Chapter 5 Labour and Conservative governments 1964-79

Labour appeared united had glossed over their divisions in Nuclear Weapons, Europe and Nationalism 

Presented the Labour party as modern dynamic and progressive 

• Manifesto/ policies -
• faster economic growth and Full employment 
• improved welfare and health services
• better housing and education 

Wilson hoped to - "Harness science to our economic planning" 
             create   -  "Britain that is going to be forged in the white heat of this {technological and                                      scientific revolution" 

Wilson appeared classless 

• Harold Wilson's Leadership of the party 
• How the electorate regarded the conservatives
• The Revival of the Liberal party
• Changes in British society during the 1950's 

• At the end of conservative years of domination, 1951-63 many voters blamed them for the growing economic problems 
• They did not have answers for the rising unemployment, inflation or industrial unrest 
• Conservatives seemed out of touch with modern society
• Alec-douglas home PM 1963-64 old Etonian 
• Had been involved in sex scandals 

• Gained 3 seats in the 1964 election and doubled their votes
• Many discontented Tory voters who were not ready to vote Labour voted liberal

• Due to the increase in living standards and the greater availability of credit it in the 1950's it meant young people where more independent and less traditionalist 
• Changing attitudes affected by opinions projected in the media, tv, books ect 

This led to 

• Young people wanting a classless, modern Britain 
• This benefited the Labour Party  

if 900 voters had voted Tory instead of Labour the conservatives would have won 

Douglas-Home's  leadership  had been a better PM than expected 
Willson was considered to be cunning 

Conservative tax cuts before the election meant earnings rose 

Unemployment had dropped before the election from 900,000 to 300,000 by July 1964 

           Attitudes to Labour -

• people distrusted its links to the unions
• disliked the commitment to nationalism 
• people wondered if its unexperienced leaders would handle crisis well 
• people opposed to immigration so people voted Tory

Wilson's problems as PM

• Only had a majority of four seats 
• needed to fulfill the promise to modernize British society 
• members of government talented - but disliked each other 
• economic situation serious 

His characteristics 

• Optimistic, patient cool in a crisis 
• Kind, charming and generous 
• sought compromise rather than conflict 
• accepted by both halves of his party 

After 1964 election had a majority of four 
After 1966 election government returned with a majority of 96 
Wilson 1964-70 avoided splits 

However, people blamed tories for country's difficulties 

Roy-Jenkins home secretary undertook task of modernizing British society - acts below 

Nov    1965 -  Murder - Temporary abolition of the death penalty made permanent in 1969 

Nov    1965    Race Relations - Discrimination in public facilities illegal 

June  1967  Family Planning - Contraception available to all on the NHS 

July   1967   Sexual offences - Homosexual acts in private between consenting adults legalised 

Oct    1967    Abortion under certain conditions legalized

April  1968  Race Relations - discrimination in housing and employment illegal 

July 1968 Theatres Censorship of plays by Lord Chamberlin ended 

May  1969 Voting age lowered from 21 to 18

Oct   1969 Divorce - process simplified and made less costly 
May  1970 Equal Pay - both genders receive the same pay for the same work 

• Social change in 1950's 
• increased prosperity meant people traveled more less class division 
• more education, a higher standard of living less respect for tradition 
• youth culture 
• more employment opportunities for women higher demands for equality 

Social reform led to outrage from traditionalists 
Death penalty had been popular 

People arrived from the commonwealth - took lower paid jobs 

Immigration unpopular with labor voters in inner-city areas

The government introduced race relations acts to attempt to slow immigration and deal with discrimination 

not overly successful

• People opposed to 11+ exam and the grammar school system
• 1963 Robbins Report - called for an expansion of univeristy education 
• 1965 Anthony Crosland the education secretary introduced new comprehensive schools for children of all abilities 
• led to controversy as grammar schools had been offering opportunities that had only otherwise been open to those attending independent schools 
• Harold Wilson also introduced the open university - part-time courses 

• Wilson had maintained party unity and balance over social reforms
• foreign and colonial issues more of a strain 

The Vietnam War

• Wilson believed Britain's economic recovery and security depended on the Americans 
• Wilson said we support..."the American stand against the communist infiltration in South Vietnam"
• BUT... To appease the left of the party criticised US bombing of N Vietnam 1966
• 1967 he attempted to make a broker peace deal 

Southern Rhodesia 1965 
What -  Illegal declaration of independence made with a white minority government 
Labour wanted and commonwealth countries wanted the government to send troops in to crush the rebellion. Britain used economic sanctions instead 

Wilson used personal diplomacy and made a generous offer which the PM of Rhodesia refused - let Wilson off the hook 

• Harold Wilson hoped he could change de Gaulle's decision to veto British entry. He didn't change his mind in 1967
•  
• Application a success - pro-Europeans happy and anti-Europeans by its failure 

• Effectively passed modernising social policy
• Avoided splits over foreign issue
• only four cabinet resignations 

However...

