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Labour government Harold Wilson (1974-76) James Callaghan (1976-1979) -…
Labour government
Harold Wilson (1974-76)
James Callaghan (1976-1979)
Economic problem
High inflation:
Inflation reached approximately 25% in 1975
Rising prices reduced people’s purchasing power
Unemployment :
Increased due to economic recession
Industrial production was affected
Inflation and the social contract
Labour worked with the trade union congress
Social contract:
Agreement between Labour and trade unions
Workers accepted limits on wage increases
Government accepted conditions in working conditions and social benefits
Initially helped reduce industrial conflict
Wage inflation helped bring inflation down
IMF crisis (1976)
Britain faces a serious financial crisis
Pound sterling lost value
Government struggled to maintain confidence in the economy
Callaghans government had to seek help from the International Monetary Fund
December 1976
Britain. Secured and IMF loan of approximately $3.9 billion
Government agreed to spending cuts
Consequences:
Reduced public spending
Cuts affected public services
Damaged labours reputation
Some economic stability was restored afterwards
Industrial relations and trade unions
Labour initially had to close links with trade unions
Social contract helped maintain cooperation
However, wage restraint caused growing dissatisfaction
Trade unions increasingly demanded higher pay
Strikes disrupted essential services
Government struggled to control industrial action
The winter of discontent (1978-79)
Government attempted to limit pay to around 5%
Trade unions rejected the the restrictions
Public-sector workers went on strike
Strikes involved:
Lorry drivers
Local government
Other public-sector employees
Disruption affected transport, public services and rubbish collection.
Consequences:
Public confidence in Labour declined
Government appeared unable to control industrial relations