The post-war consensus is a historian's model of political co-operation in post-war British political history, from the end of World War II in 1945 to the late-1970s, and its repudiation by Conservative Party leader Margaret Thatcher. Majorities in both parties agreed upon it. The consensus tolerated or encouraged nationalisation, strong trade unions, heavy regulation, high taxes, and a generous welfare state.
The concept states that there was a widespread consensus that covered support for coherent package of policies that were developed in the 1930s and promised during the Second World War, focused on a mixed economy, Keynesianism, and a broad welfare state. In recent years, the timing of the interpretation has been debated by historians, asking whether it had weakened and collapsed before Thatcherism arrived in 1979. There has also been debate as to whether a "postwar consensus" ever really existed.
The historian's model of the post-war consensus was most fully developed by Paul Addison. The basic argument is that in the 1930s Liberal intellectuals led by John Maynard Keynes and William Beveridge developed a series of plans that became especially attractive as the wartime government promised a much better post-war Britain and saw the need to engage every sector of society. The coalition government during the war, headed by Churchill and Attlee, signed off on a series of white papers that promised Britain a much improved welfare state after the war. The promises included the national health service, and expansion of education, housing, and a number of welfare programmes. It included the nationalisation of weak industries.
In education, the major legislation was the Education Act of 1944, written by Conservative Rab Butler, a moderate, with his deputy, Labour's James Chuter Ede, a former teacher who would become Home Secretary throughout the Attlee administration. It expanded and modernised the educational system and became part of the consensus. The Labour Party did not challenge the system of elite public schools – they became part of the consensus. It also called for building many new universities to dramatically broaden educational base of society. Conservatives did not challenge the socialised medicine of the National Health Service; indeed, they boasted they could do a better job of running it.
In foreign policy, the consensus called for an anti-Communist Cold War policy, decolonisation, close ties to NATO and to the United States and the Commonwealth, and slowly emerging ties to the European Community.[page needed]
The model states that from 1945 until the arrival of Margaret Thatcher in 1979, there was a broad multi-partisan national consensus on social and economic policy, especially regarding the welfare state, nationalised health services, educational reform, a mixed economy, government regulation, Keynesian macroeconomics, policies, and full employment. Apart from the question of nationalisation of some industries, these policies were broadly accepted by the three major parties, as well as by industry, the financial community and the labour movement. Until the 1980s, historians generally agreed on the existence and importance of the consensus. Some historians such as Ralph Miliband expressed disappointment that the consensus was a modest or even conservative package that blocked a fully socialised society.  Historian Angus Calder complained bitterly that the post-war reforms were an inadequate reward for the wartime sacrifices, and a cynical betrayal of the people's hope for a more just post-war society.
The foundations of the post-war consensus can be traced to the reports of William Beveridge, a Liberal economist who in 1942 formulated the concept of a more comprehensive welfare state in Great Britain. The first general election since 1935 was held in Britain in May 1945, giving a landslide victory for the Labour Party, whose leader was Clement Attlee. The policies undertaken and implemented by this Labour government laid the base of the consensus. The Conservative Party accepted many of these changes and promised not to reverse them in its 1947 Industrial Charter.
The post-war consensus included a belief in Keynesian economics, a mixed economy with the nationalisation of major industries, the establishment of the National Health Service and the creation of the modern welfare state in Britain. The policies were instituted by all governments (both Labour and Conservative) in the post-war period. The consensus has been held to characterise British politics until the economic crises of the 1970s which led to the end of the post-war economic boom and the rise of monetarist economics.
The Future of Socialism by Anthony Crosland, published in 1956, was one of the most influential books in post-war British Labour Party thinking It was the seminal work of the 'revisionist' school of Labour politics. A central argument in the book is Crosland's distinction between 'means' and 'ends'. Crosland demonstrates the variety of socialist thought over time, and argues that a definition of socialism founded on nationalisation and public ownership is mistaken, since these are simply one possible means to an end. For Crosland, the defining goal of the left should be more social equality. Crosland argued that
In Britain, equality of opportunity and social mobility... are not enough. They need to be combined with measures... to equalise the distribution of rewards and privileges so as to diminish the degree of class stratification, the injustices of large inequalities and the collective discontents.
Crosland also argued that an attack on unjustified inequalities would give any left party a political project to make the definition of the end point of 'how much equality' a secondary and more academic question.
Crosland also developed his argument about the nature of capitalism (developing the argument in his contribution 'The Transition from Capitalism' in the 1952 New Fabian Essays volume). Asking, "is this still capitalism?", Crosland argued that post-war capitalism had fundamentally changed, meaning that the Marxist claim that it was not possible to pursue equality in a capitalist economy was no longer true. Crosland wrote that,
The most characteristic features of capitalism have disappeared – the absolute rule of private property, the subjection of all life to market influences, the domination of the profit motive, the neutrality of government, typical laissez-faire division of income and the ideology of individual rights.
