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The Callaghan Era Begins in Earnest
With a renewed mandate of 57 seats, backed by increasing oil revenues, the Labour government discovered new vigour and purpose. James Callaghan had earned himself a strong position as Prime Minister with both his party colleagues and in the country.

The State Opening of Parliament on 17 October set out the new Government's agenda for the year ahead, and it included plans to tackle the "evils" of inflation and unemployment, give a boost to small businesses, resolving the situation in Northern Ireland, improving the Common Market's CAP and holding referendums on devolution in Scotland and Wales.

The Prime Minister's decision to keep Hattersley on as Secretary of State for Prices and Consumer Protection rather than moving him proved to be the right decision. In charge of the government's pay negotiations, Hattersley ended the sectoral negotiations being conducted by individual ministers with one or two unions. Armed with Labour's mandate from the public, Hattersley, with the support of other colleagues such as John Smith, imposed a series of tough pay settlements within the government's own secret negotiation range of 10%. With a singe point of negotiation, and Callaghan's renewed behind the scenes authority, further discontent from the trade unions was avoided through the autumn and winter of 1978.

Devolution Referendums - 1979
The political year in 1979 began with most eyes focused on Scotland and Wales as the two nations built up to their historic referendums on whether or not to introduce devolved government. Polls had shown that the idea had majority support in Scotland, but a question mark hung over whether the turnout would be sufficient enough to ensure that 40% of the entire electorate backed the proposals, as was required by the Scotland Act 1978. Wales, meanwhile, didn't look as though it was going to vote in favour let alone meet the 40% threshold, though the Prime Minister hadn't given up hope that his home country might spring a surprise.

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In the end, neither nation managed to deliver a result the Government was hoping for. A huge majority voted against devolution in Wales, with just 16.8% of the overall electorate backing the proposals, nowhere near to the threshold. Whilst in Scotland a healthy majority of those who voted backed devolution that only translated into 36.9% of the electorate, just short of the 40% threshold. It was a disappointing set of results for James Callaghan and his still young new government, but he defiantly declared in the aftermath of the results that "the journey towards the devolution of power in our United Kingdom is not over yet. We will present our case with greater vigour than before and, when the time is right, we hope that the people of Scotland and Wales will vote for devolution."

Oil - Labour's Golden Ticket to Dominance
In the mid-1970s Labour ministers, including Tony Benn, Eric Varley and Harold Lever, established the British National Oil Corporation to secure some control over the vast amounts of oil that had been discovered in the North Sea, and established a tax regime which helped to bring maximum benefit to the Exchequer without unnecessarily penalising the oil companies. It became the accepted political view that whoever won the next General Election would win the one after that thanks to oil. Labour would use it to invest in public services or the Conservatives would use it to cut taxes.

The potential benefits of North Sea oil, however, led to bitter infighting amongst Labour ministers. Tony Benn and Denis Healey favoured differing uses for the extra revnues. Benn sought an immediate programme of investment in social spending, whereas Healey favoured debt reduction and long-term investment. A meeting in winter 1977 attended by Healey, with his Treasury adviser, and Tony Benn, with his Department of Energy adviser, had resulted in an impasse. Callaghan intervened to broker a compromise and in 1977 the government produced a white paper called The Challenge of North Sea Oil, based on a Cabinet commissioned study which recommended six uses for the extra revenues: reinvigorating the inner cities, training young people and retraining older people, developing alternative energy sources, supporting the National Enterprise Board, increases in overseas aid and a reduction in personal taxation. The white paper also established the now familiar Oil Spoils annual report into how oil revenues are distributed by year.

By 1980 Britain had become self-sufficient in oil, producing almost 90 million tonnes a year, and was almost self-sufficient in gas. Between 1979 and 1987 North Sea oil contributed £62 billion in revenue and the contribution to the balance of payments some £100 billion.

The Conservative Party
Their 1978 election defeat marked a third consecutive time they had lost out to Labour in terms of being able to command the confidence of the House of Commons, and it was the second consecutive defeat on the popular vote level, though they did increase their vote share by a small amount. The late 1970s and early 1980s can be seen as years of Labour success and Conservative infighting.

