The background to Wilson's return to office

By 1974, Heath's government had managed to create utter chaos. The Industrial Relations Act introduced in August 1971 to impose a straight jacket on the union leadership and force them to discipline workers' militancy more tightly, had backfired. Not that the union bureaucracy was particularly keen to lead a fight but they had to be seen to do something, if they were to keep control of rank-and-file militancy. And there was at least one aspect of the Act which they strongly objected to - the compulsory registration which it imposed on them.

The jailing of workers for their defiance of the act's picketing provisions, the courts only generated more unrest. In particular, big public campaigns and strikes were waged around the imprisonment of five dockers at Pentonville and two building workers at Shrewsbury. By mid-1972, it was already obvious that Heath's industrial legislation would be virtually unworkable.

In the end, the crunch came in the state-owned coal fields. Although the miners had won a large pay rise as a result of their earlier strike in 1972, this had been eaten away by inflation. In September 1973, the miners' union, the NUM, submitted a claim for a 40% wage increase. The claim was not due until March 1974, so that, in theory, there was plenty of time for a deal to be cobbled up between the government and the union leadership. The government's response - an offer which was within the 13% maximum wage increase allowed by Heath's compulsory guidelines - was rejected by the miners and, before Christmas 1973, 280,000 miners began an overtime ban.

Heath's main problem, however, was to avoid, at any costs, a breach of its wages policy, for fear of setting a precedent for other groups of workers. This turned the miners' dispute into a test case and Heath chose to resort to strong-arm tactics. Using the pretext of the alleged oil shortage created by the oil crisis in the Middle-East, Heath responded to the miners' overtime ban by calling a state of emergency. A month later he introduced a three-day working week, allegedly to protect coal supplies even though there were enough stocks to last until the following May.

By January 1974, the situation reached a crisis point with the coinciding miners' overtime ban, a work-to-rule organised by the train drivers' union ASLEF and an overtime ban staged by engineering workers.

The TUC endorsed all these actions under the pressure of workers' discontent. But they did so primarily because there was no question of taking strike action at that stage. In fact the last thing the TUC wanted was a confrontation. On January 9, the TUC promised that if the miners were made a special case, other union leaders would not use it as a precedent in their own pay negotiations. Then, a week or so later, the TUC leaders met Heath and offered to endorse his wage restraint policy and virtually police it in excahnge for a new offer to the miners. In fact the supposedly "left" engineers' leader, Hugh Scanlon, asked or rather pleaded, "Is there anything, anything at all that we can do or say that will satisfy you?" But Heath would not budge.

Meanwhile, the miners were holding a strike ballot. The result came on 8 February. It was an 81% majority for industrial action.

Faced with this open challenge by the miners and increasingly vocal attacks from the ranks of his own party, Heath felt he had no other choice than to seek a fresh electoral mandate. He called a snap election over the issue of who was to govern Britain - the government or the unions.

Wilson, on the other hand, campaigned on the basis of Labour's ability to restore social peace. He pointed at the striking miners, accusing Heath's government of being "God's gift to militants and troublemakers" and pledged to trim down the unacceptable social injustices which were at the root of the workers' militancy. As a gesture to the bosses, and to back up Wilson's argument, ASLEF leader Ray Buckton saw to it that a train drivers' strike was called off. Only a few days before the election the chairman of the CBI was reported as saying at a management conference that the Industrial Relations Act had soured the atmosphere in industry and ought to be repealed by the next government.

Wilson's "social consensus"

While the miners' militancy forced Heath to call the election, this did not result in Labour riding into Downing street on a wave of enthusiasm. Labour only won the election by a very narrow margin on 28 February 1974. More than a Labour victory, it was a Tory defeat. There was not even a shift to Labour, rather a swing to the Liberals from both Tory and Labour voters. Despite a 78.8% turnout, much higher than in the previous general election, Labour's vote was half-a-million down and its share of the vote was only 37.1% compared to the Tories 37.9%. If Labour won 301 seats against the Tories' 297, it was only thanks to the haphazard operation of the first-past-the-post system. In the end, Wilson only became prime minister because the Liberals refused to support a new Tory government.

The first task of Wilson and the TUC was to settle the miners' strike. The miners had been promised an "honourable" settlement. In this respect Wilson had more elbow room than his predecessor. He could afford to backpeddle without his government losing face. Moreover any concession to the miners was more likely to be seen as a consequence of the election than as an achievement of the miners' militancy. The risk of setting a dangerous precedent was therefore reduced.

Ironically Michael Foot, the Employment Secretary in charge, used the Pay Board report commissioned by Heath before the election. This settled the face workers claim in full - presumably because they had the most industrial muscle - but opened a yawning gap between their wage and those of other underground and surface workers. One member of the Barnsley Panel of 22 pits reported that his members were "disappointed" that the full claim had not been met, and that the increases were not backdated to the beginning of the claim. Also "it seemed strange" that no ballot of the membership had been taken before the settlement was accepted by the leadership... This, however, settled the miners' strike for the time being.

But Wilson's problem was not confined to the miners. Just about every industry was simmering with discontent. There could be no question of allowing the miners' settlement to set an example for the rest of the economy. The TUC was called in to help. Its leaders declared bluntly that there was to be no free-for-all and they recommended that Heath's wage restraint policy, including its 13% ceiling on pay rises, should be allowed to run its full term until July 1974.

As to the future, instead of relying on confrontational tactics enforced by the courts, in the way Heath had, Wilson chose to emphasise the willingness of the union leadership to collaborate with the government in creating an atmosphere conducive to social peace.

