The election galvanised the Conservatives to attempt to shrug off the label of being upper class, old boy, school tie network which the Profumo Affair had exposed to ridicule. In future, leaders were to be elected by Tory MPs, and their first choice, Edward Heath, fitted the new mood with his Grammar School origins. Indeed, the next three leaders of the Conservatives were former grammar school pupils. Both parties have yet to see a Comprehensive-educated leader.
Even so, after the August election, Labour's majority was only of five seats and the new government had inherited a number of problems - possibly the greatest was a balance of trade deficit amounting to #800m. As the Chief Whip struggled with a tiny majority, ambulances ferrying sick MPs to Westminster became a common sight. The atmosphere surrounding the government would soon become feverish as the pound sank rapidly.
A financial crisis was staved off by foreign borrowing and a 15% import surcharge. Meanwhile, the new government pushed a programme through with some amount of zeal. A National Plan envisaging growth at 25% by 1970 and a government, TUC and CBI voluntary incomes policy was installed. The sale of all assets bar owner-occupied homes was to become subject to a Capital Gains Tax. The Corporation Tax was introduced, whilst petrol charges and income tax were increased. Both local government and defence spending reviews were ignited.
Wilson's first government abolished prescription charges on the NHS - pensions and benefits were also increased. Having performed well on such a small majority, Labour then went back to the electorate in March 1966 and won an overall majority of 96 - arguably only the second time it had been enabled to govern effectively. Events, however, were to unkindly dictate the direction of the government.
The aim was to protect the pound from devaluation and improve the balance of payments, and there was much effort placed into achieving this. The Selective Employment Tax was introduced in the first budget of the new Parliament and was designed to boost employment in export industries rather than the 'service' sector.
Haircuts became more expensive but there seemed little hope of improving exports, particularly when a lengthy seaman's strike in the summer of 1966 threatened economic paralysis - docks ground to a standstill. When the pound still failed to revive, a wages and prices freeze was announced and taxes were bumped up on tobacco, wines and spirits. There were even restrictions on foreign currency for holidays abroad.
All measures would help for a short time and then the pressure on the pound would mount again. Take a civil war in Nigeria and the Six Day War in the Middle East to cause increased oil and shipping charges, and the balance of payments problem worsened still further.
In November 1967 sterling was finally devalued and Wilson made a special announcement to quell fears of a valueless pound. His words were cruelly twisted by the Tories and the press to mean devaluation would not mean a rise in prices. This was to see the end of Jim Callaghan's reign as Chancellor. His successor Roy Jenkins' declared aim was 'a stiff Budget followed by two years of hard slog.'
Whilst devaluation helped sterling temporarily, at least until the franc devalued a year later, domestic inflationary forces now rose. To combat these, in 1968 charges on NHS prescriptions were re-introduced, free milk in secondary schools was abolished and the raising of the school-leaving age to 16 was postponed. As well as this, Jim Callaghan and others gave Harold Wilson just cause to think that they were plotting against him.
In March 1968 Roy Jenkins' budget was the most punishing in Britain's peacetime history and taxes were racked up across the board. Working people were hit hardest, especially by the bill putting a ceiling of 3.5% on wage increases. The Bill only succeeded in being passed with a majority of 35. The 'hard slog' had become a forced march.
By this stage the atmosphere surrounding the Prime Minister had soured. Harold Wilson believed that many members of his Government were set on removing him. He observed the old Gaitskellite network, which he had never been a part of, at work. Hence, the Daily Mirror's chairman, Cecil King, met with a leading Cabinet minister to try and initiate a challenge to the Prime Minister. By putting so much responsibility within the Prime Ministerial office, Harold Wilson the President made himself the centre of dissent and intrigue. He was pelted with eggs and rotten vegetables by students every now and then. "Even students can afford eggs under Labour," he drily remarked.
In addition to this, some members of the security service were acting beyond their remit and attempted to discredit and remove Wilson. This may surprise those who despised him as a right-wing lackey. He suspected that he was under surveillance and that there was a search for scandals concerning him and members of his staff. This was dismissed at the time, but Peter Wright and others were to later confirm that elements in the Establishment viewed Harold Wilson as a dangerous threat and were acting against him. Constitutional reform was not, however, treated seriously by Harold Wilson the Traditionalist.
Relations between the Government on the one hand and the Party and the unions on the other reached an all-time low with the publication in January 1969 of the White Paper 'In Place of Strife.' This suggested that there should be a month-long conciliation period before any strike action could be taken, with ballots when necessary.
