Chapter 16 – Forced to Retreat

Neil Kinnock’s attack on the Liverpool City Council at the October 1985 Labour Party Conference opened the door to an unbridled baiting campaign by the Tories, the Liberals and the media. They attempted to whip up what Engels called the “enraged petit bourgeois” behind a hastily organized “movement”, called “Liverpool Against Militant” (LAM). This body was supposedly indignant at the alleged “antics” of the city council and particularly of the “Militants”. However, the organizers were far from being the “ordinary ratepayers’ presented by the media. What ordinary ratepayers could afford an airplane for publicity on the day of the demonstration? Paul Feather, the principal spokesperson of LAM, was a failed Tory candidate and was also representing the Hotels and Restaurants Association within LAM. The local press, who had played down the massive demonstrations in the previous two years of 20,000, 40,000 and 50,000, gave huge publicity to the preparations for a LAM demonstration on October 6.

The meeting of 400 people which initiated the demonstration was mostly composed of businessmen with a smattering of so-called “Labour moderates” whom nobody had ever heard of. On, Mr. Hugh McCafferty, a retired dockworker, was quoted in the Daily Telegraph as describing Derek Hatton as “a Militant skunk”. The day of the demonstration saw a motley crowd, less than 4000 strong, gathering at the Pier Head, with a number of Labour activists counter-demonstrating. Assembling at the traditional meeting place of the labor movement, this rally was significantly different from the workers’ demonstrations. This was obvious even by the number of golf umbrellas on display – a typical badge of the middle class. A lot of demonstrators were elderly day trippers who had been bussed in for the occasion from the outskirts of Liverpool. They came from Southport, Crosby Bebington, Maghull etc.

Every anti-Militant, anti-city council statement, was widely reported in the local and national press. The Daily Mirror reported: “Godfather demo fury for Hatton”, while the Daily Express gloated: “Thousands turn out to rap chaos city lefties.” It eagerly featured the banners of the demonstrators: “Mad Hatton and his allies in Wonderland” and “King Hatton waives the rules.” However, Labour counter-demonstrators carried banners which summed up the mood of the majority of the population of Liverpool: “Hands off Hatton. Concentrate on Thatcher’s government.”

The Liberal leader, Sir Trevor Jones, and Chris Hallows, the Tory leader, were skulking at the back of the platform, pondering whether to speak or not. In order to maintain the spurious “non-political” character of this fledgling organization, they decided against it at that stage. But the blatant anti-Labour character of LAM was too much even for the opponents of Militant within the labor movement. Ian Williams for the Labour Coordinating Committee declared to the Guardian: “We’ll have nothing to do with demonstrations like this. While we are distressed as anybody by the antics of Derek Hatton and Militant, the people who were involved in organizing this campaign were consistently anti-Labour before Militant.”

The LAM demonstration once again underlined the political situation which existed in Liverpool where sharp class polarization had developed as a result of the stand taken by the city council. The attacks of the media and their attempts to whip up the middle class in opposition against the council only reinforced support for Labour among the great majority of the working-class population.

Liverpool Labour Left

Despite Kinnock’s attack at the Labour Party conference, the opponents of Militant within the Liverpool labor movement failed to make much headway. In October 1985, a new grouping, Liverpool Labour Left, became the focus of opposition to Militant. It was so “left” that it included the witch-hunter Jane Kennedy in its ranks! Realizing that open support for Kinnock was the kiss of death in a city where the labor movement had been outraged by his attack at the Labour Party Conference, they went to great lengths to identify with the stand of the council: “We consider the city council deserves the support of the Labour Party nationally in its attempt to defend jobs and services; said Ian Williams, a leading advocate of the Liverpool Labour Left. According to the Guardian, the Liverpool Labour Left also “believes Mr. Kinnock has underestimated the mood of defiance in the city”. These “left” lions were so confident of their ability to confront Militant that their first rally, at which David Blunkett and John Hamilton were invited to speak, was arranged on the very day when most Militant supporters would be in London attending their national rally.