There are many Conservatives who would like to forget about Margaret Thatcher - and many voters who already have. Thatcher was chosen to lead the party in 1975 and immediately imposed her ideological and personal dominance on her party's policies and Shadow Cabinet. Right from the off Thatcher had an image problem. Her adviser Tim Bell recalled that "Nobody liked her voice. Nobody particularly liked her. Her manner was a bit bossy, and a little bit school marmish." Matthew Parris, then working in the Conservative Research Department, recalled that "the nickname we all used for her was 'Hilda'...and it was not meant kindly."

Her short period of leadership from 1975 to 1978 is cited by some as a telling example of the dangers of political parties conceding the centre ground in pursuit of ideologically extreme territory. Embarking on a "policy review" fuelled by a range of obscure thinkers, including Hayek, Adam Smith and the Chicago School of Economists, she unceremoniously dumped a whole host of mainstream Tory policies on Europe, welfare and unemployment. The new approach, echoing British 19th Century laissez-faire and the economic liberalism being pioneered by the Republicans in the USA, failed to connect with the swing voters that Thatcher needed to persuade in 1978.

The Conservative policy platform was dismissed by Labour as 'dangerously out of their time as a penny-farthing on a motorway'. The 1978 Tory manifesto included key pledges on families, law and order, defence, immigration restrictions and the selling off of some sections of the nationalised economy. It promised: "We will offer to sell back to private ownership the recently nationalised aerospace and shipbuilding concerns, giving their employees the opportunity to purchase shares. We aim to sell shares in the National Freight Corporation to the general public in order to achieve substantial private investment in it. We will also relax the Traffic Commissioner licencing regulations to enable new bus and other services to develop - particularly in rural areas - and we will encourage new private operators." The manifesto also promised a "complete review" of the British National Oil Corporation, which some saw as a sign of an impending sell-off.

On 17 November 1978, just over a month after the election, Thatcher's Shadow Environment Secretary Michael Heseltine resigned and announced his intention to challenge Mrs Thatcher to the leadership of the party. Mrs Thatcher was expected to maintain a high level of support amongst her MPs, but it was expected right from the off that Heseltine would have more supporters though not enough to win both an absolute majority and have a 15% (40 vote) lead as the rules required. The first ballot was held on Thursday 23 November, which saw 16 abstentions and Michael Heseltine winning 47.9% of the vote (127 votes) and Margaret Thatcher winning 46.0% of the vote (122 votes).

Following her failure to win the first ballot, Mrs Thatcher announced her intention to withdraw from the contest to allow Shadow Cabinet members to stand. Nominations re-opened ahead of the second ballot. They saw Deputy Leader and Shadow Home Secretary William Whitelaw put his name forward, as well as the recently promoted Shadow Foreign Secretary Francis Pym. The second ballot took place on Thursday 30 November with a candidate only needing to win a simple majority of votes (133) to win. No candidate having done so a third and final ballot was held on Tuesday 5 December and the new leader took office on 6 December.

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Mrs Thatcher returned to the backbenches after her defeat and resigned as Member of Parliament for Finchley in 1979 - 20 years after being elected. The Labour candidate, Cherie Booth, just managed to overturn the Conservative majority of 5,000 and take the seat. The young Liverpudlian lawyer would soon rise to national prominence.

After leaving Parliament, Thatcher established the Thatcher Foundation to promote her free market ideas. It eventually folded in 1984 amid accusations of financial mismanagement and the untested ideas once dubbed 'Thatcherism' became nothing more than footnote in history.

Heseltine, as the new leader of the Conservative Party, dragged the party through another policy review, which sought to reclaim one-nation conservatism and recalled the gentler times of Edward Heath and Stanley Baldwin. By the early 1980s the Conservatives had staked out their territory as pro-European, pro-business, pro-welfare state and pro-industrial democracy. Commentators argued that by becoming a pale blue imitation of the ascendant Labour Party, the Tories would remain in opposition forever.
 
