"...It will be years—and not in my time—before a woman will lead the party or become Prime Minister...”
Margaret Thatcher (Secretary of State for Education and Science, Heath Government)
|House of Commons Vote - October 1971|
Edward Heath had been a Conservative MP since 1950, party leader from 1965 and then Prime Minister from 1970 to 1974. He was of middle class background and had been active in conservative student politics. In the context of the times, he was an unlikely Tory leader, not being blessed with any kind of upper class heritage, nor a large personal or family fortune. He would certainly not have qualified as one of Francis Urquhart's sound men from the shires. Following reforms initiated by his predecessor as Conservative leader, Alec Douglas-Home, Heath was the first to have actually been democratically elected as leader by the parliamentary party, rather than being quietly anointed by the Conservative machine, or informally emerging, as in the past.
Prior to his rise to the leadership, Heath had served in a number of senior government posts and had been at the forefront of negotiations during Britain’s initial unsuccessful attempt to join the European Economic Community (Now the European Union). The 1963 French veto preventing Britain's entry had resulted from the Nassau Agreement; an alliance between Harold MacMillan’s Government and the US Kennedy Administration, that would allow British submarines to be equipped by American nuclear warheads. French President, Charles de Gaulle, fearing too much American influence in European affairs, led the successful veto against Britain’s attempt to join the EEC. Critics and cynics might have noted that France hadn't been so hesitant to allow American involvement when it had helped to achieve their own liberation from the Nazis, less than 20 years earlier. (The veto was ultimately overturned a decade later, when Heath was Prime Minister, allowing the UK to finally join the Common Market in 1973.)
Nine months after the narrow Labour victory in the General Election in October 1964, Heath became Opposition Leader, defeating Reginald Maudling in a tight contest, with Enoch Powell coming third. Heath remained as Opposition Leader after Labour reinforced their majority in the General Election of 1966, but became Prime Minister in 1970, defeating the government of Harold Wilson.
Setting the agenda for major reform, the newly elected Prime Minister told the Conservative Party Conference;
Good intentions and strong words aside, Heath’s single term in office was fraught with difficulties and inconsistencies. His government inherited galloping wage inflation amongst a number of other economic headaches. In the year prior to the June 1970 election, wage rates had grown by 10%. Price inflation was not as high, but in danger of catching up. An uncomfortable and largely unprecedented combination of economic factors including high unemployment, slow to non-existent economic growth, and record peacetime inflation led to the use of the dreaded term, Stagflation. In 1962, Conservative Prime Minister Harold Macmillan had been confronting this very uncomfortable state of affairs, leading up to the infamous night of the long knives, a ruthless purge that removed one third of his Cabinet, including the Chancellor of the Exchequer. Macmillan was out of office the following year, and the Tories, then under Alec Douglas-Home, lost to Harold Wilson's Labour Party in 1964.
But six years later, Labour and Harold Wilson were the ones in trouble. Industrial unrest in the 6 months leading up to the 1970 election had been responsible for a total of 5 million working days lost, around 3 times the average for similar periods in preceding years. Attempts in response by the Heath Government to legislate more controls upon trade unions would do nothing to reduce disruption caused by industrial action and, in fact, it would be Mr Heath's perceived lack on impact on union militancy that would have serious implications for his government in 1974.
The new Chancellor of the Exchequer, Anthony Barber, signalled a softening of economic controls by relaxing the credit squeeze, cutting interest rates and cutting some taxes to encourage greater industrial investment and productivity, along with the announcement of a plan for a broad based consumption tax; the VAT. The Chancellor's policy was described as cautiously reflationary. With economic growth reaching 4%, the Prime Minister and Chancellor promoted optimism, but once again inflation became a major factor in the continuing instability of the the economy, forcing the Chancellor's hand.
The Government, apparently caught flailing between the twin holy-grails of low inflation and low unemployment, and against a large part of their own Conservative ideology, re-introduced statutory controls over wages and prices, and increased public expenditure. There were also attempts to rein in uncontrolled inflation using the Monetarist approach of applying controls to the money supply. If employers were facing a liquidity squeeze, they would, by necessity, have to resist the trend of excessive wage demands, ambit claims of 20% and more, which were being negotiated down to a still inflationary 13% to 15 %. The result was some moderation in wage hikes, however tighter credit controls created cash problems for a number of firms, which began shedding workers in response to the changing economic conditions. A year into the government's tenure, unemployment had already reached 900 000 registered job-seekers out of work, and would rise higher.