The Liverpool Labour Left was to be stillborn. Militant’s policies more accurately reflected the mood of the workers within the Labour Party and the working-class population of the city. Thrashing around to find points of support, this new left organization was to end up as the finger-men and women for the right wing on the National Executive Committee of the Labour Party. Their “evidence” was used later to expel leading Militant supporters, including several surcharges councilors.

Still £25 Million Short

In early October, a number of local authorities led by David Blunkett in Sheffield and under the auspices of the Association of Metropolitan Authorities (AMA) explored the possibility of a common loan from their “reserve funds” to keep Liverpool afloat. A figure of £30 million was mentioned in the press, but no more than one-tenth of this would be forthcoming when the crunch came in early November. The situation of the council was critical.

Later the city council’s opponents were to accuse spokespersons like Tony Byrne and Derek Hatton of deliberately concealing the real situation, and exaggerating Liverpool’s financial plight. But not one “expert” either then or since has been able, in examining Liverpool’s books, to accuse the council of deliberately “exaggerating”. Tony Byrne pointed out that the normal running costs of the council were about £5 million per week. With the 9 percent rate which had been set there would be a shortfall from December to the end of March which would have come to about £65 million. However, a new situation arose when the courts declared in October that the financial penalties which had been imposed by the government on Bradford District Council and Nottinghamshire County Council were illegal.

This extra money reduced the gap in the council’s finances to under 90 days. This also reduced any period of possible redundancy to below 90 days and therefore enabled the council to use a proportion of the money set aside for redundancy pay. The consequence of this would be to reduce the period of any “layoffs” from three months to four weeks.

But this did not satisfy some union leaders, particularly in the white collar unions. They were being egged on by the leadership of the Communist Party nationally. Gordon McLennan, Communist Party General Secretary, attacked Liverpool City Council policy in the Morning Star as “disastrous and grotesque”. According to the Morning Star (17 October):

He had first voiced these criticisms a year ago in the city, and not as a latter day convert to Kinnockism, although he was very pleased the Labour leader had said what he did at the party’s conference last week.

The NUT, with Communist Party member Jim Ferguson in the vanguard, had initiated legal action against the council to prevent any “layoffs” (see Appendix 8). Yet there were 400 teachers in Liverpool who would have been made permanently redundant if government ceilings had been applied by the council! The NUT leaders spoke vaguely about an “alternative plan” to solve the problems of the city. But they gave support to “capitalization” – using money earmarked for housebuilding to cover day-to-day spending. This would have meant sacrificing the jobs of building workers and condemning many families to the misery of living in slums. This course of action was rejected by the council and by the leaders of the manual workers’ unions.

Faced with a financial situation changing almost daily, and with the capitalist press and labor and trade-union leaders systematically distorting the position, the Marxists in Liverpool took the historic step of producing a regular regional supplement to the Militant. Twenty-three issues of Mersey Militant were published in the autumn and winter of 1985-6.

It played a vital role, complementing the Militant with material relating directly to the rapidly changing events in Liverpool. Each issue was eagerly awaited by council workers and Labour activists who looked to it for answers to the lies of the press, especially the Echo. Mersey Militant‘s role was especially significant as it came out in a period of setback and retreat, its explanation of events helping to maintain the morale of the supporters of the stand of the council. The right-wing leadership of Labour’s NEC paid a back-handed compliment to the role of Mersey Militant when authorship of articles in it was used as “justification” for a number of expulsions from the Labour Party.

As Liverpool approached the abyss – the day when the money would run out – frantic activity took place between the “left” authorities (hoping to raise a new loan for Liverpool), the national trade-union and labor leadership, and even professional bodies like the Institute of Chartered Accountants. The Evening Standard reported that: “Ken Livingstone says he would be ready to use some of the GLC’s surplus millions to help the city of Liverpool avoid bankruptcy.” The attempt by other councils to bail Liverpool out was not entirely altruistic, as David Blunkett indicated: “The credit of local government would be knocked for six. It would take years to get over the knock-on effect” if Liverpool was to be bankrupted.

