Crisis? What Crisis?

By Ng Wee Loon

Introduction

When James Callaghan entered Number Ten Downing Street on 5th April 1976 as Prime Minister, having defeated Michael Foot in the internal ballots of the Labour Party, he became the first and only British Prime minister to have previously occupied “the three great offices of state” in the British government. He was the Chancellor of Exchequer from 1964 to 1967, Home Secretary from 1967 to 1970 during Harold Wilson’s first term and the Foreign Secretary from 1974 to 1976 during Wilson’s second term.

Callaghan’s political life prior to becoming Prime Minister was marked by good relations with the unions; he “had risen in the Labour movement as a spokesperson for the trade unions,” “his training in the Inland Revenue” had let him “understand practical economics better than nine Chancellors out of ten” . Yet during the end of his tenure as Prime Minister, it was the combination of economic factors, the trade unions together with other factors, including the media with their satirical headlines “Crisis? What Crisis?” , that led Callaghan step by step towards his downfall.


Historical Context
The beginning of Callaghan’s term was fraught with difficulties. He succeeded Wilson in a situation of an imminent economic crisis and a tiny parliamentary majority. None of which made his job easier. Much of his attention was spent “ensuring that he conducted business in an orderly fashion, and to electoral survival,” preventing him from “being other then reactive.” He had the unenviable task of dealing with an inflation rate of 10 percent and unemployment that reach 1.56 million. This was not east to deal with, as the solutions of the two issues were in direct conflict with each other in economic terms.

The First Step – The IMF Crisis
Callaghan had a Policy Unit that he inherited from his predecessor Harold Wilson, with which he used for four main tasks. One of the tasks was “developing the policies that he took a personal interest” in, including the loan from the International Monetary Fund (IMF). “The IMF crisis that hit Britain in 1976 had as its focus the request by the Labour government for a loan from the IMF and the negotiations that followed over conditions for the loan.” Britain in 1976, was having various economic problems, inflation rate was high and as was unemployment rate. To add to that, it had to contend with unproductive industries and too much money supply. The loan from IMF, however, came with strings attached. The loan required the Labour government to decrease public expenditure, increase taxes and implement pay policies. These measures that Callaghan and his government took was to have severe repercussions at home in the events of the “Winter of Discontent” and within the ranks of the Labour party.

The Second Step – The “Winters of Discontent”
“The winter of 1978 to 1979 was characterised by mass industrial action over the government’s pay policy and became known the ‘Winter of Discontent.’” In line with the IMF agreements, Callaghan implemented pay policies that capped the pay rise of workers to 5 percent. In a time of high inflation, this translated to a decrease in the real purchasing power of the people. Indeed as Phillip Whitehead noted, “By 1977 the purchasing power of the average worker with two children had fallen by 7 percent over the two years of pay policy.” This resulted in widespread unhappiness and strikes and Callaghan was soon facing a crisis that he could not control as events unroll.
“A strike at Ford’s led to the company settling at 15 percent, the government’s last desperate attempt to push through sanctions against it was voted down at the House of Commons with the connivance of the Labour Left. In the new year, first lorry drivers, then one public-sector group after another, struck. Emotive targets were shut off. Secondary picketing seemed out of control. The press had the ultimate shocking headlines: ‘Has everyone one gone mat?, ‘Target for today – sick children’ and ‘Now they won’t let us bury our dead.’”

Ironically, Callaghan was paying the heavy price for his own decision earlier during Wilson’s premiership. Barbara Castle, then Secretary of State for Employment and Productivity, had attempted to outlaw the sort of unofficial strikes that occurred during the “Winter of Discontent” in her white paper “In Place of Strife” but she was defeated and prevented from passing it by Callaghan.

The role of the media
To compound his problem with the workers, when Callaghan came back from a summit in Guadeloupe in the midst of the “Winter of Discontent”, he was misquoted by the newspaper The Sun as saying, “Crisis? What Crisis?” ,
“For a desperate people, facing food shortages, snowy winter, the spectacle of a sun-tanned prime minister, back from the Caribbean, appearing to brush their problems aside or dismiss their concerns as parochial was hard to take.”

In this instance, something that “would in normal circumstances have been the most temporary of frissons [emphasis from original text] and immediately forgotten” had suddenly become a public relations nightmare.