High Government expenditure necessitated high public sector borrowing, which in turn placed pressure on interest rates. Despite the Chancellor's assurances that the currency was not over-valued, a floating Pound Sterling would suffer a 20% decline in its value over 18 months. With a corresponding spike in international commodity prices thanks to war in the middle east, the scene was once again set for higher inflation and interest rates. Many of the Tories' core constituency found themselves paying lending rates of 11% and then 13%, well above the rates of 5% to 7% they had grown accustomed to.
The Independent describes Anthony Barber's tenure thus;
Under a supposedly free market Conservative Government, major industrial firms were told that they could no longer rely on Government subsidies to prop them up through difficult times. But the Government’s resolve on this matter wavered as well, with an exception made for the iconic but bankrupt international British brand, Rolls Royce. A compromise was then conceded to the moribund Upper Clyde Shipbuilders Ltd, after the seizure of the yard by workers - Jimmy Reid’s Clydeside work-in - protesting the closure of the shipyard. The government also initiated public works programs in targeted areas of high unemployment.
By the end of 1973, the government’s tenuous hold on the economy and the labour market was in disarray. That November saw the worst balance of trade result in Britain’s history. In the face of rising prices across the board, the willingness of trade unions to comply with legislated wage and price restraints faltered, and industrial action in the Coal and Power industries began in earnest. With a corresponding Middle East tensions, an energy crisis loomed.
Things did not improve for the nation in 1974, as political instability and industrial disharmony rose to new levels. For the first time since 1910, 2 general elections would be held in the space of one year, on the back of a nationwide energy crisis. Following the Arab-Israeli war of late 1973, oil producing countries had cut production and quadrupled the price, placing embargoes on countries perceived to have taken the Israeli side in the dispute. Although Britain was not specifically targeted by the measures, some collateral effect was felt and panic buying placed an even greater burden on supplies.
Heath’s opponents accused him of strategically seeking a confrontation with the unions as a means to assert the government’s authority, but he had in reality taken an initially conciliatory approach. Heath had offered economic and social policy compromises in return for a commitment by the unions toward voluntary wage restraint. When no such commitment was forthcoming, the government proceeded with the third phase of their prices and incomes policy, which sanctioned an across the board general pay increase of 7%. Neither the National Union of Mineworkers, the National Coal Board nor even the government's own recently established Pay Board, which had the responsibility of enforcing the enactment of the government’s policy, abided by the government directive. The NUM had claimed 35%, and the Coal Board, colluding with the Pay Board, countered with an offer of 13%, almost double the phase three amount set out in the government plans. The union rejected the counter-offer, and immediately instituted overtime bans in support of their full claim. Clearly they had no intention of cooperating with even the legislated enforcement of restraint, much less offering voluntary compliance.
The NUM stepped up their action. A ballot returned 81% of members in favour of a full strike. The Labour Party and the Trades Union Congress suggested the Government classify the miners' demands as a special case, allowing free collective bargaining outside of the framework set by the government’s statutory powers. From the Conservative perspective, Heath, his government and the parliamentary process were now facing a direct challenge to their authority.
By the winter of 1973-1974, coal shortages were severely affecting the power stations’ ability to satisfy demand. A week after Christmas, the Prime Minister announced a three day working week for all but essential industries. Other power saving methods included restrictions on theatres, entertainment venues and street lighting, and an urging by Energy Secretary,Patrick Jenkin, that people to do their bit in the interests of saving power, including encouraging people to clean their teeth in the dark.
Heath called a general election for February 28th, 1974, seeking a fresh mandate for tough action against the NUM, and the forces of the Left that, in the Tories’ eyes at least, seemed intent on bringing the country to its collective knees.
