How effectively did Wilson and Callaghan deal with problems Britain faced between 1974 and 1979?

Question 1

When did Wilson hold another general election?

Answer 1

October 1974

• Secure greater majority.

Labour: 319
Conservatives: 277

Question 2

Social Contract reached 1973:

Answer 2

• Unions agree to co-operate in trying to control wage increases.
• Gov promised to try keep down prices and provide improved welfare benefits.
• Return to free collective bargaining over wages and no statutory income policy.

Question 3

Failures of Social Contract 1973?

Answer 3

• Social Contract did not solve economic difficulties as wage increases continued to exceed inflation rate –> ‘the only give and take in the Social Contract was that the government gave and the unions took’.
• Jack Jones (leader of transport workers’ union) most powerful man in country.
• Uneasy co-operation lasted until the winter of 1978-9.

Question 4

Evidence of socialist shift within Labour

Answer 4

• Michael Foot (Department of Employment)
  ○ Social equality.
• Tony Benn (Secretary of State for Industry)
  ○ Opposed nuclear weapons and strong socialist beliefs.

Party’s shift to left caused difficulties in 1980s.

Question 5

Divisions over Europe:

Answer 5

• Negotiated terms of EEC membership
• Britain’s contribution to EEC budget reduced
• Announced March 1975
• Nations first referendum 5th June 1975

Question 6

Vote for continued membership?

Answer 6

2:1 ratio.

Question 7

Wilson’s resignation March 1976:

Answer 7

• 60 years old
• Memory beginning to fail.
• James Callaghan defeated 5 other senior labour figures in election.

Question 8

How did Labour settle 1974 miners strikes:

Answer 8

• 29% pay increase.
• Resulted in inflation reaching nearly 50% by middle of 1975.
• Unemployment rose to 1.3 million by 1976

Question 9

Denis Healey (Chancellor of the Exchequer) economic recovery:

Answer 9

• 1975 budget increased taxes and cut government spending programmes –> taking money out of economy.
• July 1975 gov introduced formal incomes policy. £6 per week limit for wage increases and freeze on higher incomes. –> TUC reluctantly agreed. But opposed by left-wing MPs.
• 1976 –> reduced ceiling to £4 per week.

Question 10

Average level of wage increase 1975,6,7?

Answer 10

1975 - 26%

1976 - 15%

1977 - 10%

Question 11

Result of inflation level drop:

Answer 11

• Economy did not recover.
• Balance of payments deficit.
• 1976 –> severe crisis of confidence in the pound.
• Bank of England brough pounds on the foreign exchanges in order to increase value. –> used up nation’s currency reserves.
• National bankruptcy possible.

Question 12

Stagflation

Answer 12

Callaghan realised that it had destroyed some economic assumptions from 1945 in 1976 September.

Question 13

IMF loan 1976

Answer 13

September: asked International Monetary Fund for a loan of $3900 million.

• Had to cut government spending by £2 billion to secure loan.
• Cabinet agreed in december.
• Callaghan prevented severe economic crisis from becoming political. –> preserved unity

Question 14

The Lib-Lab Pact 1977-8

Answer 14

• Economic problems undermined public confidence in government.
• Nov 1976 Gallup opinion poll have tories 25% lead over Labour.
• By-election losses resulted in loss of labour overall majority.
• March 1977, Callaghan negotiated with new Liberal leader, David Steel, by which 13 Liberal MPs agreed to support gov.

Question 15

Winter of discontent 1978-9

Answer 15

• Limited pay rises at 5% to control inflation.
• Unions disliked Healey’s policies –> believed he had abandoned Social Contract.
• December 1978 –> Ford workers won 15% pay increase after 3-month strike.
• Jan 1979 –> lorry drivers demanded a 30% pay rise. Petrol shortages and affected deliveries.
• Strikes and overtime bans followed when National Union of Public Employees (NUPE) demanded a 40% increase.

Question 16

Callaghan’s reaction to the Winter of discontent?

Answer 16

• Spent a week in early Jan at a summit in West Indies –> photos of him basking in sunshine contrasted winter chaos.
• Told reporters ‘I don’t think that other people in the world would share the view that there is mounting chaos.’ –> Tabloid headline: ‘CRISIS? WHAT CRISIS?’
• Pay increases were met –> Labour gov had little control.

Question 17

How did Labour win support of Plaid Cymru and SPN in parliament?

Answer 17

• Promise to devolve some power to Wales and Scotland.

Question 18

Result of Plaid and SNP alliance?

Answer 18

March 1979 referenda in Wales and Scotland failed to win enough votes –> devolution.

• Nationalist MPS expected more support for devolution –> joined conservatives voting against non-confidence motion and lost gov by a single vote.