Tracing policy change: Intercurrent (de)politicisation and the decline of nationalisation in the 1970s

Introduction

The study of depoliticisation has produced a diverse and multidisciplinary field of scholarship. The concept has been used to improve understanding of the strategies deployed by governments to displace the political consequences of managing problematic policy areas (Burnham, 2001; Flinders and Buller, 2006), while a ‘second wave’ of contributions has produced sophisticated conceptual re-evaluation of the relationship between politicisation and depoliticisation as a dynamic and multifaceted process (Buller et al., 2019; Wood and Flinders, 2014). However, despite these important advances, how the politicisation–depoliticisation dynamic informs the process of policy change has received scant academic attention. This, we contend, is linked to three areas where the literature is conceptually and empirically underdeveloped.

First, whether implicit or otherwise, accounts of (de)politicisation are often presented in binary terms (Buller, 2019), reflecting the difficulties associated with operationalising complex typologies in empirical work. Conceptual sophistication, then, is often sacrificed for more parsimonious presentations. Second, this reflects a tendency to overemphasise (de)politicisation’s association with policy paradigms – for example, the ubiquity of depoliticisation under neoliberalism (Flinders, 2012) – thereby potentially replicating analytical inadequacies associated with the conventional political science understanding of institutions. Recent calls for a greater appreciation of path dependency (Buller, 2019: 244) risk emphasising an understanding of change as an exogenous feature of the politicisation–depoliticisation dynamic (Greener, 2005). Third, despite important attempts to impose a broader periodisation on this literature (Burnham, 2006), temporally, empirical work has short horizons, is often limited to studying individual governing strategies and neglects longitudinal approaches. All three factors limit our understanding of the politicisation–depoliticisation dynamic and, resultantly, how it informs the incremental nature of policy change over time.

We contribute a novel methodological approach to address these challenges. Drawing on Jeffrey Haydu’s (1998, 2009) critique of path dependency, we focus on the problem-solving solutions of political actors in response to ‘recurrent dilemmas’ that cut across time periods. Accounts of path dependency risk producing deterministic narratives, locking in outcomes over time without adequately explaining the source of historical reversals. Foregrounding the role of social actors in sequences of problem-solving, including interactions across governmental and societal levels, is favoured because ‘multiple causal trajectories [. . .] are brought together in episodes of social transformation’ (Haydu, 2009: 32). Rather than searching for critical junctures, this approach emphasises the range of factors – structural and agential – that inform processes of reiterative problem-solving. This can produce explanations about why particular responses are favoured over others, despite recurrent dilemmas remaining consistent across time. We argue that continuity in terms of governing dilemmas is mediated by switching between foregrounding politicising or depoliticising aspects of a strategy, a process that shapes policy change. We term this process the intercurrence of politicisation and depoliticisation, characterised by the simultaneous and continuous existence of older and newer governance arrangements (Orren and Skowronek, 1996).

To unpack the politicisation–depoliticisation dynamic, we return to the 1970s because the period tends to be presented as a critical juncture in advance of a paradigm shift in the 1980s (Hall, 1993). Specifically, we address the tensions surrounding political control (politicisation) and arm’s length discipline through commercial principles (depoliticisation) in the management of the nationalised industries (NIs) across the Heath (1970–1974) and Wilson/Callaghan (1974–1979) governments. Despite ostensibly enjoying managerial autonomy, NIs became a central tool of macroeconomic policy in politicised aspects of both governments’ responses to inflation. We argue that experimentation with quasi-market mechanisms to discipline NIs during the 1970s led to privatisation being seen as a plausible policy response to the recurrent dilemma of how to reconcile the commercial viability of the NIs with political control over them. We draw out the tensions and competing interests among social actors – an intrinsic feature of intercurrent (de)politicisation – to illustrate the incremental process of policy change not well-captured in the dominant narratives of the period.

Our methodology is underpinned by a critical appraisal of primary documents located in the National Archives. As this involves ‘a problematisation and assessment of the process of change in social, economic and political relations’ (Rogers, 2017: 122), we acknowledge that this reinterpretation is open to contestation. To mitigate against this, we approached the documents systematically, applying a theoretically informed preliminary coding framework to the secondary literature and policy documents. This process identified the recurrent dilemma of political control against commercial viability in the NIs and informed our subsequent document selection. Initially, we focused upon the ‘core executive’ – primarily the Treasury – and followed leads to documents pertaining to other relevant departments, committees and non-governmental organisations. The large quantities of qualitative data were corralled in NVivo 11. An iterative yet pragmatic approach was subsequently adopted, supplementing the predetermined codes with an ‘open’ and ‘axial’ informed coding strategy (Creswell and Creswell, 2017). Broader coding categories linked to a variety of social actors and ancillary concerns then emerged. Tracing institutional responses to the recurrent dilemma allowed us to construct an empirical narrative, teasing out the complex socio-political interdependencies that inform policy change.