The electorate had every reason to feel disillusioned and downbeat, and the government did not have much to offer to inspire confidence. Inflation was at 15%, and by now the unemployment rate had passed the dreaded, symbolically morale shattering number of 1 million. Industrial action was causing frequent and inconvenient widespread power outages. Other economic indicators gave little reason for optimism. The government’s election catchphrase was Who Governs Britain? a sentiment that would come back to haunt them. The Labour Party laid the blame for the loss of authority and control squarely at the government’s door, although the Labour Party’s own recent record in terms of industrial harmony was far from enviable, and would get a whole lot worse.
In the early stages of the election campaign, Heath inexplicably caved in to the demands of the NUM and their supporters, and conceded the referral of the miners’ case to the Pay Board for Special Case consideration. The Government’s campaign position became confusing, seeking public support for the battle against union militancy after having themselves already surrendered. As it turned out, the Pay Board reported back in early March, after the election, recommending the miners receive virtually all of their initial (35%!) claim. The actions of the National Union of Mineworkers, and Heath's own apparent indecisiveness, were being watched closely by members of Heath's own Conservative Party, and the future ramifications, not only for Heath himself, but for the country as a whole, would be dramatic to say the least.
The country was frustrated and divided, and gave neither the Conservatives nor the Labour Party any kind of individual mandate. Although the Conservatives won the popular vote, only just, at 37.9 % against Labour’s 37.2 %, Harold Wilson’s Labour had secured five more House of Commons Seats than Heath’s Tories. The Liberal Party, under the leadership of Jeremy Thorpe, had capitalised on the electorate’s malaise and general mistrust of both major parties. Only the Liberals achieved a positive swing, of nearly 12%, winning 19.3% of the popular vote and 3 extra seats, while the swings against Labour and Conservative were 5.9% and 8.5% respectively.
Heath approached Jeremy Thorpe with the offer of a coalition that would allow the Conservatives to continue as a minority Government with Liberal support. Thorpe dismissed the idea of a Liberal-Conservative alliance out of hand; as a result it was Labour under Harold Wilson which formed a minority Government. In a second election in October, Labour managed to secure a razor thin majority in its own right, of just three seats.
Read detailed analysis of both 1974 elections here;
The Wilson Labour Government faced a worsening economy, with rising inflation, now recognised by both sides of politics as the single most damaging and destabilising factor against economic prosperity. Chancellor Denis Healey set about cutting Government expenditure, which had risen by 34 % during the previous year, and raising taxes and a number of charges in an attempt to reign in spiralling government debt.
The Trades Union Congress was told that unless they abided by their Social Contract, an agreement with the government whereby free collective bargaining would be permitted in return for a union commitment that wage claims would not exceed cost of living rises, statutory wage controls would be reintroduced.
After negotiations with the TUC, the Wilson Government secured an agreement leading up to their anti-inflation white paper, limiting any pay claims to no more than 6 pounds per week for the following 12 months, with no increases at all for those on higher incomes. These measures would apply to governments, councils and nationalised industries as well as the private sector, with the government able to legally enforce compliance. The government also kept a tight rein on grants to local councils, offering no increase for the following year, even for essential social services.
Nationalised industries and government subsidies to lame ducks in the corporate sector continued to be the subject of differing opinions on either side of the parliamentary aisle. Wilson’s Secretary of State for Industry, Tony Benn, a committed socialist, blamed unregulated private enterprise, Capitalism itself, for Britain’s industrial malaise. Private enterprise could clearly not be trusted to invest sufficiently in infrastructure and innovation and was to blame for what Benn described as the de-industrialisation of Britain. The opposing view was that government interference, high corporate taxes and unchecked inflation were the root causes of the decline in Britain’s former industrial dominance.
Benn had an unlikely ally in the previous Conservative Prime Minister, Edward Heath, who had increased his government’s legislative ability to inject taxpayers’ money into struggling businesses, and also increase the government’s level of control over them.
Burmah Oil, Foden (Trucks and commercial vehicles), Alfred Herbert (machine tools), Bear Brand (hosiery) and Ferranti Electronics all applied for Government bailouts in the first half of 1975 alone. Leyland, unprofitable and with no money, was bailed out and nationalised to the tune of 1.5 billion pounds to be spread over the next seven years.
