James Callaghan was the Labour Prime Minister between 1976 and 1979 after the resignation of Harold Wilson. Callaghan inherited a government rife with economic issues, political divisions and issues with trade unions. His leadership was marked with failures, eventually leading to the fall of the Labour party and the political dominance of the Conservative party for 18 consecutive years.
What were these problems Callaghan faced, and how did he handle them?
James Callaghan Biography
Born in Cardiff in 1912, James Callaghan was a prominent Labour MP, representing the Cardiff South constituency since he became an MP in 1945. He served as Foreign Secretary, Home Secretary, and Chancellor of the Exchequer before he ascended to the role of Prime Minister in 1976.
Did you know? James Callaghan is the only 20th century Prime Minister to have held these three most important roles in the UK government before taking the premiership.
It was believed that Callaghan would never achieve the role of Prime Minister because of the younger and more popular Harold Wilson taking the fore. However, when Wilson announced his sudden and unexpected retirement in 1976, Callaghan was chosen as his most competent successor. Let's take a look at Callaghan's premiership.
James Callaghan Prime Minister
James Callaghan's premiership was during extreme industrial relations instability. In fact, during his time as Prime Minister, there was seldom a time when there was not a strike. Journalists coined the term 'British disease' to describe the continued problems between the government and trade unions.
Fig. 1 - James Callaghan
Unrest under Callaghan was influenced by issues under Edward Heath's Conservative government (1970-1974) and Callaghan's predecessor Harold Wilson (1974-1976).
During the three years of Callaghan's government, Callaghan faced:
- Serious party divisions.
- A narrow House of Commons majority.
- Trade union unrest.
- The Winter of Discontent.
- The fallout of the 1975 referendum.
- Economic instability.
Callaghan failed to resolve many of the problems facing his government, especially the continued trade union unrest. By 1979, most of the British electorate had wholly lost faith in Labour's ability to govern.
Trade Union
An organisation which represents and comprises workers within a certain trade or company in order to ensure and increase its workers' rights.
What problems did Callaghan inherit?
Let's look at the issues that Callaghan inherited from his predecessor Harold Wilson.
Narrow Labour majority in House of Commons
Labour held a 42-seat majority in 1974, however, its overall majority in the House of Commons was never greater than three seats throughout the party's five years in office.
Did you know? It is much more difficult to pass legislation when you have a narrow majority in the Commons; if just a few members of your party refuse to vote for it, it will not pass.
It was for this reason that both Wilson and Callaghan became reliant on the support of the Liberal Party, giving Liberal MPs a strong parliamentary influence.
The 1977 Lib-Lab Pact
In 1977, Callaghan oversaw the Lib-Lab pact agreement - the Liberal Party would vote in favour of Labour's motions if the Labour party agreed to push forward some Liberal policies.
As a result of this, the Labour Party agreed to a referendum on the devolution of Scotland and Wales. Both referendums were voted against at this time.
Devolution
The process of transferring power from the central government to regional governments.
The Lib-Lab pact eventually fell apart in the autumn of 1978.
The 1973 oil crisis
In October 1973, five members of the Organisation of Arab Petroleum Exporting Countries (OAPEC) placed an oil embargo on nations which supported Israel in the Arab-Israeli War, this included the US and the UK among others.
Fig. 2 - The 1973 Oil Crisis affected the United States greatly, with gasoline supplies running very low. The economic effects from the suffering US created a worldwide economic recession - affecting the UK, among many others
This began the 1973 Oil Crisis and led to a global economic recession between 1973-1975, which had devastating effects on Britain, including:
- Increase in unemployment.
- Increase in inflation.
- Increase in the balance of payments deficit.
Oil Embargo
When the export of petroleum from one country to another is prohibited.
Inflation
An increase in prices combined with a decrease in the value of a currency.
Balance of payments
The difference between money coming into the country and money leaving the country. When the balance of payments is in deficit it means that there is more money leaving the economy through the importation of goods and services than that is coming in from the exportation of goods and services.