The article proceeds as follows. Section one critiques the extant literature before section two promotes a conceptualisation of the politicisation–depoliticisation dynamic as characterised by problem-solving and intercurrence. Section three maps this intercurrent dynamic relative to the recurrent dilemma of political control and commercial principles in the NIs. Sections four and five operationalise this approach to explore the push-and-pull of the policy process as policymakers attempted to embed quasi-market mechanisms through reiterative problem-solving. To conclude, we reiterate the strengths of this conceptualisation and show how our approach has contemporary relevance as a tool to empirically study policy change.

Critiquing (de)politicisation

Depoliticisation, understood as a form of statecraft, has been defined as ‘the process of placing at one remove the political character of decision-making’ (Burnham, 2001: 136). Alongside the work of Flinders and Buller (2006) outlining the tools and tactics deployed in the pursuit of depoliticisation, this literature foregrounds the political and strategic ways that governments shift the contours of governance to reframe problematic policies as technical matters, placing them in the hands of ‘experts’ and thus displacing blame if things go wrong. This approach forms the bedrock of what is now a rich and multidisciplinary literature.

By subjecting this approach to critical reappraisal, Wood and Flinders (2014) argue that the dynamic and multifaceted nature of (de)politicisation is inadequately conceptualised, limiting analysis to the governmental arena. In advancing a new typology, Wood and Flinders highlight the need for greater appreciation of the societal and discursive aspects of (de)politicisation. This emphasises an expanded group of actors, including the media, interest groups, corporations, as well as private citizens, that give (de)politicisation its contested character and ‘frequently buttress or underpin institutional reforms and governmental decisions’ (Wood and Flinders, 2014: 152). A broader understanding of these concepts, they argue, is required to adequately capture the complexity of co-existing politicising and depoliticising processes and the interplay between different forms (Wood and Flinders, 2014: 165).

But despite the existence of sophisticated conceptual apparatuses to study (de)politicisation, there is a tendency in the literature to present politicisation and depoliticisation in binary terms, especially in empirical studies. Buller (2019: 254) is right to argue that ‘depoliticisation will always co-exist with politicisation in practice’. Why, then, have conceptual advances not been matched by empirical depth?

Part of the problem is just how difficult it is to operationalise broader conceptualisations in research. Despite repeated calls for in-depth empirical inquiry (Hay, 2014; Kettell, 2008), very few studies fully embrace more expansive frameworks. With notable exceptions (e.g. Bates et al., 2014; Fawcett and Wood, 2017; Toplišek, 2019), when they do, the binary emerges as politicisation and depoliticisation are presented in oppositional terms. Buller (2019: 254) argues that this can be explained as an ‘analytical ploy’ because, ‘ontologically speaking, the phenomenon of depoliticisation is more messy and complex’. We agree that this is part of the answer. Nevertheless, the prevalence of this ‘ploy’ has major implications for the understanding of policy change that are not fully appreciated in the existing literature.

One consequence is that there is a tendency to associate (de)politicisation with dominant policy paradigms. Burnham (2001), for example, presents an influential periodisation of 20th-century British governance as characterised by the dominance of politicisation or depoliticisation. The risk here – acknowledged by Burnham – is that depoliticisation is understood as a taken-for-granted feature of a policy paradigm – neoliberalism, say – while its contested character is underplayed. Burnham’s later work stresses that scholars should not neglect ‘the contradictions and tensions implicit within a dominant form’ (Burnham, 2006: 305) or the manner in which ‘early forms of depoliticisation co-existed with more overtly politicised methods’ (Burnham, 2011: 477). This sits well with an understanding of incremental change from politicisation to depoliticisation through ‘a gradual playing out of internal contradictions between discretionary policy instruments and the institutional context surrounding their operation’ (Buller and Flinders, 2005: 540).

More recently, like Buller and Flinders (2005) earlier work, Berry and Lavery (2017) foreground institutional context, illustrating how both politicising and depoliticising strategies can be deployed to secure the dominant neoliberal growth model. On this reading, the politicisation–depoliticisation dynamic is effectively conditioned by the broader institutional and economic context that policymakers necessarily respond to. Moreover, when depoliticisation is abandoned and politicised governing reinstated, aspects of the former remain in support of the dominant strategy, a position well-captured by Bates et al.’s (2014) notion of ‘depoliticised remainders’. This is also reminiscent of Diamond’s (2015) presentation of the politicisation–depoliticisation dynamic as a ‘duality’ rather than a ‘dualism’ whereby strategic actors ‘hedge their bets’ in oscillating between the two. These accounts highlight how the two processes can be complementary and self-reinforcing, as well as contradictory and oppositional, reiterating the unpredictability of the politicisation–depoliticisation dynamic in practice.

Understood in this way, the highly political character of (de)politicisation comes to the fore in complex narratives of policy development. But there is a danger. While this approach produces compelling accounts of (de)politicisation deployed in defence of the status quo, this understanding of institutions may well overemphasise continuity within the dominant paradigm at the expense of policy change. These approaches, then, are not best suited to explain historical reversals. Similarly, in the literature explaining the transition to Thatcherism, influential scholarship associates policy change with paradigm shifts in ideational frameworks (Hall, 1993) or moments of ‘decisive intervention’ in the light of competing constructions of crisis (Hay, 1996, 1999). As a result, Hay (2007: 198) acknowledges, there remains a relative ignorance of ‘the detailed phasing over time of policy change’. We argue that analysis of the politicisation–depoliticisation dynamic can improve our understanding of these incremental shifts in governance arrangements, but our knowledge will be constrained if we do not look across paradigms.

