The Callaghan Era Begins in Earnest
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.
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.
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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