• Often quarrels over policy
• Conflict betwixt personalities 

Barbra castle 1968 - We spend three quarters of our time in these personal pro and anti intrugues instead of getting down to real jobs 

Britain's economic difficulties in the 1960's 
1950 economic performance behind economic competitors
Labour inherited a £800 million pound balance of payment's deficit 
Belived this was due to lack of British lack of competitiveness  

To solve this they felt goods needed to be better/cheaper than foreign products this required british firms too

• Improve their efficieny by investing in new technology and machinery
• grant wage increases only if workers were more productive 

The government need to 

• use revenue from taxation to develop and improve britains transport network 
• maintain investment in the nationalised industries
• ensure that Britain had a well-trained workforce 

• In times of inflation, union leaders threatened strike actions to demand wage increases for their members.
• Unions strongly resisted attempts by the government to use its power to try to restrict pay increases or to make wages dependant on improved productivity 
• Any wage increase not linked to an improvement in productivity made industry costs higher and increased inflation.
• Higher labor costs made goods more expensive and contributed to the balance of payments deficit.
• Higher labor costs also reduced the amount of profit that employers could invest in research and development, new machinery and plant.  

The Labour government had to take account of the demands of the trade unions

• The Labour party was allied to the trade unions who provided most of its money 
• in the 1960's almost half of the British workforce belonged to a trade union 

Had to tackle balance of payments deficit else the UK would gain a reputation for economic incompetence. 

Deflation - tax cuts and or rises in government expenditure
Decrease free credit + reduce the spending power of industries --> decrease in import bill --> decrease gap between imports and exports 

Devaluation - Reduces exchange value of the pound. Make british products cheaper + boost exports. Solve balance of payments crisis but as Britain relies on imports --> rise in cost of living 

Wilson ruled out devaluation because...

• it would reduce savings of working-class families --> Labour should be protecting these people
• Devaluation had destroyed in 1931 + 49 government 
• As Wilson had a small majority it meant he would have to call an election soon 
• He didn't want to upset the Americans. US had BoP Deficit Us treasury feared if British devalued the pound it would led to currency traders assuming US were doing the same --> run on the pound

However, 1964 deflationary measures were introduced 

• Callaghan negotiated foreign loans to prevent a run on the pound BUT to get them had to agree to the maintenance of Eastern bases 

Wilson hoped to make British industry more competitive 
He created the Department of economic affairs 

Aim: to create a plan to modernise and improve Britain's economy 
Targets set by DEA for the economy: annual growth rates of 3.8% over 6 years 
An increase in exports in 5.25% per annum to wipe out the balance of payments deficit 

DEA needed the government to:

• Create a national board for prices and incomes = wages dependant on increased productivity 
• Provide investment funds for modernisation of British industry
• improvement of workers skills and regional development 

Department of economic affairs was undermined by;
Treasury as they did not cooperate with the DEA
Dea undermined by deflationary measures
NBPI had no power to inforce decisions as Unions did not support the policy of wage restraint 

Result of the National Plan; 
Contributed to Labour victory in March 1966
DEA due to to infighting with the treasury was wound up in 1969 

Result of Deflationary measures

Reduction of the balance of payments deficit
prevention of a run on the pound due to loans 

• May 1966 seamen striked for pay increases over government guidelines 
• The strike damaged exports and poor trade figures threatened another run on the pound 
• by 1967 unemployment was high - 2.5 million 
• another balance of payments deficit put the pound under pressure

  18th November 1967 the pound was devalued 
  it went from being worth $2.80 to $2.40

  How successful was it 
  Not very, it was slow to improve trade figures and did not prevent cuts in spending

Other changes

• January 1968 announcement that all British forces east of Suez where to be withdrawn by 1971 
  School leaving age from 15 to 16 deferred change from 1971 to 73 

Roy Jenkins delivered more deflation and increased taxation by £923 million value of Stirling rose and interest rates were reduced 

• The economic record of Labour
• Labour had been no more successful than Tories in tackling the economic weakness of Britain.
•  the rate of inflation had not been slowed + unemployment was higher in 1970 thn in 1964 
• Wilson's government did not achieve ambitious aims of modernising the country and planning a competitive productive economy 

High Defense expenditure and the investment in research and development
Money for research and development went into the military --> reduced investment in other sectors 

Lack of investment 

• Encouraged manufacturing sites in Wales, Scotland and Merseyside these then undermined by deflationary policies 
• Did try to improve transport network by building motorways 

Wilson hoped to win trade union support over modernisation but economic difficulties it created a rif

• Stikes for pay were often unofficial, contributed to inflation and British poor export performance
• industrial relations needed to be more strongly regulated if the government's efforts to control prices and wages were to succeed 

Trade unions argued 
Lack of competitiveness should be blamed on employers and government investment policies
government attempts to limit wage increases unfairly penalized low paid workers.
 