One way of doing this is to give greater weight to ‘path dependency’ as earlier institutional configurations shape and condition the ‘windows of opportunity’ that political actors exploit (Buller, 2019: 244). Buller and Flinders (2005: 540) point to the role of path dependency in embedding the structural conditions that made depoliticisation the norm from the 1980s. But narratives informed by path dependency can produce deterministic accounts that overemphasise ‘serendipitous events’ or ‘paradigm shifts’ when explaining policy change and reversal (Haydu, 2009). Not all ‘institutionalisms’ underplay incrementalism and change, but scholars must be cautious about presenting a shift from the dominance of politicisation to depoliticisation or vice versa as necessarily amounting to a paradigm shift (Feindt et al., 2021). In conjunction with path dependency, to do so risks reinforcing an oppositional view of politicisation and depoliticisation despite recent expositions of the politicisation–depoliticisation dynamic pointing to a more nuanced and subtle view of policy change that should instead focus on how the two co-exist as part of everyday policymaking.

Our final critique of the extant literature is straightforward. There are very few case studies that span policy paradigms, obfuscating the switch points that produce policy reversals. This reflects a tendency among researchers to focus on ‘successful’ examples of depoliticisation (Warner, 2019), but more fundamentally points to short temporal horizons and an empirical focus on discrete governing strategies. This further contributes to an overemphasis on serendipity in the path of policy change (Haydu, 2009). Reardon and Marsden (2020) are undoubtedly correct to advocate a ‘longitudinal approach’ when researching (de)politicisation and policy change, a conclusion that informs our own work.

Recurrent dilemmas and the intercurrence of (de)politicisation

We draw on the work of Jeffrey Haydu (1998, 2009) to advocate an approach that frames periods of time as phases in a sequence of problem-solving performed by social actors (in our case, governments and governmental departments) who confront ‘recurrent dilemmas’. These are problems which are persistent over time, and which several successive social actors will confront from a range of perspectives. The recurrent dilemma is a source of continuity, while the strategic pivots of social actors is a source of political contingency and change.

By studying the contingent outcomes of reiterative problem-solving, we can trace this process. Problem-solving will differ according to the social actors being examined and in relation to previous engagement with a recurrent dilemma. In Haydu’s (1998: 354) terms:

Continuities across temporal cases can be traced in part to enduring problems, while more or less contingent solutions to those problems are seen as reflecting and regenerating the historical individuality of each period.

Therefore, we posit that the policy process should be viewed as a form of adaptation and learning which conditions the possibilities of future policy (Kavanagh, 1991). A focus on recurrent dilemmas and problem-solving can ‘attend to the ways in which outcomes at a given switch point are themselves products of the past rather than historical accidents’ (Haydu, 1998: 354). This ‘puts history back into switch points’ and avoids a tendency of path dependent accounts to, on one hand, underdetermine the source of new trajectories by understating the deliberations of social actors and the historical constraints they face and, on the other hand, overdetermine the extent to which outcomes are ‘locked in’ along the course of a particular path. In short, foregrounding reiterative problem-solving shifts the balance of empirical narratives ‘towards more constrained switch points and less deterministic paths’ (Haydu, 2009: 36–37). Deliberations over the complexities of policy sets limits and provides potential paths for future rounds of problem-solving in relation to a recurrent dilemma.

Our approach pivots towards social actors and antecedent conditions and context. This overcomes binary oppositions between structure and agency and, similarly, between depoliticisation and politicisation, as discrete concepts (Luke and Bates, 2015). We argue that the institutional context that frames recurrent dilemmas is not static but rather informed by ‘intercurrence’, defined as ‘[t]he incongruous juxtaposition of old and new norms, of old and new ideas, of old and new institutions . . . as a normal condition of the polity’ (Skowronek and Orren, 2016: 30). This bequeaths a ‘political universe’ characterised by the simultaneous operation of older and newer governance arrangements and the inevitable tensions between them. The task of navigating the policy landscape, therefore, is fiendishly difficult because social actors confront recurrent dilemmas amid a fractious, unsettled and disordered institutional context as the norm (Orren and Skowronek, 1996). For us, the persistence of recurrent dilemmas is not exclusively the product of intractable public policy challenges, but also reflects the messiness of ‘intercurrence’ as an ever-present feature of the political context within which everyday policymaking is conducted.

Conceptualising (de)politicisation as ‘intercurrent’ describes a situation wherein politicisation and depoliticisation operate simultaneously, across governmental and societal levels, overlapping (in both complementary and contradictory ways) with each other, and each with their own historical provenance and dynamic. Like institutions, these processes have their own temporal logic, developing over time as newer and older features of policy interact when governments respond to recurrent dilemmas. Parsimony is achieved amid the messiness by foregrounding ‘the practical dilemmas experienced, recognised, and grappled with by real people’ (Haydu, 2009: 33). Bringing together the competing interests and diverging motivations of social actors with an understanding of intercurrence arguably achieves greater verisimilitude, capturing more of the push-and-pull of everyday policymaking, than alternative offerings. This emphasises that the simultaneous operation of politicisation and depoliticisation within governing strategies is the norm. The next section frames the recurrent dilemma characterised by the contradictory relationship between commercial principles and political control of the NIs.