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You have my attention. Will the reaction to his win in other parts of the world be covered? Wonder how well Callaghan will do with Reagan and Gorbachev if they come to power.
There will be a small part on the UK's international role and it's relations with other countries to see how much of a change there is from OTL.

How will Mason's policies affect relations with the SDLP?
Mason won't actually be Northern Ireland Secretary for that long and will be removed fairly shortly and then we'll see how that affects things in regards to Northern Ireland. Relations with the SDLP remain strained whilst he's still in post, not surprising considering Gerry Fitt accused him of "going native".
 

Tovarich

Banned
Embarking on a "policy review" fuelled by a range of obscure thinkers, including Hayek, Adam Smith and the Chicago School of Economists

I dunno if any of those could actually be called 'obscure' (even I knew who Adam Smith was, & I was only 10 yrs old in '78) and Callaghan was 'Sunny Jim' rather than 'Uncle Jim'.


Those two minor nitpicks aren't really important though, so consider me subscribed!
 
I dunno if any of those could actually be called 'obscure' (even I knew who Adam Smith was, & I was only 10 yrs old in '78) and Callaghan was 'Sunny Jim' rather than 'Uncle Jim'.


Those two minor nitpicks aren't really important though, so consider me subscribed!
'Uncle Jim' is a name that develops later on.
 
I've had a brief break from this, and a little holiday, and I'll be resuming this timeline shortly as we begin to move into the 1980s.
 
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Callaghan's Britain in the 1980s
Lord Alan Bullock, once a school friend of Denis Healey, had been asked in the 1970s to chair a Royal Commission into industrial democracy. The resulting Bullock Report recommended that workers should be represented on company boards where at least one-third of the workers voted for it. The trade union representatives on the Commission demanded that the workers should be represented via existing trade union structures rather than directly from the workforce. At the time, some argued that given the unrepresentative nature of the unions the scheme would not lead to industrial democracy but only increase union power and the Bullock Report was subsequently shelved.

After the 1978 General Election, the report was dusted down and given a new spin. Learning from the German Mitbestimmungsrecht model of worker participation, and dismissing the unions' demands for sole representation, in 1980 the Secretary of State for Industry Gerald Kaufman introduced a White Paper entitled Hand in Hand - New Partnership in Industry, which heralded a new era of worker participation. It was a great success, and the new demands of the workforce for genuine involvement forced the trade unions into wholesale modernisation of their structures, recruitment and campaigning. The reforms can also be seen as a major contributor to the reduction in strikes and the number of days lost through industrial action. For many sectors, for example local government, railways and mining, the early and mid-1980s saw a prolonged period of industrial calm and productivity.

Like so much in politics, the Bullock Report and resulting Democracy in the Workplace Act 1981 heralded a major transformation in British society which few could have foreseen at the time. The changes in working practices in the private sector and the appetite for public involvement and participation unleashed new demands for democratisation in the public services and utilities to which the Labour government responded with a programme of 'socialisation'.

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Britain in the World
On the international stage, Callaghan had three major challenges: dealing with the Soviet Union, balancing Britain's place between the US alliance and the European Community, and dealing with the aftermath of empire. Thanks to Britain's influence, the 1980s saw a thawing of the Cold War and increasing detente between the Warsaw Pact and NATO.

In the 1981 reshuffle, Callaghan appointed Welsh MP Neil Kinnock as Secretary of State for Defence with a brief to reducing Britain's expenditure on nuclear weapons through negotiations with the Soviet Union. Kinnock outdid the expectations of most, persuading Moscow to begin a reduction in their stockpiles of weapons and the Americans to remove their bases from parts of the UK, including at Greenham Common. The money Britain saved on a reduced nuclear weapons stockpile was subsequently ploughed into public services and conventional defence.