Derek Hatton’s statement on October 17, that Liverpool could run out of money in two-and-a-half weeks was the signal for another “mass meeting” of LAM at the pier head. Sensitive about the credentials of Paul Feather, who got a pathetic 236 votes for the Tories when he stood in Dingle Ward, the new spokesperson was Jeff Tinnion. The managing director of a car business in what the Daily Express (21 October) called the “pleasant suburb of Allerton”, Tinnion took a weekend off from his caravan and cod-fishing outings in Anglesey to sweep Liverpool clean of the baleful influence of Militant Marxism. The troops were railed by a new theme song “Militant Out”, specially composed for the rally. The lyrics ran: “Militant out – everybody shout Militant out, Militant out… M is for Militant, their image, their pretence; I is for Indifference, those who sit on the fence; N is for our nation, who play it by the rules; T is for the traitors destroying Liverpool.” Not exactly in the mould of The Beatles!

The purpose of the rally however was indicated by the speech of Tinnion: “We are sending this message to Mr. Kinnock and his National Executive – the vast majority of the people of Liverpool demand swift action from you to free the people of this city from its misery, unnecessary suffering and mental torment.” He demanded that Kinnock expel Militant supporters from the Labour Party. Another speaker declared, “We are from all political persuasions, some of us from the Labour Party (murmurs around the crowd), some us are Liberals (large cheers around the crowd), some of us are from the Tory Party (prolonged cheers from the crowd).”

But the flotsam gathered behind this organization, along with the press, seemed to exercise a greater effect on Neil Kinnock than the mass of working people standing four-square behind their council. This was clearly shown when Kinnock visited the city a few days later. The city councilors saw it as a genuine opportunity to familiarize the Labour leaders with he real situation in Liverpool, rather than the media-inspired distortions.

Kinnock Visits Liverpool

In the meeting Neil Kinnock had been “like a lamb” as one councilor put it and John Hamilton, council leader, announced afterwards: “Neil Kinnock did not oppose the steps taken by the council so far.” Tony Mulhearn said: “Twenty councilors met with him and we impressed upon him the total unanimity of the Labour group over policies.” After the meeting Derek Hatton, speaking to the press, commented: “Neil Kinnock listened and I think he understood. While much of the press would have loved this to have been a divided meeting or a witch-hunt against Militant, it was not. It was a proper discussion about the real problems of Liverpool, fraternal and very sympathetic.”

This impression of the meeting did not please Kinnock nor his advisers, who were eager to reinforce his “strong man” image as a “Militant basher” which had been cultivated at the Labour Party Conference. Kinnock tried to create the impression at his own press conference that he had laid down the law to the Labour group. Labour councilors emphasized the points of agreement, while Kinnock again reserved his fire and fury for fellow party members, in front of his favorite audience – the Tory press.

The next day John Cunningham indicated that one of the purposes of the visit had been to investigate the possibility of replacing the council leadership with a more pliable team which would carry out “realistic policies”. Hidden away in Kinnock’s statements was a token recognition that the government was responsible for the crisis, but the whole burden of his remarks was to paint the Labour councilors as the villains of the piece. However, as a consequence of meetings between representatives of the council and National Executive Committee members, the latter became “convinced for the first time that Mr. Tony Byrne Liverpool’s Finance Chairman, is telling the truth when he says that bankruptcy is imminent” (The Times 22 October).

The government, the Labour leadership and right-wing national trade-union leaders, were all determined to rub the noses of the city council in the mud. All of them understood that big cuts were necessary without further resources from the government. They wanted the city council, and particularly Militant supporters, to be pressurized into carrying through cuts and thereby become discredited in the eyes of the working class.