The nationalised industries and the state

To illustrate the utility of our approach, we investigate a recurrent dilemma in the governance of the NIs, namely a tension between exerting political control while maintaining an indirect governing relationship underpinned by commercial principles. Often presented simplistically as part of the Labour Party’s ‘socialist vision’ for post-war Britain (Cairncross, 1985), the process of nationalisation in the 1940s should be contextualised by the perceived need to improve industrial efficiency and modernise key sectors of the economy (Singleton, 2002). This rationalisation drive was legitimised by a cross party consensus surrounding the success of state-controlled industry during the war (Parker, 2009: 5–6). The picture that emerges is complicated by a multiplicity of motivations and objectives among social actors (Millward, 1997; Tomlinson, 2008). For our study of the politicisation–depoliticisation dynamic, these actors intertwine across the ‘governmental/societal’ divide, including successive governments (shaped by ministers, officials and political parties), NIs and their chairmen, trade unions, the media and the public, producing ‘multiple orders in action’ (Orren and Skowronek, 2004: 113).

Nationalisation involved a form of tempered political control over key strategic sectors of the economy. The Morrisonian Model established NIs as ‘public corporations’ at arm’s length from government and intended to operate along commercial lines. This embedded an already existing contradiction surrounding the political control of failing market actors. The problem was that despite commercial principles and profitability forging an important aspect of the founding statutes for numerous NIs, the government was inconsistent in application of these principles, often undermining them (Ashworth, 1991: 52). Not only did nationalisation do little to alter the balance of economic power (Singleton, 2002: 26), but by the 1960s, interventions for macroeconomic purposes subjugated commercial principles to the government’s social and economic priorities (Blackaby, 1979: 403; Tomlinson, 2008: 231). Adding to the messiness of this policy area, policymakers were responsible for, but not in complete control of, the NIs (Buller and Flinders, 2005: 536). Also constrained, NI chairmen could not raise prices or borrow from capital markets (Cumbers, 2012: 19), while the commercial viability of the industries they oversaw was repeatedly undermined by price restraint and ministerial attempts to combat inflation (Schulze and Woodward, 1996: 106). Amid the broader context of industrial unrest, stagflation and perceptions of inefficiency permeating the media (Parker, 2009: 25), a landscape of fractious interdependency characterised management of the NIs.

The following two sections examine the processes through which the Heath and Wilson/Callaghan governments sought to address this dilemma in the 1970s. They reveal the intercurrence of politicisation and depoliticisation as fledgling or failed approaches to problem-solving incrementally embedded market-based solutions into governance arrangements.

The Conservative government 1970–1974

The Conservative government 1970–1974 contended with the recurrent dilemma as it attempted to disengage from industry, particularly in terms of wage negotiations (Blackaby, 1979). In turning to market-based disciplinary mechanisms, the shifting intercurrence of politicisation and depoliticisation exacerbated rather than relieved tensions surrounding the dilemma in a context of rampant inflation. NI chairmen’s autonomy was increasingly subjugated to national macroeconomic policy objectives (Tomlinson, 2008: 237), as commercial principles were sacrificed for governmental interventionism (Williamson, 2015).

The Conservative Party (2000 [1970]) committed to reduce the role of the state in NI management in the name of ‘competitiveness’ through the introduction of private capital to ease pressure on the taxpayer and improve investment decisions. Not to be confused with a commitment to denationalisation (Stevens, 2004), this was in line with earlier Treasury initiatives to push an efficiency and profitability agenda in the NIs by integrating commercial principles in the form of marginal cost pricing (Her Majesty’s Government (HMG), 1961, 1967). The stated aim was to foster commercially driven NIs and therefore depoliticise the role of government.

However, counter-inflation policy amplified the contradiction between commercial principles and political control as policymakers struggled to disentangle depoliticising policy responses from their politicised legacy. Despite rejecting a statutory incomes policy, as de facto employer in the NIs, the government felt compelled to set an example to the private sector. The depoliticising intention of disengagement was to ‘reduce the risk that [the employer] might be tempted to concede an inflationary settlement and then to seek to attribute the responsibility to the Government’. ¹ In the private sector, the politics of disengagement allowed the government to ‘dissociate themselves’ from excessive settlements with limited risk to its credibility. ² In the public sector, however, the government’s role as employer made this difficult as it was associated with the ‘right kind of figure’ (Blackaby, 1979: 55–56) as a form of ‘indirect incomes policy’ emerged (Dorfman, 1979: 67). The nature of the government’s relationship with the NIs made it challenging to embed depoliticising market-orientated disciplinary mechanisms.

