply with the contemporary Conservative Party's defence of individualism, inherited privileges, and income inequality.
Attlee's government nationalised major industries and utilities. It developed and implemented the "cradle to grave" welfare state conceived by liberal economist William Beveridge. The creation of Britain's publicly funded National Health Service under health minister Aneurin Bevan remains Labour's proudest achievement.
However the Labour Party had developed no detailed nationalisation plans. Improvising, they started with the Bank of England, civil aviation, coal and Cable & Wireless. Then came railways, canals, road haulage and trucking, electricity, and gas. Finally came iron and steel, which was a special case because it was a manufacturing industry. Altogether, about one-fifth of the economy was taken over. Labour dropped the notion of nationalising farms.
On the whole nationalisation went smoothly, with two exceptions. Nationalising hospitals was strongly opposed by practising physicians. Compromises allowed them also to have a private practice, and the great majority decided to work with the National Health Service. Much more controversial was the nationalisation of the iron and steel industry—unlike coal, it was profitable and highly efficient. Nationalisation was opposed by industry owners and executives, the business community as a whole and the Conservative Party as a whole. The House of Lords was also opposed, but the Parliament Act 1949 reduced its power to delay legislation to just one year. Finally in 1951, iron and steel were nationalised, but then Labour lost the general election that year. The Conservatives privatised iron and steel in 1955.