As a result, when Callaghan came into power, Britain was on the verge of bankruptcy.
Did you know? Callaghan was Chancellor of the Exchequer (in charge of finance) under Harold Wilson. Historians often cite his control over the economy during Wilson's office as a reason for Callaghan's dire economic situation during his premiership.
Trade Union Unrest
Issues with trade unions began under Conservative Prime Minister Edward Heath. Unions became increasingly militant, and the government suffered an embarrassing defeat during the National Union of Mineworkers strike in 1974. Heath's failure to deal with trade unions contributed to the election of Harold Wilson.
Wilson managed to keep relatively good relations with some unions but never succeeded in making his idea of a social contract between the government and unions a reality.
Social Contract
An agreement made in 1972 between Harold Wilson and the Trade Union Commission (TUC) that when Labour returned to power, unions would abide by a wage restraint policy in exchange for an increase in policies that benefited industrial workers.
This meant that when Callaghan came to power, he faced the continued fallout of trade union militancy, which was intensified by the economic issues the nation faced.
Economic problems under James Callaghan
Inflation reached around 15% during Callaghan's time in office. This was influenced by the 1973 oil crisis and the continuous wage increases given to unions as a result of strikes. The value of the pound sterling plummeted, and the mounting economic issues threatened bankruptcy.
So what did the Callaghan government do? To stop the economy from declining further, the Chancellor of the Exchequer Dennis Healey tried to reduce government spending. In the 1976 budget, Healey also imposed large tax increases and tried to impose a 3% limit on wage increases.
IMF Loan
After struggling to prevent the economic situation from worsening Healey began negotiating with the International Monetary Fund (IMF) for a £3 billion loan in 1976.
The IMF agreed on the condition that Britain made major cuts to public spending to meet the conditions for the loan. This outraged the political left and trade unions, and exacerbated Labour party disunity.
Callaghan managed to deal with the IMF crisis and secure the loan effectively. However, the loan exposed the extent to which Britain was in economic decline.
Political divisions under James Callaghan
The Callaghan government faced several issues with divisions not only internally but within British politics as a whole. The Labour Party became increasingly split, whilst at the same time, larger issues emerged within British politics concerning Britain's entrance into the European Economic Community (EEC).
Splits in the Labour party
The divisions in the party were deeper than those exposed in the IMF crisis. Let's have a look at the three main groups.
| Left-wing | Centre-left | Centre-right |
- Supportive of social equality, often in opposition to social hierarchy.
- Concerned for those who were disadvantaged in society.
- Believed that there were unjustified inequalities that need to be tackled.
- Key beliefs included: the welfare state, nationalisation, and Keynesian economics.
- Believed that Callaghan was following more Conservative policies and didn't want pressure on trade unions.
| - Also referred to as moderate-left or 'soft left'.
- Believed in working within the established systems to improve social justice.
- Promoted a degree of social equality believed to be achievable by promoting equal opportunity.
| - Also referred to as moderate-right.
- Generally supportive of free markets, limited government spending, and other neoliberal economic policies.
- Often combined conservatism and liberalism e.g. supported civil liberties with elements of traditionalism.
- Believed that Callaghan ought to modernise towards the centre rather than nationalisation of industries and that trade unions were gaining more power than the government.
|
Welfare State
A system in which the state plays a key role in protecting the economic and social well-being of its citizens.
Nationalisation
Moving aspects of the economy from private to government control.
Keynesianism
An economic theory that advocates for increased government expenditure to boost the economy, increase people’s earnings, and create demand.
The split over Europe
One of the bigger issues that plagued the government as a whole was Britain's entrance into the EEC. Many members of parliament saw Britain's entrance into the EEC as a betrayal of democracy, as Edward Heath's government entered Britain into the EEC without a referendum vote.
In 1975, Harold Wilson held a referendum about EEC membership but many argued it was simply to provide an illusion of democracy. The 'stay' campaign had a larger budget and threatened that leaving would damage Britain.
As a result, the wider government was deeply divided. Through successive governments, there were debates about the loss of British sovereignty and democracy through union with Europe.