By intervening to limit price increases, the government undermined its intended strategy by ‘acting inconsistently with their policy that the industries should be allowed to operate commercially and free of detailed interference’. ³ An associated problem, of which Heath was well-aware, was that by overriding commercial principles through price restraint, the Treasury would have to be prepared to subsidise NIs for inevitable losses. ⁴ This was at odds with Heath’s overarching economic strategy of reducing the Public Sector Borrowing Requirement (PSBR) and achieving stability in industrial relations in the hope that confidence in sterling could be maintained and economic expansion realised. ⁵ Between 1971 and 1974, subsidies to NIs spiralled from £176 million to £1308 million (Blackaby, 1979: 60).

Turning to quasi-market mechanisms was intended to underpin commercial viability while depoliticising (but not severing) political control. But despite the desire to reduce day-to-day interventions, the short-term need to influence the economy and to ensure accountability for the use of public funds impacted the policymaking process. The recurrent dilemma reflected the fact that an emphasis on commercial principles and efficiency was hollow when NIs lacked the discipline of the profit motive, market pressures or shareholders. In addition, underdeveloped forms of strategic control (such as corporate planning) made performance measurement difficult, further limiting accountability. ⁶

The Official Sub-Committee on NI Policy’s final report notes that, throughout the 1960s, commercial principles and managerial control had been supplemented by an increasingly interventionist approach in defence of wider social and macroeconomic goals. Any notion of NIs operating ‘efficiently as businesses with restrictions of Government intervention to that of a banker concerned with the security, size and profitability of his investment’ did not emerge as the aim of striking a balance between the NIs ‘exclusively as policy instruments or as businesses committed to unfettered profit maximisation’ ⁷ proved to be politically impractical given their position in the government’s counter-inflation strategy. For example, the proposal to introduce private sector capital financing as a depoliticising quasi-market disciplinary mechanism was rejected because it would reduce ministerial control over prices and operational matters. ⁸ As this would inevitably limit the return on an investor’s capital, the final report concluded that without ‘a more strategic type of control’ attracting private capital was impossible. ⁹

Despite the intentional policy of disengagement, the Chancellor of the Exchequer, Anthony Barber, provides the clearest indication that foregrounding depoliticisation was hampered and reversed in response to the economic context. Although unrealistic, outright sale of NIs was preferable to the introduction of private capital, he argued, as the involvement of public money created ‘some moral, if not legal, responsibility’ on the part of the government to conduct stringent oversight. ¹⁰ He informed Cabinet:

we need to encourage management to adopt a vigorous commercial attitude and, at the same time, to ensure that industries operate in accordance with the wider national interest. Present arrangements leave the Government too little strategic control, and the industries without clearly defined objectives while subject to an unhealthy degree of intervention and inquiry in detail which reduces their proper management freedom and responsibility. ¹¹

After 1971, price restraint in the NIs was buttressed by a Confederation of British Industries (CBI) initiative to keep annual increases below 5%. This was deemed successful as NI prices were held down relative to manufacturing (Millward, 1991: 148). But this subjugation to macroeconomic concerns undermined ‘commercial motivation’, exacerbating the recurrent dilemma as Treasury officials believed ‘the Government would have to exercise a much closer control than in the past over all investment issues as well as over prices and wages’. ¹² Furthermore, to secure support from NI chairmen, investment programmes had to be protected through access to the National Loans Fund, even if in practice this was patchy at best. ¹³ Despite the implications for the PSBR, ‘inflation remained the greatest national problem’. ¹⁴ Without change on the horizon, a senior official noted the likelihood of ‘virtually zero progress in controlling and shaping the nationalised industries during this Parliament’. ¹⁵

The rejection of quasi-market controls reflects the internal tension within the government’s ‘disengaged’ approach and the politicisation–depoliticisation dynamic. As one official stressed to Heath, the government was ‘drifting deeper into the “engaged” system of detailed control built up under the socialist administration’. ¹⁶ John Davies, Secretary of State for Trade and Industry, lamented this failure, recalling how one NI chairman argued, ‘that he had never had to deal with a more determinedly interventionist government’. ¹⁷ Trade union activity, too, led the government to deploy politicising tactics. In February 1972, after an inflationary settlement following the miners’ strike, the government reaffirmed its commitment to avoid any more ‘wholly exceptional’ settlements in the pay round. ¹⁸ In a subsequent dispute on the railways, the British Rail Board cited a ‘tendency to move toward a more detailed day-to-day control by the Government of British Rail’s handling of the pay dispute than was realistic or sensible’. ¹⁹ Among competing aspects of strategy, politicised control was deemed necessary. This illustrates how the intercurrence of politicisation and depoliticisation shifts as the consequence of a complex interplay between social context and actors. Heath intended to depoliticise the NIs, but the economic context and determined action by trade unions demanded a strategic reversal.

