At the beginning of 1961 a Conservative prime minister, an Old Etonian, was trying to convince his party and his country of the merits of a radical “Grand Design” that would change for ever Britain’s relations with its closest neighbours in Europe. Harold Macmillan, a veteran of the Somme, was troubled by the economic rise of the six EEC nations, led by France and Germany.

He knew that their union, ratified by the recent Treaty of Rome, would inevitably diminish Britain’s already declining influence in an uncertain world dominated by the cold war powers of the Soviet Union and the United States.

Our only hope of retaining our voice in the postwar consensus and animating our moribund economic performance, Macmillan believed, was to be at Europe’s top table. That meant persuading his party and nation of the benefits of joining the new European project, with its ambitious goals of borderless trade and zero tariffs and federal co-operation.

Macmillan’s “Grand Design”, cooked up while convalescing from an illness that new year, suggested that such persuasion was possible – but only if President De Gaulle in Paris and Chancellor Adenauer in Berlin agreed to Britain entering the EEC while retaining its existing trading relationships with the Commonwealth. In other words, that we should be allowed to have our cake and eat it, too.

No current historian is as versed as Hennessy in the internal cogs and springs of the British state

Peter Hennessy’s inside story of the shuttle diplomacy and party politicking that resulted from Macmillan’s fevered vision is told with his characteristic storyteller’s brio. The account not only establishes one of the key contexts for the historian’s narrative of a formative three years in our national life, but also sounds a resonant alarm over our present follies.

Macmillan was urged to make Britain a part of the new union by JFK’s White House, which wanted its firmest ally at the heart of the continent, shaping events. Macmillan’s plans never came to fruition, however. Some Tory backbenchers revolted against what they saw as a surrender of sovereignty while Labour MPs raised fears that membership would prevent the “establishment of socialism here”. Hugh Gaitskell called it “the end of a thousand years of history”. Macmillan’s desire for special treatment from the EEC was also summarily vetoed by De Gaulle, who he felt had “never tried to negotiate seriously”. Britain did not enter the common market for another decade, by which time “the spectre of relative economic decline and industrial underperformance rarely left the cabinet room”.

This is the third in Hennessy’s wonderfully insightful series of books that make up a portrait of a nation coming to terms with victory in a ravaging war and the loss of empire. Like the others – Never Again and Having It So Good – it performs a singular balancing act between social history and cabinet-room politics. No current historian is as versed as Hennessy in the internal cogs and springs of the British state, but he also has a keen eye for the luminous face of passing time.

‘Fevered vision’: Harold Macmillan in 1960. Photograph: Jarvis Darville/The LIFE Images Collection via Getty Images

He begins here with a juxtaposition that stands as a metaphor for what follows. His own Cotswold boyhood, walking home duffel-coated from the grammar school at Stroud, to his “dark, snow-entombed village”, seemed untroubled by wider world events – but they were shaping things if you knew where to look. The sexual revolution, which began in 1963, as Larkin suggested, arrived in Nailsworth in the pages of Lady Chatterley’s Lover and the Profumo affair (a friend prowled the streets of the village of Amberley, hoping for a sighting of Christine Keeler, who was said to be holed up there).

Meanwhile, unbeknown to those schoolboys, they were also on the front line of the cold war. Underneath their feet, a few miles to the south down the A46, was the Stockwell bunker, the secret home of government in the event of nuclear attack: 800 offices over 240 acres, with 60 miles of tunnels, all 90 feet below ground, and manned day and night by officers arriving in unmarked trains from Addison Road station in Kensington. Hennessy visited that site for the first time 40 years later, after its secrets were unearthed. He has performed a similar excavation of cabinet papers and civil service files, and innumerable interviews with those involved, to bring other buried histories to light.

Many of them should give us pause, as we seek to detonate much of the effort that built the foundations of our current nation. For example, as Hennessy notes: “One of the many reasons for being eternally thankful that the Cuban missile crisis did not trigger a global war… is that Cliff Richard did not take the palm for the highest form of pop music that Britain was to attain.” By the time Khrushchev had backed down from nuclear conflict – papers suggest that British intelligence thought it likely that five megatons would fall on Liverpool alone – the Beatles had only produced Love Me Do, which stood at the No 17 spot in the charts…

This review is from the Observer

• Winds of Change: Britain in the Early Sixties by Peter Hennessy is published by Allen Lane (£30). To order a copy go to guardianbookshop.com or call 0330 333 6846. Free UK p&p over £15, online orders only. Phone orders min p&p of £1.99.