Unlike his predecessor, Callaghan was not a media person. He did not make use of the media and seldom talk to the press, except for a few journalists. “He kept close some journalist associates from earlier days such as Peter Jenkins and Alan Watkins, but he evinced little interest in what others, even Labour stalwarts were writing.” This “inner self-confidence” he had in him and little regard for the “opinions of journalists and editors” resulted in unfavourable reports. Had he known how to make use of the media like Wilson did, the impact of the “Winter of Discontent” could have been downplayed.

Minority government
Other than the IMF crisis, the “Winter of Discontent” and his public relations problem, Callaghan also had problems in government. As previously mentioned, Callaghan came into Number Ten Downing Street with only a tiny parliamentary majority. Having succeeded Harold Wilson in mid-term, Callaghan had to worked with a minority government with only 37 percent of the popular votes. Wilson had came into power only due to the “success of the resurgence of the Liberals, who polled their highest figure for forty years, reducing the Conservatives in turn to their lowest percentage since 1929.” In addition to the original electoral results, the Labour party’s standing continued to go south during the by-elections in view of the various problems Britain was facing. “On paper, there was after a time no majority of any kind. It was possible however (and this Callaghan achieved) to keep afloat by an agreement with the Liberals.” Agreement came at a price, as the Labours had to consult with “David Steel, the Liberal leader, over sensitive discussions” and the latter gained more influence in parliament then they had did for many years.



Labour factionalism
Callaghan’s problems in parliament were mirrored by factionalism in the Labour party. The IMF crisis had brought with it, together with the “Winter of Discontent”, seeds of unhappiness within the Labour party. The IMF crisis together with the problems with the unions saw the Labour Party split into two groups. On the one hand, the “born again Social democrats decried their reliance on the unions, the immense deference to Michael Foot inside the Cabinet and Jack Jones outside it.” On the other side, there was the Labour left, who saw them as “premature monetarists, abandoning full employment, alternative economics policies, industrial democracy, the poor and national sovereignty itself, in desperate wheeling and dealing with the forces of international capital.”

Such splits had their roots deep inside Labour as Wilson had earlier, during his time, refused to elaborate on the directions of a Labour Party “fallen on hard economic times”. Callaghan later added to it when he introduced the IMF loans. At a time of trouble such as these, even a “shrewd and successful political operator” like Callaghan could have needed problems at least not from his own party.

The final step – Devolution
The final stroke to Callaghan’s time in Number Ten Downing Street came in March of 1979. Referenda held in Scotland and Wales for devolution of the two areas, “which had occupied much of parliamentary time since the end of 1976 and which were vital to the tactical manoeuvres which ensured the government’s survival” came back negative. The campaigns in Scotland and Wales for devolution did not go well in these two areas because it had “inevitably turned into a plebiscite on the government’s record as a whole during the winter of discontent.” As a result of the failed referenda, the Scottish Nationalist pulled out their support that they had given Callaghan in the minority government. With that, the Liberals subsequently pulled out their support as well, as they changed their position and hoped for an earlier election to prevent it from happening concurrently with the trial of their former leader who was being charged for murder and homosexuality.

Conclusion
James Callaghan’s Labour government “fell on 28 March, the first to be defeated on a vote of no confidence for fifty years.” Reviewing Callaghan’s time in Number Ten Downing Street, it is important to understand that he had inherited an office that was burdened with so many troubles that even with his experienced accumulated over three other top offices in the British government, he could not handle it.

The minority government that he inherited from Wilson meant that he had to contend with working with the Liberals and the Scottish and Welsh Nationalist, who abandoned him near the end. The economic problems left him with little options except to seek help from the IMF. Yet this very action sowed the seeds of discontent not only in his people during the “Winter of Discontent” but also within his party as they spilt up over the way of socialism, further weakening his position as prime minister. His disdain for the press and the media, which proved to be a useful tool for his predecessor, did not help him during the “Winter of Discontent” as the media churned up sensationalised headlines on a daily basis culminating in the one “Crisis? What Crisis?” that has since became “national folklore”

In the end, he “could only turn to the realms of foreign affairs”, where he had close personal relationship with the German Chancellor Helmut Schmitt and American President Jimmy Carter, for relief.” Retrospectively, Callaghan was a victim of circumstances who did all that he could. As Peter Whitehead concluded,
“Callaghan held on to his income policy with the tenacity with which Mrs Thatcher was to pursue the Argentines (although his task force sank!). Within the limitations of almost nil growth and low profits there were efforts at redistribution. The emphasis on direct taxation rather than regressive indirect taxes protected the poorest. Pensions and employment subsidies helped other vulnerable groups, though unselectively.”

And Mrs Thatcher would later add that, “In other circumstances he would have been a great prime minister.”

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