By August 1972, both the Treasury and the Central Policy Review Staff (CPRS) agreed that the government’s approach towards the NIs was in ‘disarray’. ²⁰ The situation could not be resolved in this Parliament, particularly once a return to statutory incomes policy was finalised in November 1972 and subsequent ‘stages’ included Price Codes that excluded NIs from minimum profit provisions while protecting private capital (Millward, 1991: 148). The intercurrence of politicisation and depoliticisation reveals a gradual shift from ostensible disengagement to an overtly ‘engaged’ counter-inflation policy. But officials at the Department for Trade and Industry still noted a ‘sub-structure being laid for the future’ ²¹ as talk of ‘a financial regime which provided something realistic to aim at’ ²² infiltrated Treasury thinking. Despite the unintentional preponderance of politicisation, depoliticisation simultaneously informed the thinking of governmental actors as they wrestled with the complexities of the recurrent dilemma. While this gives a sense of where the state was moving, for now, ‘treasury politicisation’ (Burnham, 2007) inhibited change.

By mid-1973, despite general agreement on the need for reform, repeated attempts by the CPRS to drive policy change were thwarted by Treasury officials as relations became increasingly discordant. As one official noted, ministers had intervened in NIs three times in 10 days and unilaterally cut investment. The relationship, it was noted, ‘changes day-to-day’. ²³ Counter-inflation strategy was being used as ‘a respectable alibi for postponement’. ²⁴ The politicisation–depoliticisation dynamic played out through counter-inflation policy and an institutional preference for politicised intervention. One Treasury official wrote:

I would argue that there are some decisions – and one could draw the boundary lines reasonably tightly – which any Government of whatever political colour will want to reserve to itself, because in the last analysis it carries the political blame and cannot shuffle it off on to the management of the industry (even if it sacks the Chairman). ²⁵

By September 1973, NI chairmen informed ministers of low morale. Despite promises to the contrary, the contrasting treatment of NIs to the private sector meant that the former had ‘either been forced into the red or into increasing their deficits to an extent which would take years to recover’. ²⁶ When informed by the Chancellor that Stage III of the government’s counter-inflation legislation would be ‘pretty tough’, the chairmen stressed that discipline could not be maintained without financial objectives. ²⁷ This was despite the fact that private sector profits continued to rise and the PSBR was spiralling. ²⁸

The shifting intercurrence of politicisation and depoliticisation reflects the push-and-pull of policymaking amid increasingly fractious relations between actors across the governmental-societal divide. In a context of political and economic crisis, the Heath government sacrificed the commercial viability of NIs to ensure a firm grip on political control. However, while counter-inflation policy was prioritised irrespective of the costs to the PSBR – a form of politicisation – Treasury officials consistently reached for a quasi-market mechanism or financial regime to discipline the NIs, revealing an intercurrent depoliticising countertendency within the same strategy. As the recurrent dilemma remained unresolved, depoliticising quasi-market mechanisms would be returned to in increasingly sophisticated ways. In what follows, we focus on one such mechanism: cash limits.

The introduction of cash limits in 1976

For the 1974–1979 Labour government, depoliticising the NIs was not on the agenda. On the contrary, politicising promises were made to the labour movement. What became the ‘Social Contract’ committed the new government to measures to increase the social wage (through subsidies, price controls and expansion of certain public services), redistribute wealth and begin the extension of industrial democracy (Holmes, 1985: 5–6). In contrast to 1970, politicisation was intentionally foregrounded. However, the Labour Party leadership and state officials remained sceptical of these reforms throughout the 1970s. Instead, they were concerned about the primary economic ill which had also afflicted the Heath government: inflation.

Between 1974 and 1975, the annual rate of inflation (RPI) was 24.3%, unprecedented for peacetime, while wages were increasing at an annual rate of around 29%. Alongside and related to this, the PSBR stood at around £4000 million by 1974. Taken together, this forced the government to grapple with the recurrent dilemma of reconciling commercial viability of NIs with political control at the expense of the more radical plans formulated while in opposition. Treasury officials warned that ‘the achievement of a substantial reduction in the rate of inflation means a once-and-for-all cut in living standards’ ²⁹ which not only contradicted Labour’s election promises but would not be accepted willingly by the labour movement. This involved the NIs directly. Determined to avoid the errors of the previous government, in 1976, senior Treasury officials argued that the move away from ‘market pricing’ through price restraint in the NIs resulted in a ‘loss of commercial direction in management and loss of cash sense among employees’. ³⁰ It was deemed essential that commercial viability be carefully considered as an alternative to the undermining of NIs for the sake of short-term macroeconomic goals. Cash limits offered a novel depoliticising ‘financial regime’ to embed with the more broadly politicised approach to counter-inflation policy taken by the Labour government.

The extant literature on cash limits argues that they emerged in response to a highly publicised ‘loss of control’ over public expenditure by the Treasury in 1975, wherein public expenditure totals far exceeded planned amounts (see Pliatzky, 1989 and the case of the ‘missing billions’). Cash limits sought to remedy this by setting annual cash ceilings on all public expenditure (excluding demand-led expenditures such as social security). These cash ceilings would be set in line with projected inflation in pay and prices, meaning that if actual expenditure outpaced plans then the Treasury could impose off-setting savings through cuts and possible redundancies (Thain and Wright, 1995: 46–56).

