James Callaghan

James Callaghan Biography

Born in Cardiff in 1912, James Callaghan was a prominent Labour MP, representing the Cardiff South constituency since he became an MP in 1945. He served as Foreign Secretary, Home Secretary, and Chancellor of the Exchequer before he ascended to the role of Prime Minister in 1976.

It was believed that Callaghan would never achieve the role of Prime Minister because of the younger and more popular Harold Wilson taking the fore. However, when Wilson announced his sudden and unexpected retirement in 1976, Callaghan was chosen as his most competent successor. Let's take a look at Callaghan's premiership.

James Callaghan Prime Minister

James Callaghan's premiership was during extreme industrial relations instability. In fact, during his time as Prime Minister, there was seldom a time when there was not a strike. Journalists coined the term 'British disease' to describe the continued problems between the government and trade unions.

Fig. 1 - James Callaghan

Unrest under Callaghan was influenced by issues under Edward Heath's Conservative government (1970-1974) and Callaghan's predecessor Harold Wilson (1974-1976).

During the three years of Callaghan's government, Callaghan faced:

1. Serious party divisions.
2. A narrow House of Commons majority.
3. Trade union unrest.
4. The Winter of Discontent.
5. The fallout of the 1975 referendum.
6. Economic instability.

Callaghan failed to resolve many of the problems facing his government, especially the continued trade union unrest. By 1979, most of the British electorate had wholly lost faith in Labour's ability to govern.

What problems did Callaghan inherit?

Let's look at the issues that Callaghan inherited from his predecessor Harold Wilson.

Narrow Labour majority in House of Commons

Labour held a 42-seat majority in 1974, however, its overall majority in the House of Commons was never greater than three seats throughout the party's five years in office.

It was for this reason that both Wilson and Callaghan became reliant on the support of the Liberal Party, giving Liberal MPs a strong parliamentary influence.

The 1973 oil crisis

In October 1973, five members of the Organisation of Arab Petroleum Exporting Countries (OAPEC) placed an oil embargo on nations which supported Israel in the Arab-Israeli War, this included the US and the UK among others.

Fig. 2 - The 1973 Oil Crisis affected the United States greatly, with gasoline supplies running very low. The economic effects from the suffering US created a worldwide economic recession - affecting the UK, among many others

This began the 1973 Oil Crisis and led to a global economic recession between 1973-1975, which had devastating effects on Britain, including:

• Increase in unemployment.
• Increase in inflation.
• Increase in the balance of payments deficit.

As a result, when Callaghan came into power, Britain was on the verge of bankruptcy.

Trade Union Unrest

Issues with trade unions began under Conservative Prime Minister Edward Heath. Unions became increasingly militant, and the government suffered an embarrassing defeat during the National Union of Mineworkers strike in 1974. Heath's failure to deal with trade unions contributed to the election of Harold Wilson.

Wilson managed to keep relatively good relations with some unions but never succeeded in making his idea of a social contract between the government and unions a reality.

This meant that when Callaghan came to power, he faced the continued fallout of trade union militancy, which was intensified by the economic issues the nation faced.

Economic problems under James Callaghan

Inflation reached around 15% during Callaghan's time in office. This was influenced by the 1973 oil crisis and the continuous wage increases given to unions as a result of strikes. The value of the pound sterling plummeted, and the mounting economic issues threatened bankruptcy.

So what did the Callaghan government do? To stop the economy from declining further, the Chancellor of the Exchequer Dennis Healey tried to reduce government spending. In the 1976 budget, Healey also imposed large tax increases and tried to impose a 3% limit on wage increases.

IMF Loan

After struggling to prevent the economic situation from worsening Healey began negotiating with the International Monetary Fund (IMF) for a £3 billion loan in 1976.

The IMF agreed on the condition that Britain made major cuts to public spending to meet the conditions for the loan. This outraged the political left and trade unions, and exacerbated Labour party disunity.

Callaghan managed to deal with the IMF crisis and secure the loan effectively. However, the loan exposed the extent to which Britain was in economic decline.