Conservative critics railed against increasing government powers over the direction of private enterprise, including laws that forced companies to disclose potentially commercial-in-confidence information to the government and to unions with a vested interest. A new billion pound bureaucracy, the National Enterprise Board, would direct Government investment to selected manufacturing sectors. The Conservatives described the measures as the grasping hand of state socialism. In order to allay at least some of the concerns expressed by the Opposition and industry lobbyists, Prime Minister Harold Wilson promised to take the major decisions on industrial policy personally. In due course, Tony Benn was eased out of the Industry portfolio and replaced by a more moderate pair of hands, Eric Varley. Under the new Minister, motorcycle builder, Norton Villiers Triumph, had their application for funding rejected, while Varley and the Chancellor of the Exchequer jointly worked on a plan to better target funding toward areas of potential growth and innovation.
In the Spring of 1976, Harold Wilson informed the Cabinet that he intended to resign as Prime Minister and move to the backbenches. Although he had advised the Queen and one or two other close colleagues of his intention around the previous Christmas time, the move would come as a big surprise to the majority of his parliamentary colleagues and the electorate at large.
Wilson’s explanation was vague and not altogether convincing. He had been in the job for long enough, 8 of the previous 12 years, and had just celebrated his 60th Birthday. None but the most optimistic might have conceded that the country was in sufficiently good shape for a natural succession, in fact, his successor would face major challenges on a number of fronts. Statistically Wilson was Labour’s most successful leader, having successfully contested four elections. Conspiracy theories would abound, from a coup by the intelligence services to the fact that the Prime Minister was suffering early onset dementia.
BBC reporter Barrie Penrose and his producer subsequently met with Harold Wilson secretly, and discussed, amongst other things, suspected interference by the South African Security Services, who were allegedly mounting a campaign of smear against opponents of Apartheid. Wilson then expressed distrust of his own security services, citing alternative centres of power, and asserted that the security services had been actively plotting against him by managing unfavourable press stories about himself and his close colleagues. BBC producer Roger Courtiour offered this explanation:
The young BBC reporting team claimed to have uncovered credible accounts of some conniving toward the planning of a coup against the Wilson Government, involving the head of MI5 and senior military and establishment figures. The former Prime Minister further alleged that MI5 were also after Jeremy Thorpe, leader of the Liberals, and were gathering information about his private life and the fact that he was gay. By this time, according to Courtiour, the BBC were having misgivings, and he alleged that, following intervention from the Home Secretary, he and Penrose were summarily terminated by the BBC. They continued their investigations on a freelance basis, eventually producing a book, The Pencourt File.
In the leadership ballot that followed, modern day Bevanite, Michael Foot, won the first ballot, but his vocal enthusiasm for socialism was never going to satisfy the right wing of the party. Other candidates in play, including Tony Benn, Denis Healey and Roy Jenkins among others, arguably represented more what divided Labour than what united them. As a result, James Callaghan, with no clear factional alliances, the moderate or compromise candidate, (Not unlike Jim Hacker's own rise to power in Yes Prime Minister) defeated Foot in the third ballot 176 to 137.
Under Wilson, Callaghan had been Foreign Secretary, but had also served as Home Secretary and Chancellor of the Exchequer. He had re-negotiated Britain’s financial commitment toward the European Economic Community, its continued membership of which had been narrowly endorsed in a 1975 referendum. Callaghan’s succession came in difficult times. Inflation had peaked at 26% and unemployment was heading toward 1.5 million, or 5.5% of the registered workforce. He immediately was forced to make highly unpopular cuts in government spending in response to terms set out by the International Monetary Fund, after a financial crisis precipitated by the plunging value of the Pound had necessitated an emergency loan. This was not the first time that austerity had been a condition of an international loan in an atmosphere of financial crisis. Labour Prime Minister Ramsay MacDonald had faced similar conditions in 1931, after which he had resigned and then, to the disgust of many of his own Party members, formed a coalition with the Conservatives and remained as Prime Minister. The subsequent election saw Labour’s parliamentary presence dramatically weakened.