Another illustrative test of Labour's international diplomacy came in 1982. It concerned a small group of islands, first settled by Lord Byron's grandfather, of which most people had never heard. British and American intelligence intelligence picked up strong signals that the Argentinian junta, led by General Galtieri, facing riots at home were making preparation for an invasion of the Falkland Islands. Without knowledge of it being leaked to the public or any foreign government - except for the Argentinians - the UK, like in 1977, dispatched a nuclear submarine, accompanied by two frigates and two support vessels, to the Falklands. Foreign Secretary Gerald Kaufman had the operation carried out with maximum secrecy, with even the crews not being informed of where they were going. For a second time, the signal to the Argentinians was clear and the invasion was never carried out. The Government disclosed the deployment to the public once signs of an imminent invasion had disappeared which led to a surge in popularity - avoiding a war and the potential deaths of British civilians and personnel was something the public was undeniably grateful for.

On South Africa, Labour adopted a similarly robust stance that secured a similarly positive result. Their 1978 manifesto stated that "Labour is totally opposed to the system of apartheid, and will continue to support opponents of apartheid, giving humanitarian and other aid to liberation movements of Southern Africa. We will take active steps to reduce our economic dependence on South Africa by British companies." The Prime Minister had discussed with President Carter and other leaders at the Guadaloupe Summit in January 1979 a joint approach to the apartheid regime, and in the early 1980s, under some pressure from the growing Anti-Apartheid Movement, the government moved from a position of 'discouragement' of involvement in South Africa to outright sanctions, as had earlier been deployed against Rhodesia. British firms, including major banks, engineering and oil companies were prohibited from working in South Africa from 1982 onwards, with a series of high-profile prosecutions to demonstrate the government's resolve. Britain's supply of backbone to the international efforts to end apartheid is now viewed by historians as one of the major contributing factors to President Botha's release of Nelson Mandela from prison in 1984, and the dismantling of the apartheid regime which swiftly followed in the mid to late 1980s.

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The Gang of Four
Britain's first new party for 80 years was launched on May Day 1980 by the so-called Gang of Four. The four leading Labour left-wingers in the form of Tony Benn (sacked by Callaghan in 1978), Eric Heffer MP, miners' leader Arthur Scargill and Margaret Beckett MP declared in the 'Holland Park Manifesto' that it was time to break the mould of British politics. The Gang of Four and their supporters rejected the consensus politics of Labour in government and called for a more robust form of socialism. The New Labour Party, or 'New Labour' as the media called it, wanted unilateral nuclear disarmament, immediate British withdrawal from the EEC and NATO, the extension of state control of industry, and increased personal and business taxes. The 'Holland Park Manifesto' delivered to the media from Tony Benn's front drive stated that: "We want more, not less, radical change in our society, but with a greater stability of direction. We want to eliminate poverty and promote greater equality. We want fair shares of the rewards of a strong economy based on public ownership, free trade unions and full employment. We want world peace and disarmament, and equality between nations and people. We want Britain out of the EEC and NATO. With heavy hearts, but calm heads, we reject the soggy centrism of today's so-called Labour government and demand a return to socialist values and policies."

None of the 22 MPs who joined Benn's New Labour Party sought re-election in a by-election and the rump voted with Labour on most occasions between the party's launch in 1980 and the 1983 general election - where all 22 of them were defeated by Labour candidates, including Tony Benn himself. The party soon descended into rancour; after Arthur Scargill resigned to form his own Socialist Party in 1984, New Labour became no more than a Tony Benn fan club. It was wound up in 1990, but Benn remained a favourite of the left-wing pressure groups and a prolific author of diaries.

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The 1981 Reshuffle
On Sunday 25 January 1981, Foreign Secretary David Owen resigned on a point of principle after the Labour Party rejected 'one member one vote' for future leadership elections, instead opting to retain the system of MPs alone electing the leader - the preferred choice of the Prime Minister and the Labour leadership. He resigned vowing to support the Prime Minister and the Labour government.