There were other options open to the government, as The Times (22 October) commented:

There is a fourth way, but no one, yet, dare touch it. Three high Court judges will declare at the end of next week that Liverpool’s nine percent rate is illegal. Liverpool disputes that, although Labour Politicians privately accept that they are on dodgy ground over having agreed a deficit budget. The High Court will not, however, quash the rate because it has not been asked. It would take only one ratepayer, councilor or a parliamentary request to the Attorney General, to have the anomaly resolved with an application to the court. The council’s opposition parties and the government will not move because Militant could blame the rate rise on them and, in the present climate, it would take a courageous Labour politician to force the issue.

In other words, all the forces of “official society” were refusing to act “responsibly” and apply for a High Court writ for rate increases to cover the deficit. They were determined that the odium attached to big rate rises must be borne out by the Labour group and in particular by the Marxists.

The stubborn refusal to go down this road, and in particular its refusal to heed the “sensible” advice of the national labor and trade-union leaders accounts for the fury unleashed against the city council and Militant in October and November. The Tory press were quite clear as to what role they expected from the leadership of the labor movement. The Daily Telegraph jeered: “The council has had to accept Mr. Kinnock as the best man to arrange the terms of surrender.” Kinnock was to demonstrate his willingness to fulfill such a role. From the unlikely quarter of the Economist came an admission of the real plight of Liverpool: “The Association of Metropolitan Authorities will deliver to Westminster and Whitehall a message much ignored when it is delivered by Mr. Hatton. They will almost certainly say that Liverpool is not being treated like everybody else, but worse.”

The Stonefrost Report

As a consequence of the debate at Labour Party Conference, a commission to investigate Liverpool’s finances was organized by trade-union and labor leaders, headed by Maurice Stonefrost, former Director-General of the GLC. When the findings of the Stonefrost Commission were finally published, Kinnock once again jumped the gun and launched a vicious attack on Militant supporters within the city council.

On October 29, before the councilors themselves had even had a chance to read the Stonefrost Report, Kinnock’s office leaked a statement claiming that the money was there all the time for those who “really wanted to look”. This betrayed gross ignorance of the report’s findings or a deliberate attempt to misrepresent its conclusions and to bounce the labor council into carrying out a policy diametrically opposed to those upon which it had been elected. In fact, most of the material in the report had been provided by discussions with Tony Byrne, Derek Hatton, Tony Mulhearn and the city’s financial experts.

John Edmonds, GMBATU leader elect, subsequently claimed to his union executive that “92 pence a week on the rates will solve Liverpool’s financial crisis” and thereby save all the jobs. In fact the report demonstrated the opposite, and showed that it was impossible to balance the books without massive cutbacks, or attacks on living standards.

The report explicitly called for extra money to be raised through rent and rate rises, non-filling of job vacancies, and financial juggling which would inevitably have jeopardized the housebuilding program and jobs. The report suggested a 15 percent rate rise in addition to the 9 percent rise that had already been agreed. This was described as the “cornerstone” of the report’s strategy and the authors claimed that it would bring in an extra £19 million. The additional 15 percent rate rise would have severely hit big sections of the city’s population. It would moreover have fuelled the opposition of Liverpool Against Militant, which drew most of its support from small businessmen who would inevitably be severely hit by the big rent and rate rises implicit in the Stonefrost Report.

The report also said that money could be saved by sacking workers – or by cutting “employee costs”, as it blandly called it. It calculated that 1000 redundancies would save the council £1 million in 1985 and £7 million in the next year. It proposed a freeze on employment and the non-filling of vacancies. It also suggested a £1 a week increase in rent to bring in £1 million in 1985 and £3 million in 1986.

Labour promises not to increase the already massive council house rents were supposed to be tossed aside like so many useless scraps of paper. Despite Kinnock’s claims to support the strategy of building houses, the proposals of Stonefrost on capitalization would have meant the effective ending of the housebuilding program. Because of the council’s building program, thousands more building workers were employed than in 1983. No matter how much the report was dressed up, it represented a savage attack for the population of Liverpool through a combination of rent increases, job losses and rate rises.