A third important argument was Crosland's liberal vision of the 'good society'. Here his target was the dominance in Labour and Fabian thinking of Sidney Webb and Beatrice Webb, and a rather grey, top down bureaucratic vision of the socialist project. Following Tawney, Crosland stressed that equality would not mean uniformity:
We need not only higher exports and old-age pensions, but more open-air cafes, brighter and gayer streets at night, later closing hours for public houses, more local repertory theatres, better and more hospitable hoteliers and restaurateurs, brighter and cleaner eating houses, more riverside cafes, more pleasure gardens on the Battersea model, more murals and pictures in public places, better designs for furniture and pottery and women’s clothes, statues in the centre of new housing estates, better-designed new street lamps and telephone kiosks and so on ad infinitum.
"Butskellism" was a somewhat satirical term sometimes used in British politics to refer to this consensus, established in the 1950s and associated with the exercise of office as Chancellor of the Exchequer by Rab Butler of the Conservatives and Hugh Gaitskell of Labour. The term was inspired by a leading article in The Economist by Norman Macrae which dramatised the claimed convergence by referring to a fictitious "Mr. Butskell".
However, the concept of consensus has also been challenged as a myth. Labour Historian Ben Pimlott says this idea is a "mirage, an illusion which rapidly fades the closer one gets to it." Pimlott sees much disputation and little harmony. He notes the term "Butskellism" meant harmony of economic policy between the parties, but it was in practice a term of abuse, not celebration. In 2002, Scott Kelly claimed that there was in fact a sustained argument over the use of physical controls, monetary policy and direct taxation. Political scientists Dennis Kavanagh and Peter Morris defend the concept, arguing that clear, major continuities existed regarding policies toward the economy, full employment, trade unions, and welfare programs. There was agreement as well on the major issues of foreign policy. British historian David Kynaston considers the period of post-war consensus a unique and distinct period in the history of twentieth century Britain and has undertaken to map the development of British society between 1945–79 in his ongoing series of books titled Tales of a New Jerusalem. So far, three volumes have been published, covering the years 1945–63.
Market-orientated conservatives gathered strength in the 1970s in the face of economic paralysis. They rediscovered Friedrich Hayek's the Road to Serfdom (1944) and brought in Milton Friedman, the leader of the Chicago school of economics. He preached Monetarism to discredit Keynesianism. Keith Joseph played a major role as an advisor to Thatcher.
Keynesianism itself seemed no longer to be the magic bullet for economic crises of the 1970s. Mark Kesselman et al. argue:
Britain was suffering economically without growth and with growing political discontent ... the "winter of discontent" destroyed Britain's collectivist consensus and discredited the Keynesian welfare state.
Global events such as the 1973 oil crisis put pressure on the post-war consensus; this pressure was intensified by domestic problems such as high inflation, the three-day week and industrial unrest (particularly in the declining coal-mining industry). In early 1976, expectations that inflation and the double deficit would get worse precipitated a Sterling crisis. By October, the pound had fallen by almost 25% against the dollar. At this point the Bank of England had exhausted its foreign reserves trying to prop up the currency, and as a result the Callaghan government felt forced to ask the International Monetary Fund for a £2.3 billion loan, then the largest that the IMF had ever made. In return the IMF demanded massive spending cuts and a tightening of the money supply. That marked a suspension of Keynesian economics in Britain. Callaghan reinforced this message in his speech to the Labour Party Conference at the height of the crisis, saying:
We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.
Thatcher reversed other elements of the post-war consensus, as when her Housing Act 1980 allowed the residents to buy their flats. Thatcher did keep key elements of the post-war consensus, such as nationalised health care. She promised Britons in 1982 that the National Health Service is "safe in our hands."
Economists Stephen Broadberry and Nicholas Crafts have argued that anticompetitive practices, enshrined in the post-war consensus, appear to have hindered the efficient working of the economy and, by implication, the reallocation of resources to their most profitable uses. David Higgins says the statistical data support Broadberry and Crafts.
The consensus was increasingly seen by those on the right as being the cause of Britain's relative economic decline. Believers in New Right political beliefs saw their ideology as the solution to Britain's economic dilemmas in the 1970s. When the Conservative Party won the 1979 general election in the wake of the 1978–79 Winter of discontent, they implemented New Right ideas and brought the post-war consensus to an end. A similar Thatcherite consensus would exist during John Major's premiership, with Neil Kinnock, John Smith and Tony Blair mostly accepting the policies advocated by the Conservatives at this time-this continued until the financial crisis of 2007–2008, which convinced politicians to abandon New Right neo-liberal markets and deregulation in favour of Keynesian methodologies.
Outside Britain, the term "post-war consensus" is used for an era of New Zealand political history, from the first New Zealand Labour Party government of the 1930s until the election of a fundamentally changed Labour party in 1984, following years of mostly New Zealand National Party rule. As in the UK, it was built around a 'historic compromise' between the different classes in society: the rights, health and security of employment for all workers would be guaranteed, in return for co-operation between unions and employers. The key ideological tenets of governments of the period were Keynesian economic policy, heavy interventionism, economic regulation and a very powerful welfare state.