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Successes and Limitations of the Labour government 1974-79 (LIMITATIONS…
Successes and Limitations of the Labour government 1974-79
SUCCESSES
The EEC election = Labour unity as no longer divided over the EEC
LIMITATIONS
Relations with the TU's
Labour and the TUC reached an agreement in 1973 called the
social contract:
Unions agreed to cooperate in trying to control wage increases
Govt promised to try to keep down prices and provide improved welfare benefits
There would be return to free collective bargaining over wages and no statutory incomes policy
However, this did not solve Britain's economic issues - wage increases continued to increase inflation
Social contract did suggest that the government and TU's had some shared objectives
Cooperation lasted until the winter of discontent - failed to stop the wave of strikes
Jack Jones (leader of the transport workers union) viewed as the most powerful man in the country according to the opinion polls
The Drift to the left in the Labour party
There were divisions between the left and right factions as 2 influential left-wingers Michael Foot and Tony Benn clashed with Labour's more moderate leaders
Led to rise in militant tendency (further left wing)
Divisions over Europe
The party was divided over entry to the EEC and Wilson had to hold a referendum in 1975, which the 'stay' side won. 2:1
Voters believed that the EEC offered a way to overcome Britain's economic difficulties
This buried the issue of Europe and appeared to preserve Labour unity
Economic issues
Inflation continued to rise over 35% per year
The war between is real and it's arab neighbours in 1973 led to higher oil prices
TU's responded to higher prices with demands for more pay - Labour accepted a pay rise for miners of 29% which encouraged other groups to demand more and then had to fall back on making spending cuts to reduce inflation and also to imposing legal limits on wage increases - unpopular
The economy appeared stagnant with low growth rates, low productivity and low investment
Wilson suddenly and unexpectedly resigned as he was fearful his mental capacities were declining - led to a lack of confidence in the financial markets which led to depreciation of £
James Callaghan took over. Chancellor of the exchequer, Denis Healey, cut govt spending, placed a ceiling on wage increase and increased tax
Inflation dropped but economic recovery didn't follow
Healey and Callaghan were forced to take out a loan form the IMF, who demanded extensive cuts of £2m to secure loan
Convinced cabinet to agree in December
Deepended rift between labor leadership and left-wingers
However, callaghan still had managed to preserve unity within cabinet and keep the govt in office - unlike 1931 when a similar crisis key labour out of office for 13 years
The lack of confidence in the £ meant that the BOE had no choice but to try and rescue the economy using stagflation - this destroyed some of the economic assumptions which had prevailed since 1944 - It was no longer possible to 'buy your way out' of recession
Lib-Lab Pact 1977-78
The severity of economic problems undermined public confidence in Labour
Callaghan feared there would be a call for a vote of no confidence, so he developed a pact with the liberals to support labour if called
in return, Labour said they would ensure industrial democracy, control monopolies, introduce a new CR bill focused on gay rights and bring in new employment programmes
Lasted until the Winter of discontent
winter of discontent 1978-9
As inflation rose and wages were frozen, the TU's pressed for big wage increases
Strikes in the winter hit key public services such as rubbish collection
Press claimed crisis
Govt failed to keep it's promises to begin devolution for Scotland and Wales, and the Scottish and Welsh nationalist MP's voted against them and brought the govt down in March 1979
Why they won Feb 1974
Conservative failures
Heath seemed to have lost control of the country and did not communicate effectively
Even those who disapproved of the miners actions were themselves facing higher prices which caused discontent
Many thought the 3-day week over dramatic
Heath was unable to form an anti-labour coalition, the election resulted in a hung parliament - Wilson became PM
Wilson called another election in Oct to try and secure a majority - achieved a small majority of 3 seats but won fewer votes than in Feb
Wilson's more Conciliatory line was accepted
Although not overly popular