The Star boldly declared, “Take the medicine” and it went on: “The principal requirement of any medicine is to cure the ailment – not to taste nice.” It viewed with equanimity the suffering of the working-class population of Liverpool. Even John Hamilton was constrained mildly to tick of Kinnock: “The leadership had rushed into making statements at this stage that are not helpful.”

The District Labour Party, at a 400-strong meeting, carefully considered the report and rejected its main proposals. At the same time, mass meetings of the GMBATU and TGWU workers also rejected the Stonefrost Report. This unflinching attitude of the Liverpool labor movement, with the Marxists in the vanguard, provoked the ruling class and its acolytes to a new paroxysm of fury, but the real feelings of tens of thousands of workers throughout the city, were summed up in a letter by a Liverpool resident to the Guardian:

Congratulations to Neil Kinnock and his team of experts for solving Liverpool’s financial problems. It just didn’t occur to us simple Merseyside folk that the answer to underfunding was a package involving selling off assets, cooking the books and raising the rates. Now I need worry no longer about the £1.2 million gap in arts funding which has been brought about by the Merseyside county council. Why didn’t we all think about this when the government cuts were first announced?

The attacks on Liverpool by so many in the labor and trade-union leadership with the backing of the press only served to harden and steel support amongst the working class for Militant and for the council. Over five thousand workers and youth cheered the speeches of the leading figures of Militant at its biggest ever national rally in the Royal Albert Hall on November 4. The stand of Liverpool City Council was the Centerpiece of the rally. Derek Hatton received a standing ovation both before he started and when he concluded his speech. The audience were cheering the stand not just of one man but of the brave 48 councilors who remained firm in their support for the council’s policies and the Liverpool labor movement. Derek Hatton called on Neil Kinnock to “represent your people the same way Thatcher represents hers”.

On the same day as the Militant rally in London the Liverpool Labour Left meeting discussed above was held in Liverpool. The platform speakers led by David Blunkett and Keva Coombes, Leader of the Merseyside County Council, accepted the Stonefrost Report and called for its implementation. Two Merseyside MPs present, Bob Wareing and Alan Roberts, also suggested that the rates should be put up. This was met with opposition from the floor, with Tony Byrne putting the case for opposition to the Stonefrost Report.

The uncompromising stand of the Liverpool Labour group, stiffened by Militant supporters, undoubtedly convinced the leaders of the labor and trade-union movement to prepare for the expulsion of the Merseyside Militant supporters.

But the Liverpool Labour Left was a very weak reed upon which the national leaders of the Labour Party could lean at a time when the whole of the labor and trade-union movement in the city had shifted decisively towards the left. The rank and file workers in the wards, constituencies and trade-union branches were behind the stand of the council. The Liverpool Labour Left only found its support amongst a gaggle of frustrated councilors or would-be councilors, trade-union officials who feared that control over their rank and file was slipping out of their hands, and some very middle-class ex-“left-wingers”.

A Barrage of Lies

With the rejection of the Stonefrost Report another onslaught was launched against the council. As the city began to be starved of funds, the press began to use the inevitable cutbacks as a stick with which to beat the council. The first fiddle in this chorus was taken by Sarah Cullen, a commentator fir ITV’s News at Ten, a program now commonly known by workers as “Lies at Ten”.

The sick, the old and the infirm, whose facilities were threatened by the Tory government’s cuts, were presented as victims of the council’s policies. When a spina bifida children’s home was threatened with closure because the council was unable to maintain grants, scenes of spina bifida children were shown on the television, with the implication that Labour councilors were about to turn them out of the home.