An under-examined aspect of cash limits is their use as a mechanism of control associated with the government’s attempt to achieve successful wage restraint through a voluntary incomes policy agreed with the Trades Union Congress (TUC) and CBI in 1975–1976. Ministers viewed cash limits as a ‘weapon’ to ensure wage discipline in the public sector (central and local government and the NIs). As such, they operated as a key plank in the government’s counter-inflation strategy. Cash limits, presented as a technical fix to the failure of public expenditure control, underpinned the politicised incomes policy – the success of which was contingent upon the continued agreement from trade unions – by depoliticising a disciplinary mechanism that placed downwards pressure on public sector wages. This enabled a supposedly technical mechanism, beyond the purview of negotiation, to exert substantial influence on wage negotiations moving forward. There was, therefore, a convergence of politicisation and depoliticisation towards the same end, rather than binary and oppositional features of a policy paradigm.

Unlike with central government, cash limits within the NIs could not be applied to all spending. Due to the commercial character of the NIs, cash limits restricted the amount a NI could borrow or receive in subsidy in one year and were referred to as external financing limits (EFLs). NIs were expected to finance a certain amount of their activity from internal funds, while access to funding from government grants, overseas or domestic capital markets or the National Loans Fund was restricted by the EFLs (Heald and Steel, 1981). In a report to ministers, senior Treasury officials argued that this arrangement was an opportunity to bring ‘home the consequences of excessive [pay] settlements’ by insisting that any ‘excessive element is paid for by cutting services’. This process was sold as a way to ‘bring the [nationalised] industry closer to the situation of a private sector firm which cannot raise prices and has to cut back employment to stay in business’. ³¹ EFLs would mimic the market by imposing commercial discipline by limiting the amount the NIs could spend, thus using them to reinforce a politicised counter-inflation policy irrespective of the intentional agreement between the government and trade unions. This demonstrates the counter-intuitive notion that politicisation and depoliticisation can work towards similar outcomes, while also driving novel policy implementation. This insight is often missed when politicisation and depoliticisation are understood in binary and oppositional terms.

This conclusion is supported by archival evidence highlighting a direct attempt to use EFLs to bear down on labour costs. In commenting on an early draft report concerning the use of cash limits in the NIs, officials in the Department for Trade and Industry suggested that the purpose of cash limits was:

to strengthen the negotiating position of management. For this purpose it would be essential for the Government to convince not just the Boards but all levels of management and the trade unions that they meant business so that any action needed to keep within the financial limits – and it might have to be rough – would be taken in good time. ³²

For the Department, the inflationary situation was both a pressing necessity and opportunity to restructure the relationship between labour, capital and the state. Inflation was interpreted as being driven by ‘wage-leadership’ associated with an ‘inflationary psychology’ among highly unionised sectors of the economy. This needed to be broken down through a fundamental change in thinking regarding the consequences of inflationary pay settlements. As the NIs were densely unionised, it is unsurprising that cash limits were viewed as a valuable weapon in the hands of management. Treasury officials recognised this, stating that any financial discipline in the NIs would ‘have to damage the union’s own interests, for instance by creating redundancies, and not just the interests of the public’. ³³ This, it was argued, brought NIs in line with private sector firms who had to cut jobs rather than raise prices. ³⁴

This approach resolved, for a time, the dilemma of commercial viability and political control. EFLs were designed to bite in circumstances of inflation, making public sector managers more ‘cost-conscious’ ³⁵ in their activities, while also acting as an important ‘counter-inflationary weapon’. ³⁶ These limits assisted NIs in maintaining wage discipline throughout the period, consonant with a politicised incomes policy. For the years 1976–1979, the NIs in aggregate remained within the EFLs set for them. ³⁷ This allowed senior Treasury officials to maintain that cash limits were effective in creating a more ‘business-like’ ³⁸ approach within the public sector and an important mechanism in putting downwards pressure on the growth of the PSBR. ³⁹ The political aims concerning counter-inflation and the PSBR seemed to be achieved through the disciplining and depoliticising effect of cash limits in terms of their ability to promote keen purchasing and wage discipline without catalysing industrial unrest.

However, this resolution to the dilemma looked increasingly uncertain and throughout the late 1970s and early 1980s the tension between commercial principles and political control began to re-emerge. For instance, a 1978 White Paper set out a new financial framework based on the notion of achieving a 5% rate of return for NIs with the introduction of flexible price policies (Heald and Steel, 1981). But this framework sat poorly alongside EFLs and only exacerbated the contradictory pressures felt by the NIs for the need to reconcile restraint with flexibility. Consequently, in Opposition, the Conservative Party established several policy groups, including one to consider NI reform. A sense of the policy direction is confirmed by the group’s conclusion that the NIs ‘have always cheated and recouped from the Exchequer, and they always will’, a position that ‘creates havoc in the private sector as well as costing a lot of money’. ⁴⁰ The report’s main thrust focused on the need to develop a system of financial discipline that secured a rate of return on capital and afforded the Treasury indirect control over wages through financial discipline. ⁴¹ There is clear evidence that the idea of denationalisation was taking root. Michael Heseltine wrote of the need to ‘construct policies designed to lead to the slow erosion of the public sector industry’. ⁴² This chimed with the group’s report that argued against a ‘frontal attack’ in favour of ‘a policy of preparation for return to the private sector by stealth’ ⁴³ and with it the foregrounding of depoliticisation in Conservative Party statecraft and the abandonment of any politically negotiated pact with trade unions and other social actors concerned with the continued public ownership of the NIs.

