He'd just led Britain to victory... but even Churchill was stunned by what happened next

The events to commemorate the 80th anniversary of VE Day are over, but what happened after the celebrations marking the end of the war in Europe? There was widespread euphoria the Nazis had been defeated and Britain had been on the winning side, but the country faced enormous problems when it came to rebuilding the war-torn economy.

Our national debt stood at 249% of GDP - an all-time high; a number of our major cities, including of course the capital London, had been heavily bombed in German air raids; and there were continued shortages of food and other essentials; plus a housing crisis - with at least 500,000 houses destroyed in the war. Moreover, although the fighting in Europe was over, the war with Imperial Japan in the Far East continued.

The first question was: to whom should the task of rebuilding post-war Britain lie? Winston Churchill, inspirational leader of the Conservative Party as well as Prime Minister since 1940, wanted the wartime coalition government to continue until Japan was defeated. But a special Labour Party conference in Blackpool on May 21 voted for the cross-party alliance to end and so, on June 15, King George VI dissolved Parliament and a general election was scheduled for July 5.

In the meantime, people enjoyed the first idyllic days of peace in Europe for six years. "Seventeen days since VE Day, and never have I seen a nation change so quickly from a wartime mentality to a peace mentality," noted the former diplomat and spy Sir Robert Bruce Lockhart. "The war has disappeared from the news... Sport and the election now fill the front pages."

There was understandably a huge public appetite to get back to enjoying those things which had not been possible, or else had been curtailed, during wartime, such as spectator sport. Starting in May 1945, a five-match Victory Test cricket series was held throughout the summer between England and an Australian Services XI. An incredible 367,000 people attended the games in total - with 93,000 alone attending the final Test at Lord's. The series finished in a 2-2 tie.

In racing, the 1,000 Guineas was held at Newmarket on VE Day itself. "The stands were packed," former trainer Gerry Blum told the Racing Post in 2005. "I never saw a crowd quite like the one on VE Day." After years of war, people were determined to enjoy themselves. "Elsewhere during these immediate post-war months, the dance-halls were heaving, the country's 4,709 cinemas were almost invariably packed out, and favourite programmes on the radio continued to draw huge listening figures," says historian David Kynaston, author of A World to Rebuild.

In July, it was time for people to vote in the first general election since 1935. Many expected Churchill - the man who had embodied the country's defiant wartime resistance to the Nazis - to win comfortably. But when the results came in three weeks later (the overseas service vote had to be counted), there was a major surprise.

Labour under Attlee had won a landslide victory - taking 393 seats to the Conservatives 213. Despite Churchill's popularity as a great war leader, voters had decided that they preferred Labour to the Tories when it came to building the peace. To add insult to injury, a majority of the service vote went for Labour, deserting the man who had hailed their achievements in his immortal rhetoric. Churchill's wife Clementine, keen for him to retire from politics, consoled him by saying: "It may well be a blessing in disguise." He famously replied: "At the moment it seems quite effectively disguised."

Those with longer memories perhaps remembered the promises made after the First World War to build "a land fit for heroes" that had not been realised. The bestselling 1942 Beveridge Report had called for the introduction of a National Health Service, full employment and a welfare state and Labour had pledged to implement the report in full, unlike the Conservatives who seemed to have little enthusiasm for its proposals.

It also helped Labour's cause that leading figures, including Attlee, who had served as Deputy PM in the wartime coalition, had demonstrated their competence. Churchill had been attending the Potsdam conference on the future of post-war Germany with Attlee and the leaders of the US and the USSR, but on losing office was replaced there by Attlee and the new Foreign Secretary Ernest Bevin. Accepting with good grace his new role as leader of the Opposition, Sir Winston would return as PM in 1951.

But for now it was Labour who had to make the important decisions. And their first month in office was certainly dramatic.

On August 6, the Japanese city of Hiroshima was devastated by the dropping of the world's first atomic bomb. Three days later another was dropped on Nagasaki. At midnight on August 15, Attlee announced on radio that Japan had been defeated. "It was the signal for celebrations all over the country as flags were waved, bonfires lit and cheering people crowded on to the streets of every city and town," was how the Daily Express described events.

It was like VE Day all over again, with some saying that the celebrations for VJ Day were even more exuberant. Just a few days later, however, the economic outlook took a turn for the worse as US President Harry S. Truman abruptly ended the Lend-Lease programme, by which it had provided aid to its allies.

In the autumn of 1945, Britain's overseas debts stood at around £3.4billion and a new loan, on unfavourable terms, had to be agreed with Washington. But despite the difficulties, most people were just happy war was over. On the last Saturday of July 1945, trains carried a record 102,889 holidaymakers to Blackpool. Indeed, the mid-to-late 1940s were a golden age for seaside resorts, with the new holiday camps proving hugely popular.

Despite the end of the fighting, rationing continued and was actually extended in its scope. In June 1946 bread was rationed for the first time. Even so, just as the economic situation looked to be slowly improving, then came the severe winter of 1947 - one of the coldest and snowiest of all time. The 'Big Freeze' saw 20ft deep snowdrifts, the Thames freezing over, and snow falling somewhere in the country every day from January 22 to March 17. The extreme weather led to shortages of fuel, and basic foodstuffs, and for the first time potatoes were rationed.

The energy crisis saw restrictions on domestic as well as industrial use with homes having to go without electricity for five hours a day, between the hours of 9am to midday and 2pm to 4pm. With sporting fixtures abandoned, the football league season, the first since the war, was only concluded on June 14, with Liverpool winning the First Division title.

These were hard times, but fortunately the coldest winter in living memory was followed by a glorious summer. 'Brylcreem Boy' Denis Compton thrilled the nation with his brilliant batting in the home Test series against South Africa in 1947, which England won 3-0. For good measure Compton also played football for Arsenal, who won the title the following year.

There was further cause for celebration in November, when Princess Elizabeth, heir to the throne, married Philip Mountbatten at Westminster Abbey on November 20, 1947. Despite the economic difficulties it encountered, the Attlee government was determined to press ahead with its ambitious legislative programme. A number of important industries, including coal, electricity, gas and the railways were brought into public ownership.

A modern 'cradle to grave' welfare state was established, with its 'jewel in the crown' being the National Health Service, which came into operation on July 5, 1948. For the first time all citizens, rich or poor, would be provided with free-at-point-of use health care, with Aneurin Bevan proudly claiming the new service would make Britain "the envy of all other nations in the world".

The immediate post-war years were not easy but given the enormous challenges that the country had to face, great progress was made in building "a land fit for heroes".