The 1975 referendum The left-wing of the Labour Party and the trade unions remained deeply suspicious of the EEC. According to them, it was a capitalist club that was hostile to socialism.
Wilson began renegotiations regarding agriculture, budget payments, and special provisions for Commonwealth imports in 1972 to quiet the left. In fact, Callaghan assumed a role as the government's chief representative.
Wilson's negotiations produced no major changes but were a precursor to the 1975 referendum.
There was a wide difference of opinion between the MPs of each party since they were not instructed which side to take. The majority of Labour members favoured leaving the EEC, and the majority of Conservatives and Liberals favoured staying.
James Callaghan Education
James Callaghan left education at the age of 17, never went to university or achieved a degree, and yet became Prime Minister of the United Kingdom and helped to shape education administration.
The Labour Party traditionally views education as a means to increase opportunities for citizens and transform people's lives. In October 1976, Callaghan, having just assumed the office of Prime Minister in April 1976, gave a speech wholly dedicated to education policy at Ruskin College, Oxford. This began what is known as The Great Debate.
The Great (Education) Debate Speech - October 1976
Much press rumours were spread in the lead-up to Callaghan's Great Debate speech at Ruskin College as it was a unique position for a Prime Minister to take. Rather than asserting his authority as the new Prime Minister and strengthening Labour's position in UK politics, Callaghan posed probing questions about the education system in the UK and suggested how they could be solved.
Callaghan opened up a national discussion regarding education, known as the Great Debate. The Great Debate centred around a few reasons for improving and changing the education system.
- Employers were complaining of low levels of academic ability in their new workers, especially regarding mathematics.
- There was a significant lack of applicants for science degrees at universities. Young women especially were opting not to study science-based courses.
- Educators posed that an increased focus on science teaching would improve young people's employability.
- Teaching standards were not universal. Whilst some informal methods were effective in competent teachers' hands, other less competent teachers were producing sub-par students.
Callaghan aimed to overturn the curriculum to produce well-rounded students who were employable, had technical skills, and were well-integrated into society by the time they left education. He opened up the debate with professionals and teachers across the UK, which led to the Cabinet proposing some new measures, such as a core curriculum and a General Teaching Council to improve teaching standards. They also proposed reforms to the school inspections system to improve standards nationwide.
Unfortunately, due to the increasingly dire economic situation in the UK at the time, the proposed Education Bill in 1977 was dropped from Cabinet's agenda to avoid a "shopping list" of bills from the Labour government.
Callaghan and Trade Unions
One of Callaghan's lasting legacies is his unfavourable relationship with trade unions. His premiership was plagued with strikes and unrest. Let's take a closer look at this relationship in the later 1970s.
Trade Unions
The major factor that contributed to the militancy of trade unions was the cuts to public expenditure as a result of the IMF loan. These cuts made several Trade Unions abandon their loyalties to the Labour party.
By the time Callaghan assumed office, Wilson's "social contract' with trade unions had fallen through. As a result, there was barely a month in which there wasn't a strike. More significantly, the Callaghan government saw more moderate unions begin to become increasingly militant.
Fig. 3 - The 3rd G7 summit between major industrialised nations, held in May 1977 at 10 Downing Street. James Callaghan hosted the likes of US President Jimmy Carter and West German Chancellor Helmut Schmidt to discuss the global economic crises and offer support to each other's difficult economic decisions.
In December 1977, Callaghan introduced a 5% ceiling on wage increases. This only worked to aggravate trade unions further, who were already angered by the cuts in public spending. The 1977 fireman strike and the 1979 Ford Motor and Lorry Driver strike showed the significant protests against Callaghan's policy.
The increase in moderate unions and the public sectors to trade union strike action during the Callaghan government was the key reason for the Winter of Discontent (1978-1979).
Winter of Discontent 1978-1979
The Winter of Discontent saw all sectors of the workforce getting involved in strike action. During this era, trade unions were seen by many as having more power than the government.