The White Paper reflected growing public disquiet at the power of unions, which had been fanned by the press. It was becoming easier for the general public and the 'Gnomes of Zurich' to make the unions the scapegoat for Britain's economic ills. In retrospect, 'In Place of Strife' seems very reasonable as providing the unions with a solid democratic base, but caused many in the Labour movement to protest strongly.
'In Place of Strife' was dropped after the TUC adopted its own code of practise. The decision to abandon it was portrayed by the media as a surrender. Harold Wilson had been forced to disregard the work of one of the most successful Cabinet ministers, Barbara Castle, whose innovative previous work as both the first Minister of Overseas Development and as Transport Minister had won many plaudits.
The 1966-70 Government can be seen as a genuine and worthy effort to address the long-term problems of the British economy, and this effort was not without reward. The fact that 'stop-go' was not curbed does not diminish the fact that a balance of payments deficit of #800 millions a year was turned by 1970 into a surplus of #600 millions.
Britain had arguably become a better place to live. In the social sphere, public spending on education rose for the first time above that of defence. More teachers were trained, class sizes were cut, more pupils stayed on at school and more students went into further education. The Open University was launched, spreading the expertise gained from labour movement adult education to the reach of all.
With Jennie Lee, Bevan's widow, as Minister for the Arts and Denis Howell as Sports Minister, both areas received increased public support. Social security was re-organised with one ministry in overall charge, and the humiliating system of national assistance replaced by supplementary benefits as of right. Whilst pensions and other benefits (including those for industrial injury) were increased, redundancy payments were introduced.
One of the problems that the government had inherited from the Conservatives was that of race relations. Throughout the 1950s thousands of people from the New Commonwealth had been invited to work in England, and seeing the chance of a rise in living standards, many arrived. When the economy slowed, this was resented by many, as illustrated by the Smethwick campaign. The hysteria which heralded the arrival of expelled Asians from Kenya compounded problems further.
In 1968 Labour passed the Commonwealth Immigrants Act which deprived UK passport-holders of the right to enter Britain unless they could prove substantial connections with Britain. Under provocation from the likes of Enoch Powell, the overall record in this field was, however, good. Whilst the 1965 Race Relations Act only banned discrimination in pubs, the 1968 Act made discrimination illegal in housing and jobs.
This lay the framework for integration in Britain, as Roy Jenkins said, 'not as a flattening process of assimilation but equal opportunity, accompanied by cultural diversity, in an atmosphere of mutual tolerance.'
There was special help for areas with declining industries, and docks were re-organised to put an end to casual labour. The Transport Act 1968 established the principle of government grants to help preserve uneconomic passenger services on social grounds. This was too late to reverse the Beeching cuts, but alleviated some of the pain.
The Government was also to provide time and support for a succession of radical Private Members Bills - the legalisation of abortion and homosexuality among them. The permanent abolition of capital punishment in 1969 was surely the crowning achievement. These reforms are still attacked by reactionaries today - a measure of their significance.
For the Labour Party itself was changing, increasingly becoming the Party of the public sector. Much of the working class was either becoming affluent or electorally untouchable. If Wilson's government is notable, it owes much to its libertarian outlook, which shaped the sixties almost as much as the sixties shaped it. Liberty arrived with a bottle of brown sauce.
Yet in Britain, local elections led to massive swings away from Labour, as Scottish and Welsh nationalists benefited from dis- illusionment. Violence erupted in Northern Ireland. The supply of weapons to Nigeria continued although they were being used to crush Biafra. The scaling down of Britain's military presence abroad continued, leaving Rhodesia in the hands of Ian Smith. And Wilson's government was constrained in its criticism of American policy in Vietnam by the desire not to compromise NATO.
The opinion polls in 1970 indicated a Labour victory, after a good record of social legislation and an improved balance of trade. However, surveys showed many Labour supporters abstained on polling day, despite the recent inclusion of 18-year olds on the electoral roll, and even many party activists were reluctant to throw their weight into the battle, with memories of pay freezes and continued inequality - as well as a slight rise in unemployment. Edward Heath had promised to slash prices at a stroke. He was to be the new Prime Minister after the election gave Labour only 287 seats, down from 363 in 1966.
Labour was not to see the first stream of Open University graduates from a position of office. The new Leader of the Opposition suspected a World Cup defeat for England just a few weeks beforehand may have played a crucial part. There were to be plenty more of them.