His resignation led to James Callaghan holding a reshuffle of his Cabinet on Monday 26 January 1981. The key changes were as follows:
  • David Owen resigned as Foreign Secretary - replaced by Gerald Kaufman
  • Bill Rodgers sacked as Defence Secretary - replaced by Neil Kinnock
  • Shirley Williams moved from Education Secretary to Industry Secretary, succeeding Gerald Kaufman
  • Ann Taylor appointed Education Secretary
  • Eric Varley sacked as Employment Secretary - replaced by John Smith
  • Department of Prices and Consumer Protection abolished with responsibilities moved to Trade
  • Roy Hattersley moved from Prices Secretary to Trade Secretary
  • Albert Booth sacked as Transport Secretary - replaced by Joel Barnett
  • Roy Mason sacked as Northern Ireland Secretary - replaced by Peter Archer
  • Alec Jones appointed Wales Secretary, succeeding Neil Kinnock.
  • Bryan Gould appointed Chief Secretary, succeeding John Smith.
1981 Cabinet

Prime Minister: James Callaghan
Chancellor of the Exchequer: Denis Healey
Foreign Secretary: Gerald Kaufman
Home Secretary: Merlyn Rees
Defence Secretary: Neil Kinnock
Education & Science Secretary: Ann Taylor
Energy Secretary: John Morris
Employment Secretary: John Smith
Environment Secretary: Peter Shore
Industry Secretary: Shirley Williams
Overseas Development Minister: Judith Hart
Trade Secretary: Roy Hattersley
Transport Secretary: Joel Barnett
Scotland Secretary: Bruce Millan
Northern Ireland Secretary: Peter Archer
Wales Secretary: Alec Jones
Agriculture, Fisheries & Food Minister: John Silkin
Health Secretary: Stanley Orme
Social Security Secretary: David Ennals
Leader of the House of Lords: The Lord Peart
Leader of the House of Commons: Michael Foot
Government Chief Whip: Michael Cocks
Chief Secretary to the Treasury: Bryan Gould
Lord Chancellor: The Lord Elwyn-Jones​
 
Awesome update. Scargill, think I've heard of him, big minor's strike in the UK in '84 and '85, he was involved in that? Wonder how Callaghan's gonna deal with Northern Ireland.
 
Awesome update. Scargill, think I've heard of him, big minor's strike in the UK in '84 and '85, he was involved in that? Wonder how Callaghan's gonna deal with Northern Ireland.
There'll be talk of Northern Ireland in the not too distant future. Stand by.

How would a more successfully socialist affect her European neighbors and the Commonwealth?
I'm not quite sure what you're trying to say here. I'm assuming it's "How would a more successfully socialist Britain affect Europe and the Commonwealth?". The answer to that is that what is to come isn't necessarily socialism. It'll obviously take shape the further in time we progress. Either way, there wouldn't be much of an effect on Europe and the Commonwealth, though how this affects Britain's relationship with Europe in particular will be seen shortly.

Is Reagan still president ITTL? I wonder how he and Sunny Jim get along...
Same with Gorbachev, if Callaghan's still PM by the time he's General Secretary.
Unless otherwise mentioned, global leaders and the politics of other nations are practically the same as IOTL. I may do a piece focusing on specific relations, like the US-UK relationship, but that would be something I'd do at the end as a kind of extension.

And we'll wait and see how long Callaghan is Prime Minister for...
 
Very fascinating TL.

In regards to South Africa, you hadn't mentioned Namibia. It would be interesting to hear how Namibia and Angola (and Angola's civil war) were affected by South Africa facing sanctions from the UK in the 1980s. Because for Namibia, it was the territory through which South Africa could continue to be involved in the Angolan civil war (through sending its own forces and supplying allied Angolan rebel groups) and the US was interested in not giving the Soviets, Cubans and the MPLA allies in Angola a boost with a weakening of the anti-MPLA forces. So in OTL the Angolan Civil War and Namibia became linked with South Africa withdrawing from Namibia once Cuban and Soviet forces were withdrawn from Angola.

But then, if the sanctions and increased British efforts against apartheid from 1979 put more pressure on South Africa from 1979 and especially from 1982, then could South Africa have even prosecuted its war in Angola the way it did in OTL? Presumably the early release of Mandela and early dismantling of apartheid are in part due to sanctions crippling the South African government economically, so if South Africa did become involved in Angola at all, then perhaps by 1983 it may have had to withdraw because it simply could no longer afford it.
 
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