An alliance of public service unions, including the National Union of Public Employees (NUPE) and the Confederation of Health Service Employees (COHSE), took cues from the successful strike of the haulage drivers and called for a day of action.
Approximately 1.5 million workers responded by striking on 22 January 1979. These successful strikes were followed by selective strikes in areas that were expected to attract the greatest media attention.
The strike action resulted in:
- The suspension of the school meal service.
- Piles of refuse were left uncollected.
- Gravediggers refused to bury bodies.
All this caused a media frenzy. Reporters asked Callaghan in January 1979 how he planned to handle the chaos in the country, and he simply denied that there was any crisis. Famously the Sun newspaper ran the headline, "Crisis? What crisis?" in reference to Callaghan's ambivalence.
The Winter of Discontent had such a damaging impact on the legacy of the Callaghan government and more widely the reputation of the Labour government. This historical event was extremely important in shaping the landscape of British politics for the proceeding decades.
This was because the Winter of Discontent furthered the idea that the Labour party wasn't fit for governance. This idea played a key role in the reason the party was deemed unelectable for over 18 consecutive years.
James Callaghan Legacy
The legacy and contribution of James Callaghan remain a topic of debate for British historians. However, it is generally accepted that Callaghan failed to be an effective leader.
- Among the Labour left, Callaghan was considered a traitor who betrayed socialism by allowing the IMF to stipulate control measures over the budget.
- Callaghan's critics on the right of the Labour Party believed him to be a weak leader who could be unable to stand up to the left.
What is clear is that when Callaghan left power, he failed to rectify any of the issues inherited from Heath and Wilson. In consequence, the Labour party lost significant support in the electorate and did not regain control from the Conservative party until 18 years later.
James Callaghan Successor
James Callaghan successor was Margaret Thatcher. It is important to note that Callaghan made matters worse during his tenure as Prime Minister by failing to call an election before Labour's tide turned.
In Autumn 1978, opinion polls showed that the Callaghan government was gaining support. However, as a consequence of the Winter of Discontent, Callaghan forfeited the trust of the electorate.
Callaghan had gradually deteriorated the reputation of his government, and the Labour party as a whole had been damaged by:
- Economic crisis.
- Labour Party divisions.
- Increased trade union militancy.
Thatcher led a campaign called 'Labour isn't working'. For the majority of voters, this was a fair assessment of Labour's performance. The Conservative Party won a comfortable majority of 70 seats over Labour and an overall majority of 43 seats in the 1979 general election.
Margaret Thatcher hence became James Callaghan's successor.
James Callaghan - Key takeaways
- James Callaghan became the Labour Prime Minister of the United Kingdom after the surprise resignation of Harold Wilson in 1976.
- Callaghan took over a government and country in dire straits, with an economic recession caused by the 1973 Oil Crisis and increased trade union unrest, which began with Conservative PM Edward Heath in the early 1970s.
- Callaghan successfully negotiated a £3 billion loan from the IMF in 1976, but it came at the cost of the IMF demanding the UK government significantly cut public spending - this caused disunity among the Labour party and across the country, especially regarding wage increases to accommodate inflation.
- Callaghan attempted to reform education, and proposed a series of questions to do this during the Great Debate in 1976. However, the government soon had to focus again on the economy so the proposed Education Bill was not passed.
- Callaghan is best known for being in power during the Winter of Discontent (1978-9). Trade unions and many industries began striking for wage increases as inflation reached a staggering 25% in 1975. Although inflation decreased during Callaghan's premiership, it still was around 15% in 1976-8.
- The IMF loan, Labour party disunity, economic crisis, and the Winter of Discontent led to the end of the Labour party's control of government. In 1979, Callaghan called a general election, but it was too late and Labour had lost a lot of support. As a result, Margaret Thatcher secured a Conservative majority and became the next Prime Minister.
References
- Fig. 1 - 'James Callaghan (1975)' (https://commons.wikimedia.org/wiki/File:James_Callaghan_(1975).jpg) by European Communities (https://en.wikipedia.org/wiki/en:European_Communities) licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/deed.en)
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