It became absolutely clear at this stage that the Labour and trade-union leaders were as much afraid of a Liverpool success for “militancy” as the Tory government itself. There is plenty of evidence to show that the leaders of the labor movement behind the scenes were actually encouraging Baker and the ruling class not to give any concessions. One MP, an honest supporter of Kinnock, admitted in a private discussion with Tony Mulhearn that, through his contacts in the Tory Party, he had learned that the government would not be able to stand by and see a major city go into bankruptcy.

This discussion was confirmed by reports in The Times (19 October 1985) of suspicions “that a plan forged between Mr. David Blunkett, the Sheffield City Council Leader, and the Association of Metropolitan Authorities, is being sabotaged by the Labour front bench”. It reported that Kinnock and John Cunningham “want to delay any attempts to save the council” and instead “leave Militant to hang themselves”.

Jack Straw and John Cunningham in particular did everything to frustrate David Blunkett in his attempt to put together a package which could bail out the city council. Tony Byrne angrily declared: “Cunningham could have been far more helpful, but he and Straw are so blinded by hatred of the Militant Tendency that their political judgment has been most warped. They hate Militant so much that they are almost prepared to see Liverpool run out of resources as a means of getting rid of Militant.”

As the money began to run out, the workforce began to prepare once more for a strike. The government was still refusing to give £25 million to Liverpool although it had just bailed out Johnson-Matthey, the bullion dealers, to the tune of £150 million! The press were baying for blood, ranking up any blemish in the past of council and union leaders in order to discredit the council. The Sunday Times on November 17th screamed: “Security boss was jailed for assault.” Under the signature of Lew Baxter, a Labour Party member who worked for the Sunday Times and used his attendance at Labour Party meetings to gather information for this scurrilous anti-Labour journal, the report indicated that Ian Lowes had once, 12 years previously, been jailed for assault.

No measure, no weapon, no dirty smear was too low at this stage to be used by the press against the Labour council. Only during the miners’ strike did the press work itself up into such a lying frenzy. An atmosphere of impending doom was deliberately created. Church leaders even issued a call for prayer to save the city from collapse. At the same time, the press gave prominence to the statements of the Liverpool Leader, Trevor Jones, who accused the Labour group of “a reign of terror” and the national Liberal leader, David Steel, who “urged Mr. Kinnock to expel the Liverpool Militants from the Labour Party”. Steel and Jones, demanded that the government should speed up legal action to surcharge the Liverpool Labour councilors and disqualify them from holding office so that by-elections could be held in the city. Labour countered this by demanding that these “democrats” resign their sears so that a min-general election could be fought in the event of Labour councilors being disqualified.

General Secretaries of ten major unions were mobilized to exert pressure on the council. At previous meetings with the council’s leaders they had been asked point blank to spell out how many of their members the city council should make redundant in order to balance the books. Fred Jarvis, leader of the NUT, escaped out of a back door at one meeting rather than answer this question! A meeting with the national trade-union leaders on November 11 broke up in disorder.

The new feature of this meeting was not the role of the right-wing General Secretaries, which was entirely expected, but that of the TGWU, previously supportive of the stand of the council, but now siding with the right wing. “Left-wing” officials like Bobby Owens, soon to become regional secretary of No 6 North West Region of the TGWU, demanded that the council retreat. His outburst was to cause much bitterness then and subsequently. He had been raised to his position by the left of the TGWU, within which Militant had played an important role. The General Secretaries in turn had been urged on by Labour’s front bench, who made the most outrageous statements in the press. Jack Straw declared to the Sunday Times (17 November): “Hamilton and Byrne have emerged as Militant pawns” and “Without Militant this whole, unnecessary crisis need not have occurred.” The Liverpool delegation was united in rejecting the General Secretaries’ demands. The Guardian reported on November 18th that John Hamilton:

said the union leaders had told them they ought to raise rates by 15 percent on top of the existing 9 percent rise and implied other cuts to balance the books. That could mean £5 on a weekly rate bill of the average household. That is quite unacceptable to us. We are quite firm in out resolve.