To compound Prime Minister Callaghan’s problems, his government was also facing a dramatic rise in union militancy on a nationwide scale.
Following the second election of 1974, Labour held a tenuous 50.24% the House of Commons seats. The Tories held 43.45% with the remainder divided between Liberal (2.05%) and a mix of Ulster Unionists, Scots and Welsh Nationalists and other independents. A series of unsuccessful by-elections eroded their numbers, and Labour was soon governing from a minority situation, and, from 1975, were opposed by a newly energised Conservative opposition dominated by Margaret Thatcher’s right faction.
The Government was forced to stare down a no-confidence motion in the House over the issue of Government spending. The Tories assessed Labour’s spending proposals as, predictably, way too lavish, while the Labour’s own left faction urged for more. Callaghan needed to shore up support to avoid being forced to an early election. An offer was made to the Liberal Party, whose support the Tories had been courting in furtherance of their no-confidence motion. The Liberals held a decisive 13 seats, and were offered, in return for supporting the government throughout the parliamentary session, due consideration in the making of economic and social policy. The alliance would become known as the Lib-Lab Pact.
In the autumn of 1978, the Government proposed that the unions moderate the following year’s pay increase claims to 5%. The Treasury had assessed this amount the maximum allowable claim that would enable Government to maintain its tenuous control of inflation, which was sitting on a much improved 8%. Unemployment was trending upwards, around 6%, equivalent of over 1.5 million registered job seekers out of work. On the more positive side, the balance of trade was improving on the back of growing revenue and production from North Sea Oil, which was expected to make the country self-sufficient in terms of oil by 1980.
The Bank of England had chosen to unpin the pound from fluctuations in the US Dollar and it was holding its own in international trading, rising above US $ 1.80. This, along with a number of measures implemented as part of the IMF loan, including cuts in public sector borrowing and a move toward monetarist supply side economics were giving grounds for confidence. The Trade Unions, however, rejected any limits proposed by the Callaghan Government and vowed to pursue their right to free collective bargaining. The first major employer to concede to demands over and above the Government’s proposed ceiling was Ford Motor Company, which conceded 17% after an initial ambit claim of 25%. That December, the Labour Government’s already faltering control of wage negotiations was dealt a knockout blow in the House of Commons, when a motion was carried condemning….
“…the arbitrary use of economic sanctions against firms and workers who have negotiated pay settlements beyond a rigid limit which Parliament has not approved...”
The only way the Government had been able to extend and enforce its wages policy beyond the Government sector been by the threatened withdrawal of Government grants and contracts to companies that would not hold the line against excessive wage claims. The House of Commons motion had now removed this discretionary power. The Civil Service Unions, feeling restricted and isolated under Government control while their brothers in other sectors were free to set their own negotiation benchmarks, prepared for militant action.
As the cold winter closed in, a nationwide transport strike created shortages of a number of essential commodities. Into this chaotic atmosphere returned Prime Minister Callaghan from a summit with US President Carter, French president Valery Giscard d’Estaing and the West German Chancellor Helmut Schmidt. With a comically absurd piece of political timing, the meeting had been held in the sunny Caribbean Island of Guadeloupe. Callaghan, looking relaxed and unconcerned according to reports, did neither himself nor his Government any favours with his appearance of complacency and hollow reassurances that things were not as bad as they seemed. He told reporters:
"...I don't think that other people in the world would share the view that there is mounting chaos…”
Callaghan was ridiculed the in the tabloid Murdoch controlled Sun newspaper with the headline;
The road haulage drivers stepped up their action and were supported by secondary picketing at depots and factories that had not been otherwise participating in the strike action. Virtually no essential institution was unaffected. NHS hospitals, ambulance services, schools and even funeral and burial services were caught up in stoppages that created nationwide chaos. The bin men were also on strike, leading to memorable images of city and suburban streets drowning under piles of rat-infested garbage. Industry and commerce ground to a virtual halt, at one point 200 000 workers were temporarily laid off. By the end of January 1979, the strike was beginning to wind back with employers conceding to almost all of the various unions’ demands. The government’s attempts at any kind of wage moderation were in ruins. They looked weak, powerless and clueless.
