Foreign policy

Turning his attention to the looming crisis in Europe, he became the Labour Party's spokesman on foreign policy in Parliament. Pacifism had been a strong element in Labour Party (and other parties as well), but the Spanish Civil War changed that, as the Left moved to support arms for the Republican ("Loyalist") cause. However Dalton was not enthusiastic for the Labour party policy of wanting to intervene in the Spanish Civil War,^[8] later stating:

I was far from enthusiastic for the slogan "arms for Spain" if this meant, as some of my friends eagerly did, that we were to supply arms which otherwise we should keep for ourselves, for I was much more conscious than most of my friends of the terrible insufficiency of British armaments against the German danger.^[9]

His views were different from those of Attlee, later recalling that before the Second World War he believed:

as Germany and Italy were potential enemies of Britain and Franco was their ally, it was in Britain's interest that Franco should not win the Spanish Civil War. It was on this proposition rather than any extravagant eulogy of the Spanish Government that I based most of my public references to this most tragic struggle.^[9]

Yet Dalton admitted he was wrong in this assessment of British interests, stating that "When the Germans overran France in 1940 and reached the Pyrenees, Franco was neutral, and with remarkable skill maintained his neutrality until the end of the war. Hitler respected this and never forced his way through Spain to attack Gibraltar or crossed the Straits into Morocco." and "Hitler would not have respected the neutrality of a Spanish Republican Government. If Franco had lost the Civil War, Hitler would have occupied Spain."^[9]

Aided by union votes, Dalton moved the party from semi-pacifism to a policy of armed deterrence and rejection of appeasement. He was a bitter enemy of Prime Minister Neville Chamberlain. On 15 March 1939, Germany occupied the Czech half of Czecho-Slovakia on 15 March 1939. Later that same day, Hitler during his visit to Prague proclaimed the Protectorate of Bohemia-Moravia. On 16 March 1939, Dalton played a leading role in the debates in the House of Commons about the end of Czechoslovak independence.^[10] Under the Munich Agreement, Britain had promised a "guarantee" of Czecho-Slovakia (as Czechoslovakia had been renamed in October 1938) against aggression in exchange for the Sudetenland being allowed to "go home to the Reich". Dalton in his speech to the House of Commons noted bitterly that Germany had just violated the Munich Agreement and that the British "guarantee" had proven worthless.^[10] Dalton stated that Chamberlain "should disappear from office", saying that the only decent thing left for him to do would be to resign immediately.^[10] Dalton called the newly declared state of Slovakia a sham as he stated the Slovak declaration of independence "had been paid for by German money...and organised by German agents"..^[10] Dalton called the Slovak declaration of independence "a convenient legal let-ago of the guarantee" as Chamberlain insisted that the "guarantee" was not longer valid as Czecho-Slovakia had ceased to exist on 14 March even before the Germans marched in on 15 March.^[10] In response to several Conservative MPs who called Czechoslovakia an "artificial" state created by the Treaty of Versailles, Dalton called Czechoslovakia "a once free and happy model democracy in Central Europe" and noted pointedly that he had actually visited Czechoslovakia a number of times, unlike his critics who had never been there.^[10] Dalton ended his speech by warning of "a rapidly increasing danger to Britain", supported the idea put forward by the former Foreign Secretary Anthony Eden for a bloc of states to resist further aggression and urged a barrier to further aggression under the slogan "thus far, but no further".^[10] Hugh Dalton was among the 2,300 names of prominent persons listed on the Nazis' Special Search List, of those who were to be arrested on the invasion of Great Britain and turned over to the Gestapo.