The Morning Star correctly identified the mood of the trade union tops: “Trade-union leaders furious as Liverpool talks fail”. The full weight of the national trade-union machinery was now brought to bear in order to pressurize the council into making cuts and to undermine its support amongst the unions’ rank and file members. NUPE sent out a national circular reinforcing the demands in the Stonefrost Report. The General Secretaries issued a statement which, while making perfunctory reference to the responsibilities of the government, demanded that the Stonefrost proposals be implemented immediately. All their efforts were used to force the council to capitulate.

On November 19th, Jack Dromey traveled to Liverpool and convened a meeting in the Liverpool boxing arena of the 2500 TGWU members employed by the city council. Liverpool councilors, even TGWU sponsored ones, were refused the opportunity to speak to the meeting. Dromey managed to persuade the meeting with threats of “chaos and ungovernability” to pass a resolution demanding rate increases to end the city’s financial crisis. When similar demands were made to a specifically convened meeting of councilors who were members of the TGWU, this was rejected.

But the barrage of propaganda began to have the desired effect. Even members of the GMBATU who hitherto had remained solid in support of the council began to bend. Four hundred workers in the Cleansing Department indicated that they thought that rate increases needed to be introduced to solve the crisis.

Commissioners and Troops?

If the ruling class had been terrified by the developments in Liverpool this was only outdone by that of the Labour leaders. This fear was best expressed in the shameful support of Kinnock for the government’s threat to use Commissioners and even troops against the Liverpool working class in the event of the city going bankrupt. Asked whether he would back the use of Commissioners, Kinnock replied to a Times reporter (22 November):

If the council cannot quickly balance the budget on the basis that it has been offered, and thereby saves jobs and services, we are going to have to put in the Labour Party a complete emphasis on trying to prevent that massive addition to unemployment and misery, and therefore give consideration to proposals which the government may want to put.

What this meant was spelt out by Anthony Bevins writing in The Times:

Mr. Kenneth Baker, Secretary of State for the Environment, will be prepared to send Commissioners in to run Liverpool, ousting the Militant dominated Labour council when Mr. Neil Kinnock gives a commitment to support the necessary legislation!

Kinnock railed against the Liverpool council: “I think sometimes I would have to employ the services of a psychiatrist to identify the motives of some of these people” (Daily Express 22 November).  Using precisely the language which the press had urged in the past, he “disowned” the Labour group. These attacks were featured in the Daily Mirror with the simple headline “Madmen”. However, the more far sighted strategists of capital, such as The Times cautioned the government (and Kinnock) against prematurely sending in Commissioners: “It must choose exactly the right moment. The electors of Liverpool must see in action the consequences of voting for this council.”

The statements of Kinnock, Cunningham, Straw and others during the Liverpool crisis provoked a wave of revulsion throughout the labor movement. It brought back the memory of Callaghan government using troops against the firefighters in 1977. It also raised the question in the eyes of many workers about the role of a Labour government with Neil Kinnock at its head. Would this mean that the next Labour government would be prepared to use troops against workers in struggle? It was certainly unprecedented that a Labour front bench could give tacit approval to a Tory government for the use of Commissioners and troops.

An Orderly Retreat

By November 22, with the offensive launched by the trade union leaders, an entirely new situation had opened up. While sections of the manual workers, especially in GMBATU were still prepared to battle on alongside the council, it would have been light-minded adventurism to lead the most determined sections to inevitable isolation and defeat given the desertion from and even opposition to the struggle by local, regional and national leaders of the movement. It became clear that in order to prevent a rout, an orderly retreat would be necessary. Militant supporters recommended such a course of action to the District Labour Party and the Labour Group. It was necessary to adopt a strategy which involved conserving the main gains of the previous two years. A package was prepared to balance the books based partly on capitalization and partly on new loans to make up for the cash which the Tories had stolen from the city and failed to make available in the current financial year. The DLP pointed out that Liverpool could still have achieved victory in 1985 if the resources of the labor and trade-union movement had been swung behind their fight, instead of behind the Stonefrost Report.