Although the unions won the battle, they lost significant ground in public opinion. Any sense of common purpose between the Labour Government and the union movement had been shattered. The Prime Minister, in a classic piece of understatement, told parliament that the Trade Union movement was, in danger of exhausting the public’s patience. He said that many of the militant practices seen during the strike were not Trade Unionism as he had known it. He described their actions as not free collecting bargaining, but free collective vandalism.
Callaghan’s political goose was cooked on a number of
levels. His government’s efforts toward wage restraint had failed disastrously and as a result, its otherwise commendable results in reducing inflation were unravelling. Any semblance of a productive working relationship with the union movement was shown to be a myth. In 1973-74, the Union movement had been confronted by Edward Heath’s Conservatives and industrial chaos had followed. At that time, Labour had had the political advantage, probably easier from the perspective of Opposition, of close union ties and the public perception at least, of an ability to work collaboratively toward resolution of disputes, something that the Tories were unable, or unwilling to do. But Prime Minister Callaghan's Winter of Discontent disruptions appeared to be proof positive that the relationship had irretrievably broken down. Labour no longer had any industrial relations credibility. The cooperative and constructive relationship between Government, The Trade Union Movement and Industry, cleverly brokered and nurtured by Ernie Bevin during World War Two, was dead and buried.
Recognising the damage that had been done, not only to the country but to their own political fortunes, the Government and Trades Union Congress tried to publicly reconcile. An election was looming. The new Concordat, issued in February 1979, spelled out guidelines for a new cooperative approach toward dispute resolution, called for restraint in wage demands and set a joint ambition for an inflation rate of below 5% by 1982. It promised more measured picketing and more liberal union control over workforces. The wounded but determined Prime Minister called the accord, a great step forward. The Confederation of British Industry, predictably but accurately, said it was too little, too late.
Any benefit to the Government from the new accord would be to no avail. The Government’s position, and that of Mr Callaghan as Prime Minister, were now secured with cross-bench support, once the formalised arrangements under the Lib-Lab pact came to their natural end. Scottish and Welsh Nationalists were now in a position of much greater influence. In return for the support of the SNP and Plaid Cymru, Callaghan’s Government had moved toward devolved government for both Scotland and Wales. Amidst a number of political manoeuvrings, non-binding referenda in both constituencies failed to meet the criteria for a yes vote. Wales said no decisively, but the result in Scotland was much less emphatic, despite pre-referendum polls showing a heavy pro-devolution majority.
The Scottish Nationalists now had the Government by what Yes Minister’s Jim Hacker later referred to as (the) round objects and the position became increasingly unmanageable. The handful of SNP members demanded that the Government continue to enact the devolution measures in spite of no clear mandate. Prime Minister Callaghan knew that he could not come up with the numbers to proceed from within his own Party, much less from the remainder of the House.
Into this conflicted mess steamed the ambitious Opposition Leader, Margaret Thatcher, who seized a golden opportunity to take command of the agenda. She introduced a motion of no confidence against the Government on March 28th 1979. This time the Government did not have the numbers. The motion was passed by one vote, the first such successful motion since 1924. Jim Callaghan had no option but to go the country and an election was called.
The scene was set for a radical change in the way Britain was to be governed.
Read on here;
The scene was set for a radical change in the way Britain was to be governed.
Read on here;
From 1973, here is an episode of the Parkinson Show, with a debate between union leader Jimmy Reid and Kenneth Williams, discussing many of the economic and social issues confronting Britain in the early 1970s.
Credits and References
Generic images in the Public Domain sourced from Pexel
Edward Heath photo by Open Images Ltd Link to Source
James Callaghan photograph UK Archives (Public Domain)
Statistics from Archived Collier’s Weekly and BBC Reporting)
BBC Documentary Heath V Wilson - Also Night of the Long Knives (1989)
BBC Witness and Desert Island Discs
The Independent (Online) and the Guardian
Harold Wilson image by Allan Warren Link to Source
Newspapers announcing EEC membership - Source University of Salford
Text, charts and graphs by George Fairbrother © 2015-2020, except the unemployment/inflation chart above which is public domain.
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