CNB George Cobuc.

Grade 12 The Making of Modern Britain, 1970-201

Labour Governments of Wilson and Callaghan, 1974-79

The February 1974 general election produced a hung parliament. The Prime Minister, Edward Heath
(Conservative), initially tried to form a coaltion with the Liberals. When these negotiations failed,
Heath resigned and was replaced as Prime Minister by Harold Wilson at the head of a minority
Labour government.

The Wilson Governments, 1974-76

Wilson inherited a country in crisis: industrial unrest, above all a nationwide miners strike, had led
the previous administration to declare a state of emergency and impose a three-day working week;
inflation was at 13 per cent and rising; unemployment was still considered high by postwar
standards (3.6 per cent in the first quarter of 1974) and the balance of payments was unhealthy. In
addition, the political situation in Northern Ireland was precarious, to say the least something that
we will return to later in the course. Wilson quickly moved to tackle some of the problems
bequethed to him. For example, the new government offered the miners a 35 per cent wage
increase within days of coming to power and this allowed Wilson to end the state of emergency
and the three-day week. More generally, Wilson also sought to deal with the twin problems of
industrial unrest and wage inflation through the so-called Social Contract between the trade unions
and the government which Wilson had initially negotiated while still in opposition in which the
unions agreed to pay restraint in return for the repeal of Heaths industrial relations legislation. By
the end of the summer, Wilson felt that he had done enough to go back to the country despite
inflation having increased to 17 per cent.

The general election took place on 10 October 1974. Labour won 319 seats which gave it a
majority of three in the House of Commons. The Conservatives lost votes and seats Heaths
position as leader subsequently became untenable and he was replaced by Margaret Thatcher in
February 1975. Significantly, the Scottish National Party (SNP) continued to make gains north of the
border it increased its representation to 11 seats having secured 30 per cent of the vote in
Scotland; while Plaid Cymru now held three Welsh seats. These nationalist gains helped to make
devolution (that is, the constitutional relationship between the UKs constituent parts), which had
been simmering away since the 1960s, a hot political issue in the second half of the 1970s.

Wilsons government aimed to improve the life changes of working people by increasing spending on
education, health and housing and to this end taxes on the wealthy were increased. But whatever
Wilsons achievements in terms of social policy, the governments reputation hinged on the state of
the economy and here the picture was mixed. Inflation was a particular problem by August 1975
it was running at 27 per cent; and it was still over 20 per cent, though falling, by the time that he left
office in April 1976. With the failure of the Social Contract to restrain pay weekly earnings often
outstripped inflation, which meant living standards did not necessarily fall for those in work Wilson
was forced to cut public spending and to introduce a more formal system of pay restraint. With little
or no economic growth the economy actually contracted in 1975 unemployment increased ,
surpassing 5 per cent by autumn 1975. Moreover, although the balance of payments deficit had
been reduced, it was still in the red in short, the UK was spending more than it was earning. It was
against this background of ongoing economic crisis that Wilson suddenly announced his resignation
in March 1976. To this day, nobody is completely sure why he resigned but the most likely
CNB George Cobuc. Grade 12 The Making of Modern Britain, 1970-201

explanation is a combination of work-related stress, health problems and commitments made to his
wife.

The Callaghan Government, 1976-79

Wilson was replaced as Prime Minister by James (Jim) Callaghan (1912-2005). Callaghan seemed the
perfect candidate to weather the crises of the 1970s: he had already served as Chancellor of the
Exchequer (1964-67), Home Secretary (1967-70) and Foreign Secretary (1974-76); and he had close
links to the trade unions. Yet Callaghans government is often portrayed as a failure. Callaghan was
immediately faced with a sterling crisis in short, foreign investors indicated their lack of confidence
in the British economy by selling sterling, causing the pound to depreciate against the dollar.
Eventually, the Chancellor, Denis Healey (1917-2015) had to secure an emergency loan of 3 billion
dollars from the International Monetary Fund (IMF) in return for which, the IMF insisted on cuts to
public expenditure. Those on the left of the Labour Party cried betrayal; while the Conservative Party
decried the countrys national humiliation. Yet by autumn 1978 there were clear signs of economic
recovery: cuts in public expenditure and pay restraint had brought inflation down to 8 per cent; the
balance of payments was in the black; and unemployment, while still over 5 per cent, had plateaued.
Moreover, the UK was now about to benefit from the revenues generated by North Sea oil. Most
commentators therefore expected Callaghan to call a general election in late 1978 but Callaghan
chose not to do so. By the time that that general election did take place, at a time not of Callaghans
choosing, in May 1979, the government was once again associated with crisis.