The government had difficulties reforming industrial relations as unions had previously been allies and provided labour with money. 

The unions had bargaining power 
Strikes in nationalised industries could cause disruption throughout the country. 

Barbra Castle - leader of employment and productivity ministry 

In place of strife proposals

• Ensure employees had legal right to join a trade union
• The government could order a ballot if they believed a strike was a threat to national interest
• In unofficial disputes, there would be a 28 day cooling off period.
• Disputes to be referred to an industrial commission whos decision where legally binding
• Workers who were unfairly dismissed entitled to compensation or get their jobs back

The result of In place of Strife 
TUC and Left-wing Labour MP's incensed 
Resistance in the party led by the home-secretary Callaghan 
the failure contributed to the fall of the Labour government - showed unions had too much power and they were an obstacle to economic progress 

Traditional industries declined - largest unions lost power
White collar employment grew - increase in public sector union membership

However private sector grew --> union decreases as a whole 

Harold wilson looses the election in 1970
He decided to call an election due to mending economy and good opinion polls 

Why the Labour Party Lost in 1970
Wilson's Complacency - Wilson had a 51% approval rating vs Edward Heath with 28% 

Publication of poor trade figures disproved the theory that the economy was on the mend 

Disillusionment of the Labour Party 

• Richard Crossman thought that too many Labour supporters did not bother to vote
• Barbra castle felt there was a detachment amoung the Labour supporters 
• Too much money spent on defence not enough on welfare education and economic revitalisation
• maintaining the value of sterling had benefited only the city of London and US
• labour had abandoned its commitment to socialism 
• britain had been too supportive of the USA especially over Vietnam 

The failure of In place of strife 
People impressed by Wilson's promise to modernise Britain - the failure of in place of strife showed that unions were selfish and had more power than the government 

Why the conservatives won

Conservative policy proposals
 Used years in opposition to develop principles to underpin their policies 

• Industrial relations law would be reformed to reduce strikes and inflationary pay settlements
• Less state intervention in industry 
• Attempts to control prices and incomes by law would end 
• Britain would apply to join the EEC

Edward Heath's Leadership 

Heath attacked the economic record of Labour - since 1964 inflation as measured by the retail price index had risen by 33% 
Daily express praised his "guts and Leadership" 
He dealt firmly with a challenge to his authority when he sacked Enoch Powell from the Shadow cabinet 

He promised to

• Strengthen the economy and curb inflation 
• Legislate to transform industrial relation
• Create one nation, promising regional development, faster economic growth, better social services and the maintenance of full employment 
• Apply to join the EEC common market, believing that membership would facilitate these objectives 

Policy Proposals 
Hoped to allow market forces to determine prices and wages and would be less involved in managing the economy 
Overall his aim's and economic policies were not that different from Harold Wilson's 64-70 policies 

• Tories inherited inflation rate of circa 5%
• Unemployment same between 1970-74
• However, days lost to strikes doubled 
• He inherited a balance of payments surplus but left a deficit 

Decide how much can be blamed on his decisions and how much on adverse circumstances eg he presided over the time of the "World economic Blizzard"

Britain became a member of the European economic community 1793
Tory votes for 39 MP's against 
69 Labour who theoretically against joining voted for joining

Heath felt EEC would give Britain better access to Europe's markets 
De Gaulle left office 1969 new president not opposed Pompidou agreed on grounds that britain would;

• Sacrifice any remaining preferential trade deals with the Commonwealth
• Accept the EEC policy of heavily subsidising French farmers 

• There was support for an attempt to curb strikes.
• The aim of the Industrial relations act; to balance rights of workers and unions while reducing likelihood of strikes
• Workers would have legal right to Join a trade union - Challenged legality of closed shop
• National Industrial relations court and industrial relations commission were established
• Trade Unions required to register with NIRC + IRC
• Members of registered unions would enjoy better protection against unfair dismissal 
• Failure to register meant unions liable for claims for damages 
• gave gov power to order a pre-strike ballot and 60 day cooling of period 
• Outcome; Failure 
• Similar to in place of strife = unpopular 
  TUC told members to defy act
• Increased the bitterness of confrontations between unions and employers 
• complicated heaths effort to negotiate with TUC over strikes about prices and wages

Heath less successful in managing industrial relations, more strikes due to the act but mainly due to inflation. Prices rose = workers striked to prevent living standards falling 

• 1971 - Nixon ended the system of fixed exchange rates --> devaluation of the dollar --> made british exports more expensive in the USA
• 1972 - Pound allowed to float freely - the value determined by money markets = imports became more expensive 
• Worldwide increase in commodity prices; prices of raw materials food and fuel