Appointment

After the unexpected Labour victory in the 1945 general election Dalton wished to become Foreign Secretary, but the job was instead given to Ernest Bevin. Dalton, with his skills in economics, became Chancellor of the Exchequer. Alongside Bevin, Clement Attlee, Herbert Morrison and Stafford Cripps, Dalton was one of the "Big Five" of the Labour government.^[11]

In his biography of Attlee and Churchill, Leo McKinstry wrote: "Attlee had initially decided that two of the other most vital jobs, the Treasury and the Foreign Office, should be filled by Bevin and Dalton respectively. But the King had baulked at the idea of Dalton as Foreign Secretary, seeing him as untrustworthy and partisan. Similarly, the Foreign Office exerted pressure against Dalton, the outgoing Foreign Secretary Anthony Eden declaring that ‘it should be Bevin’."^[12]

Economic policy

The Treasury faced urgent problems. Half of the wartime economy had been devoted to mobilizing soldiers, warplanes, bombs and munitions; an urgent transition to a peacetime budget was necessary, while minimizing inflation. Financial aid through Lend Lease from the United States was abruptly and unexpectedly terminated in September 1945, and new loans from the United States and Canada were essential to keep living conditions tolerable. In the long run, Labour was committed to nationalization of industry and national planning of the economy, to more taxation of the rich and less of the poor, and to expanding the welfare state and creating free medical services for everyone.^[7]

During the war, most overseas investments had been sold to fund the cost of its prosecution (the state thus losing the income from them), and Britain suffered severe balance of payments problems. The $3.75 billion 50-year American loan negotiated by John Maynard Keynes in 1946 (and the $1.25 billion loan from Canada) was soon exhausted. By 1947, rationing had to be tightened and the convertibility of the pound suspended. In the atmosphere of crisis, Morrison and Cripps intrigued to replace Attlee with Bevin as Prime Minister; Bevin refused to play along, and Attlee bought off Cripps by giving him Morrison's responsibilities for economic planning. Ironically, of the "Big Five" it was Dalton who ultimately fell victim to the events of that year.

Cheaper money—that is, low interest rates—was an important goal for Dalton during his Chancellorship. He wanted to avoid the high interest rates and unemployment experienced after the First World War, and to keep down the cost of nationalization. He gained support for this cheaper money policy from Keynes, as well as from officials of the Bank of England and the Treasury.^[13]

Budget

Budgetary policy under Dalton was strongly progressive, as characterised by policies such as increased food subsidies, heavily subsidised rents to council house tenants, the lifting of restrictions on housebuilding, the financing of national assistance and family allowances, and extensive assistance to rural communities and Development Areas.^[11] Dalton was also responsible for funding the introduction of Britain's universal family allowances scheme, doing so "with a song in my heart", as he later put it.^[14][15]

In one of his budgets, Dalton significantly increased spending on education (which included £4 million for the universities and the provision of free school milk), £38 million for the start (from August 1946) of family allowances, and an additional £10 million for Development Areas. In addition, the National Land Fund was established. Harold Macmillan, who inherited Dalton's housing responsibilities, later acknowledged his debt to Dalton's championing of New Towns, and was grateful for the legacy of Dalton's Town Development Bill, which encouraged urban overfill schemes and the movement of industry out of cities.^[7]

Food subsidies were maintained at high wartime levels in order to restrain living costs, while taxation structures were altered to benefit low-wage earners, with some 2.5 million workers taken out of the tax system altogether in Dalton's first two budgets. There were also increases in surtax and death duties, which were opposed by the Opposition. According to one historian, Dalton's policies as Chancellor reflected "an unprecedented emphasis by central government on the redistribution of income".^[16]

Return to cabinet

Dalton returned to the cabinet in 1948, as Chancellor of the Duchy of Lancaster, making him a minister without portfolio. He became Minister of Town and Country Planning in 1950, the position being renamed as Minister of Local Government and Planning the following year. An avid outdoorsman, he served a term as president of the Ramblers Association, which promoted walking tours.^[19] As Chancellor in 1946 he had started the National Land Fund to resource national parks, and in 1951 he approved the Pennine Way, which involved the creation of 70 additional miles of rights of way. He still had the ear of the Prime Minister, and enjoyed promoting the careers of candidates with potential, but was no longer a major political player as he had been until 1947. He left government after Labour lost the 1951 general election.