One of the ways that the Callaghan government had tackled inflation was through pay restraint. In
1978 it imposed a 5 per cent pay ceiling on public sector workers and urged similar pay restraint in
the private sector. This, though, was rejected by the trade unions. There followed a major strike at
Ford, followed by a strike by lorry drivers this set the scene for widespread industrial unrest in the
public sector, by train drivers, hospital porters, local authority clerical workers, dustmen and even
gravediggers. This was the so-called Winter of Discontent. Although the strike wave had started to
recede by February 1979, the political damage had been done.

The Callaghans problems went much deeper than the economy. The government had already lost
its parliamentary majority by the end of 1976 and was governing only with the support of other
parties, each of which had imposed their own demands: the Liberals (in the so-called Lib-Lab Pact)
had secured a joint consultative committee to discuss implementing some of their policies; the
Ulster Unionists (UUP) were able to increase the number of Northern Irish seats at Westminister;
and both the SNP and Plaid Cymru were promised a referendum on devolution.

Devolution was a particularly controversial topic because it threatened the supremacy of

Westminister and the integrity of the UK as a unitary state. It was therefore bitterly opposed by the
Conservative Party and large swathes of the Labour Party. It is hardly surprising therefore that the
governments first attempt to legislate for devolution failed; and the second attempt only passed
with the proviso that at least 40 per cent of the electorate which included those who chose not to
vote voted in favour in a referendum. The referendums were duly held on 1 March 1979. The
result in Wales was an overwhelming no to devolution 80 per cent voted against. In Scotland, on
the other hand, there was a narrow yes in favour of devolution but as this only constituted 33 per
cent of the electorate, the referendum was lost. As a consequence, the SNP withdrew its support
from the government.
CNB George Cobuc. Grade 12 The Making of Modern Britain, 1970-201

Callaghans parliamentary position was now perilous. The Lib-Lab Pact had come to an end in 1978,
with the Liberals disgruntled about their lack of influence on the government; the UUP had secured
extra parliamentary seats for Northern Ireland; and the SNP had been alienated by the referendum
result. At the end of March 1979, the Conservative Party leader, Margaret Thatcher, saw her
opportunity and tabled a vote of no confidence in the government. Although Plaid Cymru and a
couple of Ulster Unionists voted against the motion and therefore in support of the government
the Liberals, the Scottish Nationalists and most of the Ulster Unionists sided with the Conservatives.
The result was announced to a packed House of Commons at 10.19 pm on 28 March the motion
was carried by a single vote (311 for and 310 against with 4 abstentions).1 In accordance with British
constitutional practice, Callaghan asked the Queen to dissolve Parliament and a general election was
duly called for 3 May 1979.

In the subsequent election campaign the Conservatives focused on the governments economic
record, for example, unemployment (Labour Isnt Working); the power of the trade unions and
industrial unrest (the Winter of Discontent); inflation (which was running at just over 10 per cent by
the time of the election); and law and order. The Conservatives increased their share of the vote by
over 8 per cent, benefiting not only from the (relatively modest) decline in support for the Labour
Party, but also from the loss of support for the Liberal Party and the SNP. As a consequence, the
Conservatives were able to win the election with a comfortable majority of 43 and Margaret
Thatcher duly became Prime Minister.

Questions
1. Do you think that the Wilson and Callaghan governments between 1974 and 1979 were a success
or a failure? Give reasons for your answer.
2. What do you understand by the term devolution? Why were devolution referendums held in
Scotland and Wales in 1979?
3. Imagine your were a voter in May 1979. Which party would you have voted for and why?

1
The House of Commons was not televised in 1979. But you can hear the radio broadcast the result of the vote,
Callaghans response and Thatchers reply on YouTube: https://www.youtube.com/watch?v=7vfSxF4PBy0 (it lasts just
over two minutes!)