Political divisions under James Callaghan

The Callaghan government faced several issues with divisions not only internally but within British politics as a whole. The Labour Party became increasingly split, whilst at the same time, larger issues emerged within British politics concerning Britain's entrance into the European Economic Community (EEC).

Splits in the Labour party

The divisions in the party were deeper than those exposed in the IMF crisis. Let's have a look at the three main groups.

The split over Europe

One of the bigger issues that plagued the government as a whole was Britain's entrance into the EEC. Many members of parliament saw Britain's entrance into the EEC as a betrayal of democracy, as Edward Heath's government entered Britain into the EEC without a referendum vote.

In 1975, Harold Wilson held a referendum about EEC membership but many argued it was simply to provide an illusion of democracy. The 'stay' campaign had a larger budget and threatened that leaving would damage Britain.

As a result, the wider government was deeply divided. Through successive governments, there were debates about the loss of British sovereignty and democracy through union with Europe.

James Callaghan Education

James Callaghan left education at the age of 17, never went to university or achieved a degree, and yet became Prime Minister of the United Kingdom and helped to shape education administration.

The Labour Party traditionally views education as a means to increase opportunities for citizens and transform people's lives. In October 1976, Callaghan, having just assumed the office of Prime Minister in April 1976, gave a speech wholly dedicated to education policy at Ruskin College, Oxford. This began what is known as The Great Debate.

Callaghan and Trade Unions

One of Callaghan's lasting legacies is his unfavourable relationship with trade unions. His premiership was plagued with strikes and unrest. Let's take a closer look at this relationship in the later 1970s.

Trade Unions

The major factor that contributed to the militancy of trade unions was the cuts to public expenditure as a result of the IMF loan. These cuts made several Trade Unions abandon their loyalties to the Labour party.

By the time Callaghan assumed office, Wilson's "social contract' with trade unions had fallen through. As a result, there was barely a month in which there wasn't a strike. More significantly, the Callaghan government saw more moderate unions begin to become increasingly militant.

Fig. 3 - The 3^rd G7 summit between major industrialised nations, held in May 1977 at 10 Downing Street. James Callaghan hosted the likes of US President Jimmy Carter and West German Chancellor Helmut Schmidt to discuss the global economic crises and offer support to each other's difficult economic decisions.

In December 1977, Callaghan introduced a 5% ceiling on wage increases. This only worked to aggravate trade unions further, who were already angered by the cuts in public spending. The 1977 fireman strike and the 1979 Ford Motor and Lorry Driver strike showed the significant protests against Callaghan's policy.

The increase in moderate unions and the public sectors to trade union strike action during the Callaghan government was the key reason for the Winter of Discontent (1978-1979).

James Callaghan Legacy

The legacy and contribution of James Callaghan remain a topic of debate for British historians. However, it is generally accepted that Callaghan failed to be an effective leader.

• Among the Labour left, Callaghan was considered a traitor who betrayed socialism by allowing the IMF to stipulate control measures over the budget.

• Callaghan's critics on the right of the Labour Party believed him to be a weak leader who could be unable to stand up to the left.

What is clear is that when Callaghan left power, he failed to rectify any of the issues inherited from Heath and Wilson. In consequence, the Labour party lost significant support in the electorate and did not regain control from the Conservative party until 18 years later.

James Callaghan Successor

James Callaghan successor was Margaret Thatcher. It is important to note that Callaghan made matters worse during his tenure as Prime Minister by failing to call an election before Labour's tide turned.

In Autumn 1978, opinion polls showed that the Callaghan government was gaining support. However, as a consequence of the Winter of Discontent, Callaghan forfeited the trust of the electorate.

Callaghan had gradually deteriorated the reputation of his government, and the Labour party as a whole had been damaged by:

• Economic crisis.
• Labour Party divisions.
• Increased trade union militancy.

Thatcher led a campaign called 'Labour isn't working'. For the majority of voters, this was a fair assessment of Labour's performance. The Conservative Party won a comfortable majority of 70 seats over Labour and an overall majority of 43 seats in the 1979 general election.

Margaret Thatcher hence became James Callaghan's successor.