When the Labour government was removed in 1979, cash limits increasingly took on the burden of incomes policy, as the politicised approach of negotiating with trade unions was abandoned. The political imperatives of reducing the PSBR became increasingly important for the new Conservative government, meaning EFLs tended to overshadow any of the commercial criteria contained within the 1978 White Paper. Cash limits could act as a powerful tool of indirect control, but also had their limitations. In the early days of office, the Thatcher government discussed how cash limits may well be affective where NIs were not monopolies. Otherwise, it was noted that they could only impose limited discipline due to the scale of outgoings and the impact of external factors. There was no question of allowing essential services to go bankrupt and the power of the unions could not be ignored. For this reason, the government made it their ‘aim to reduce the monopoly power of the nationalised industries’. ⁴⁴ Cash limits continued as a means of putting pressure on pay, not as a permanent solution but one in lieu of a full confrontation with organised labour. ⁴⁵ But this technical, depoliticising tool pointed to the need for a reorientation. Keith Joseph argued that the initial policy position left the government ‘facing in two contradictory directions’. It wanted NIs to be wholly independent within the parameters of their financial targets and cash limits, but nonetheless needed to ensure that money was not diverted into pay packets when efficiencies were not achieved. ⁴⁶

In the early 1980s, the Thatcher government still wrestled with the same dilemma in the NIs. Despite the flirtation with quasi-market mechanisms in the early 1970s and the later introduction of cash limits, depoliticisation, while intercurrent, remained in the background. Understood this way, the lineage of privatisation becomes clearer as politicians built on already existing ideas (Stevens, 2004) which overlapped with policies previously introduced. As Heald and Steel (1981: 360) note, privatisation effectively cut the ‘purse strings’ by ‘subjecting [former NIs] to the disciplines of the capital market and freeing them from political pressure’. In theory, privatisation is the ‘purest form’ of institutional depoliticisation as it involves a complete shift of responsibility away from government. In reality, however, government retains some capacity for control through independent regulatory bodies, and hence politicising undercurrents or ‘remainders’ (Flinders, 2008: 251–252). By tracing the intercurrence of the politicising and depoliticising tendencies of the British state, we can see how the dilemma for political control remains, even if the state re-orientates in relation to it for ideological reasons.

Conclusion

This article advances an understanding of policy change that draws on the intercurrence of politicisation and depoliticisation found in problem-solving responses to the recurrent dilemmas that policymakers face. It shows how studying this dynamic within statecraft strategies and across the governmental-societal divide exposes the tensions at play as social actors and institutions interact along the path of policy change. This reveals the provenance of privatisation through the incremental embedding of quasi-market mechanisms as policymakers searched for, and often failed to find, a way to impose discipline on the NIs. By not overemphasising a paradigm shift in the 1980s, a nuanced picture emerges that captures the politically contingent nature of the policymaking process. This adds weight to accounts that see a dichotomy between nationalisation and privatisation as misleading because the balance between public and private interests is always more complex (Heald, 1985: 21). Our account is not a case of ‘inter-paradigm borrowing’ (Hay, 2011: 23) but the intercurrence of older and newer governance arrangements captured through simultaneously occurring politicising and depoliticising processes. The strength of our approach is that by pointing to the persistence of recurrent dilemmas across time we can see how the political character of the politicisation–depoliticisation dynamic evolves through the state’s incremental reorientation as policymakers oscillate between political control and blame shifting.

Complementing the study of recurrent dilemmas with a focus on intercurrence foregrounds the fractious and dysfunctional structural context within which the politicisation–depoliticisation dynamic unfolds. It discourages the use of analytical ploys to differentiate between discrete aspects of (de)politicisation because the inherently complementary and self-reinforcing, as well as contradictory and oppositional, nature of the dynamic animates the research agenda underpinning our approach. Focusing on the practical dilemmas that policymakers contend with – framed in their own terms – amid a ‘political universe’ of competing interests, diverging motivations and structural constraints produces rich analytical narratives that capture more of the push-and-pull of everyday policymaking without overdetermining the (re)emergence of governance patterns over time.

This approach is also well-suited for analysing contemporary events. For example, the intertwining crises of Brexit and COVID-19 have accelerated an already existing proclivity for foregrounding politicisation as politicians pull the levers of state power. Hay (2020: 201), writing in the aftermath of the Brexit referendum, identifies the emergence of ‘highly politicised’ tendencies as a ‘temporary moment in the transition to the next phase of depoliticisation’. The post-Brexit context he describes points to the utility of an understanding of intercurrence in (de)politicisation debates. As the UK economy re-orientates and economic imperatives come to dominate, Hay argues, politicians must tread carefully in a populist context in which the government’s claim to have taken back control will be on voters’ lips. An understanding of the intercurrence of politicisation and depoliticisation may help researchers navigate the emerging landscape as politicians imperfectly respond to dysfunctionalities associated with the multiple overlapping governance ordering arrangements that characterise the British state.