Waiting at the Church: Thatcher's Forward March Halted?

If the years 1974-1977 were the worst of times for the Labour government, then 1978 was the crucial turning point. The Labour party which had entered government under Harold Wilson in 1974 seemed unprepared to deal with the enormity of the crisis facing Britain. The party's period in opposition from 1970 to 1974 was marked by bitter internal clashes over the issues of the EEC and industrial policy, and by the Left's growing control over the NEC, and therefore, Labour's election manifesto. In both of the general elections of 1974, the public responded to both Labour and the Conservatives without enthusiasm, granting Wilson a majority of just three in October. To make matters worse, the government was left an inheritance of spiralling inflation, rising unemployment and growing industrial conflict. For the next few years, the party remained divided and the economy remained in crisis. The figurehead of Labour's Left, the Industry Secretary Tony Benn, advocated a radical strategy of greater public investment and control in industry, whilst the EEC referendum of 1975 further polarised the party. Meanwhile, the Chancellor of the Exchequer Denis Healey, was desperately trying to balance fighting inflation through cutting public expenditure and the imposition of incomes policy, with maintaining the Social Contract with the trade unions to prevent further industrial conflict. This delicate juggling act was further complicated by the necessity of maintaining the confidence of the financial markets in a world of floating exchange rates; when this confidence was lost, the government was forced to apply for a loan from the IMF in 1976. These were indeed tough times, provoking commentators such as The Times' Peter Jay to argue that Britain's economic problems posed a serious threat to parliamentary democracy. He predicted that the most likely resolution to the national crisis was the rise of an authoritarian figure of the left or right. Britain, according to many observers, was the sick man of Europe, and Labour could do nothing to halt its decline.

By 1978, however, the Labour government under Callaghan was proving its critics wrong. Inflation, which had reached twenty-seven per cent in 1975, had now fallen to eight per cent. The economy was now growing at a steady rate and unemployment was falling. Living standards were begin to rise again, whilst the poorest in society emerged from economic crisis virtually unscathed as a result of increases in benefits. The Social Contract was still intact, despite the retirement of the influential Jack Jones as General Secretary of the TGWU in 1977 and calls within the trade unions for a return to free collective bargaining. Although Healey had flirted with monetarism in 1975 and 1976, his reflationary budget of 1977 signalled a return to Keynesian demand-management, indicating that Labour was not bankrupt of ideas, even in tough circumstances. Indeed, the economic recovery of 1978 seemed to discredit the "Alternative Economic Strategy" of import controls and public ownership expounded by Tony Benn and Stuart Holland, curbing the momentum of the Left.

As a result of this change in fortune, Labour were leading in the polls, and Callaghan enjoyed considerable personal popularity amongst the public, especially in comparison with his rival, Margaret Thatcher. Reflecting upon his success, Callaghan remarked: "I am Moses, leading my people towards the Promised Land." He had succeeded in surviving the crises of the past two years, but one significant hurdle faced him...

- Peter Clarke, Britain Transformed: 1970-1995 (2001)


In the summer of 1978, most observers of British politics were predicting that a general election would take place in the autumn. Callaghan, however, remained undecided and spent most of August on his Sussex farm deliberating over the issue. He was not certain of victory and seemed at first to believe that a hung parliament would be the most likely outcome. In the end, he was convinced as to the merits of an autumn general election by Healey. On 18th August, the Callaghans invited themselves over to Healey's country house in Alfrison, a few miles away from Callaghan's farm. When Callaghan told Healey that a spring election might be preferable, a bad-tempered Healey snapped and vehemently rejected the idea. He argued that an election must take place in the autumn, before the improvement of living standards slowed down over the winter and before the government negotiated the next pay round with the trade unions. Callaghan, taken aback by Healey's response, consulted his other cabinet colleagues over the following days and found them in agreement with the Chancellor. In consequence, he began to have second thoughts about a spring election and in a second discussion with Healey, finally decided upon an October election.

- Ben Pimlott, Jim Callaghan (1996)


1978 May - (43/43/8)
1978 Jun -
(45/45/6)
1978 Jul -
(45/43/8)
1978 Aug - (43/47/6
)

- Gallup Polls, May-August 1978 (Conservative/Labour/Liberal)




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"In those dark and candlelit days of the last weeks of the Conservative Government, the question that was being posed was: ‘Is Britain governable?’ In our 1974 manifesto we gave the reply, and I quote: ‘Labour does not go along with the prophets of doom. Give us your backing over the difficult two or three years ahead. We shall get back on the right course. We have confidence in the British people.’ ‘Give us two or three years,’ we said, ‘and we shall get back on the right course.’ The people did, and we have. And now, I ask the British people to give us their backing again so that we can continue the work we have started. I am calling an election in October, and I am confident that when we present our case to the people they will support us.

We do not want to win support on the basis of fear. We are the party of hope. Yet I think we have every right to assert that Britain would be a cruder, a more unjust, a more selfish society if Tory values were to prevail. In and out of office, they are the consistent champions of privilege, and of the strong, and of the wealthy. Let them succumb, if they wish, to the temptation to make scapegoats, to pick on minorities, including racial minorities. Let Labour have none of it. Our commitment as a Party is to a harmonious, peaceful and united society, and that is absolute. At home, we shall face the future with confidence, but in no mood of complacency, as I hope what I have said illustrates. The British people know that the nation is capable of much, much more. Ours is not a tired nation with a past and no future. Our best days lie ahead. There are energies to be released, talents to be channelled. We are one of the world’s few industrial powers self-sufficient in energy and with vast reservoirs of talent. We encourage these talents not only so that the individuals concerned can make the best use of them for their own reward, but out of concern for their neighbours, too. We deny, I repeat, that there is some choice to be made between an efficient Britain and a caring one. They go together. And Labour’s call - its call to the people over the next few months is this: we wish to unite everybody in our nation under our banner - young and old, black and white, English, Scots, Welsh, Irish, everybody who shares our beliefs. We invite them to unite under our banner, to join us in building a new and better Britain, in which our traditional values, our democratic socialist beliefs, will uphold the challenge that Britain will face in the next decade. Ours is a message of hope for the 1980s, based on a record of promises kept, and we shall submit ourselves with confidence to the British people."

- Jim Callaghan, Leader's speech to the Labour Conference, Blackpool, 3rd September 1978
 
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