But the press were dumbfounded at the reaction of the Liverpool labor movement when they heard the decision. Militant (29 November 1985) reported the aftermath of a special DLP meeting:

The scenes outside the Liverpool District Labour Party meeting on Friday November 22 were more akin to a victory rally than the climb-down or cave-in or surrender described by the Tory press. This was the biggest meeting in the history of the DLP, with 700 delegates and members inside and a further 200 outside the meeting.

The District Labour Party voted by 694-12 in favor of adopting a recommendation by the Executive for the council to implement a financial package to balance the council’s books. This followed a meeting earlier in the day of the Joint Shop Stewards Committee which voted by 250-30 to support the council’s proposals. The local authority trade unions and the labor movement of Merseyside recognized by this decision that they had to accept an orderly retreat given the monstrous campaign that had been waged against them.

Not just the Labour and the trade-union leadership, but some who stood on the left had played a less than honorable role during the November crisis. They had also clamored for the implementation of Stonefrost. If Liverpool had been completely successful in its battle, this would have raised questions about the position of councils like the GLC, Islington, Sheffield, etc, in the earlier part of the year. Right wingers leaned on some of the left as a means of bringing pressure to bear on Liverpool to capitulate. In a letter to the Parliamentary Labour Party, John Cunningham and Jack Straw quoted David Blunkett, approving of his characterization of Liverpool’s stand as “insane” and also “an act of sabotage of the labor movement”. Margaret Hodge, Leader of the Islington Council had earlier had the temerity to attack Liverpool’s tactics as “discrediting the left”. Militant retorted that it was the actions of leaders like Margaret Hodge earlier in the year, running away from the fight on rate-capping, who had discredited the left in the eyes of workers looking for an effective struggle against the Tories.

The Liverpool DLP, and particularly Militant supporters, believed in telling the working class the truth about the November financial package, the acceptance of which was undoubtedly a setback. The main element in the package was a form of capitalization, which was made possible by a £30 million (£60 million over two years) loan from the Swiss banks. This meant that parts of the housebuilding and house repair program would be carried out on the basis of a deferred payment scheme (the municipal equivalent of hire purchase) financed by the banks, while the original capital funds from government grants would be used for current expenditure. This in turn allowed the housebuilding program for the following financial year to be completed.

The package incorporated the use of the small hand of £3 million transferred borrowing capacity from other local authorities, arranged through the Association of Metropolitan Authorities. It also involved another £3 million of “unallocated cuts” which the Labour group openly explained would probably mean some “unfilled vacancies” as well as other cutbacks. But there was no loss of jobs in the financial year 1985-6.

The £60 million which was loaned by the Swiss banks would have been impossible but for the preparedness of the council to go to the end in the struggle against the government. Pressure was undoubtedly used behind the scenes in Liverpool by the Tory government, notwithstanding its subsequent claims to “non-involvement”. The Guardian and other capitalist journals jeered that the “gnomes of Zurich had rallied to the Trotskyists in Merseyside”. Neil Kinnock echoed the same theme in attacking the details of the agreement.

The house of Lords devoted nearly a whole day to denouncing Militant, Liverpool council and particularly the Swiss bankers for seemingly bailing out the council. Beside himself with rage, Tory Peer Lord Beloff even delved into history: “He thought Lenin’s remarks about the capitalist classes applied particularly to the bankers: They would sell the rope by which they would themselves be hanged” (Financial Times 12 December 1985). But then, hinted the ignoble Lord, perhaps the £60 million loan was some fiendish plot hatched 70 years before and just then coming to fruition: “He reminded us Lenin spent a considerable time in Zurich”! The fact remains that the loan only came through at one minute to midnight, when it appeared as though the city was going to the brink and over.

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