• Heath government aimed to stimulate growth - cut taxes increased public spending - stimulated demand for good but pushed up prices 

• Miners had sympathy for doing a dangerous job 
• they wanted a 47% pay increase = above the government's wage policy 
• January 1972, 280,000 coal miners striked 
• The government was forced to declare a state of emergency
• Regular power cuts throughout the country and a 3 day week 
• Why was it successful
• Miners were well organised under Arthur Scargill + they used flying pickets 
• There were violent incidents eg Birmingham - 15,000 mased pickets prevented fuel leaving the depot 
• The government was poorly organised + winter weather had an immediate impact on power supplies

It damaged the government because
encouraged others to strike, added to inflationary pressures, made the gove look weak, emphasised failure of the act  

Heaths intention - reduce state intervention in industry however....

• 1971 - Rolls royce aircraft division was nationalised when it faced bankruptcy 
• 1972 - Upper Clyde shipbuilders where granted £35 million to safeguard 3000 jobs
• A new ministry for industrial development was set up in April to provide industry in deprived regions as part of the government's plan to stimulate growth
• Failure to secure a voluntary agreement with the union over wages --> statutory policies in 1972 to regulate prices and pay increases but success was destroyed by the oil shock of October 1973 

• October 1973 Egypt and Syria waged war against Isreal 
• They became angry at western support --> cutbacks on  supplies and quadrupled prices 
• Britain 50% dependant on oil 
• November 1973 Miners striked for higher wages 
• December State of emergency declared --> 3-day working week
• Electricity supplied to industry and businesses 3 days per week
• max 50mph on all roads 
• no television after 10:30 pm 

• Edward Heath called the 1974 election to gain support for government policies 
• The result was unclear --> Harold Wilson became PM again (1974-76) 

Minority government 
Labour achieved a majority of 3 seats 

Relations with the Trade Unions 
Labour and TUC reached an agreement = "The Social contract, 1973"

• Unions agreed to cooperate to try and control wages increases 
• Free collective bargaining over wages + no statutory incomes policy
• The government would try to keep prices down and provide improved welfare benefits 

Outcome - did not solve economic difficulties, co-operation continued until 1978-79

The drift to the left in the Labour Party 
reflected in cabinet appointments - Micheal foot and Tony Benn 
Also occurred at a local level 
caused it difficulties in the 1980's 

Wilson promised to renagotiate terms with the EEC 
New terms - Britain's contribution to the EEC budget was decreased 
Referendum called in 1975 
Outcome 2:1 for continued membership 
Appeared to preserve Labour party Unity 

Wilson's resignation March 1976 
He was replaced by James Callaghan 

1974 miners strike solved by 29% pay increase
1975 mid - inflation rose to circa 30% - unions demanding higher wages
A world recession hit British exports --> economic slump + unemployment 

• Denis Healey (C of th Excqr) thought - economic recovery depended on conquering inflation
• 1975 - increased taxes cut government spending programmes 
• 1975 July formal incomes policy introduced
  • £6 ceiling on wage increases per week then £4 in 1976 
  •  freeze on higher incomes  
• Result - decrease in average level of wage increases 
  Inflation level dropped but economic recovery did not prevail 

1976 - there was a Crisis of confidence in the pound - falling exchange value threatened to push up prices of British imports and increase inflation
Bank of England brought pounds on the foreign exchange to prop up value but used up large amounts of nations currency reserves - Threat of National Bankruptcy 

• The international monetary fund- provides loans to enable members to overcome balance of payments deficit 
• 1976 - asked for a loan of $3900 but government had to cut spending by £2 billion
• This was accepted in December BUT Did deepen riff in Labour 
• Callaghan prevented a severe economic crisis from becoming a political one and preserved unity of his cabinet and kept the government in office 

The Lib-Lab pact 1977-78

• Economic problems undermined public confidence in the government 
• 1976 Labour lost the majority in the commons 
• 1977 Callaghan negotiated with Liberal leader David Steel for the Liberals to prop up the Labour government, pact lasted until 1978 

• Government's strategy for controlling inflation dependant on unions agreeing to pay rises of no more than 5% 
• Unions felt Chancellor Healey had abandoned the Social contract and that members were suffering under the government's counter-inflation policy -->
• December 1978 - ford workers won a 15% pay increase after a 3 month strike -->
• strikes from Lorry drivers, grave  diggers, dustmen members of the NUPE Union

Outcome; Government appeared weak, Callaghan complacent 

Pay rises were granted and implied government couldn't control economy or unions

• The government had promised to devolve some power to Wales and Scotland but after referenda didn't get enough votes for this to happen.
• Nationalists felt annoyed and voted conservative
• government lost by 1 vote