Heath's Industrial Relations Act was repealed just after the election (although its National Industrial Relations Court was only disbanded the following July, allowing it to sequestrate the engineering union's fund for non-payment of fines). A "new social concensus" was heralded, with the so-called "social contract", the joint product of Labour's National Executive and the General Council of the TUC. This "historical" agreement stated that: "Only practical action by the Government to create a much fairer distribution of national wealth can convince the worker, his family and his trade union that an "incomes policy" is not some kind of trick to force him, particularly if he works in a public service or nationalised industry, to bear the brunt of the national burden."

Thus wage restraint was still firmly on the agenda. Only it was to be enforced through a non-binding contract whereby union leaders would use their influence to moderate wage claims in return for economic and social benefits - i.e. economic prosperity, improved public services and social provisions - which were later referred to as the "social wage". At the same time, to slow down the rapid devaluation of wages, private and council house rents were frozen until the end of the year, existing subsidies on basic foodstuffs were prolonged and a bill to tighten up controls on prices (without freezing them though) was introduced.

The union leadership board the gravy train

In order to put the union machineries more securely into the government's bandwagon, Wilson rewarded them with many new positions in state bodies. The aim was to ensure that the bureaucrats would feel bound by the "social contract" despite its alleged "non-binding" nature, that they would be more reluctant than ever to rock Labour's boat and more willing to resist the pressure of their membership.

This policy was not new, by any means. Even under Tory governments union leaders had held many positions on state bodies - for instance on the National Economic Development Council (NEDC) which had been set up by MacMillan in 1962, as an instrument of wage control but also as a forum for government ministers to discuss economic policy with union leaders. Nor was this policy comparable in scale to the level of involvement of the union machineries in state bodies during World War II. Nevertheless Wilson went a long way towards satisfying the union leadership's craving for official positions and status.

Thus, in exchange for the bureaucrats' assistance in ending the miners' strike, Wilson promised a "Plan for Coal" in which union leaders would have their say and plenty of scope for seats on various committees. The following year, the promised Advisory Conciliation and Arbitration Service (ACAS) was set up - just in time to take the heat out of a prolonged hospital workers' strike. ACAS was designed, in the spirit of the "Social Contract", to mediate in industrial disputes on a voluntary basis. The new body certainly did not interfere with management's "right to manage", but it did offer the union bureaucrats many seats and positions.

Likewise the union machineries were offered seats in the scores of committees in charge of implementing the Employment Protection Act and the Industrial Democracy Act, as well as in the Manpower Services Commission and the Health and Safety Commission, among others.

Of course, there were plenty of symbolic rewards for the union bureaucrats, such as decorations by the queen, honorary degrees from the universities, etc.. But there were also rewards which were far from symbolic. The directorships of public bodies carried many very material perks, for instance.

Thus, by 1978, an investigation into the directorships held by leading union figures gave the following results. Jack Jones, for instance, the so-called "left" leader of the Transport and General Workers Union (TGWU), was on the board of the National Ports' Council and the British Overseas Trade Board. Hugh Scanlon, of the engineering workers' union, was a director of the Metrication Board and British Gas. Alan Fisher of NUPE, the public employees blue-collar union, was a director of British Airways and Harland and Wolff shipyards. Tom Jackson, of the postal workers, was a board member at the Press Council and BP, as well as a former governor of the BBC. Finally Frank Chapple, the electricians' and power workers leader - an ex-Communist party member who had turned coat to become an anti-communist witch-hunter - sat on the Totaliser Board, the National Electronics Council, the Royal Commission on Environmental Pollution and the Joint Consultative Committee on Prison Industries! Here all these union bureaucrats rubbed shoulders with senior civil servants and businessmen, received signals from the bourgeoisie and passed on information as to what they could deliver and what not.

The September election - a change of tone

Having put some order into the social chaos left by Heath, Wilson was still faced with the problem of having no parliamentary majority. A new election had to be held at some point, and the sooner the better. Six months after having come to power, Wilson felt that the time was ripe, and that he could not wait much longer. He decided to call an autumn election.

This time, however, Labour's election campaign no longer emphasised the social injustices which were responsible for workers' discontent but the need to build a prosperous - i.e. profitable - economy for the bosses. At the September TUC conference, Wilson spelt this out in his closing address: "The Labour government wants to see industry prosper, and this means a Stock Market strong and confident to help industry raise the finance required for industrial investment.. For this, investors must have confidence in the viability of industry and that means profitability." He then told delegates that living standards would do well to stay the same over the next two years. Proof that there is nothing very "new" about Blair's "new" Labour after all.

At this conference, the union bureaucracy backed voluntary wage restraint unanimously. The TGWU leader Jack Jones "forgot" his past criticisms of Wilson's attempt to curb union rights in the 60s, declaring that "we're all for getting Labour's re-election with a big majority and that's what it's all about this week". And, being never short of a grandiose cliche, Jones called Wilson's statement a vision of a "new Jerusalem".

Initially this shift of emphasis had been opposed by Wilson's other main "left" critic, Hugh Scanlon, the AUEW leader. Soon, however, Scanlon withdrew his objections "in the interests of unity". When foreign minister, Jim Callaghan, gave a "grim" warning of a return to the 30s if the "social contract" was not backed, Scanlon was among the first to join a standing ovation. In the end Wilson got the full backing he wanted. As Ken Gill, a Communist party member and general secretary of TASS, the white-collar section of the engineers, noted cynically: "we hated wage restraint under Heath" (when the TUC was kept on the sidelines) "but we welcome it under Wilson" (with the union leaders moving centre stage).

The time seemed definitely ripe for Labour's re-election. So far wages had kept more or less pace with prices - thanks to food subsidies and index-linked pay increases inherited from Heath's period - but there was no question of this carrying on for ever. As a former Labour minister, Richard Crossman, had said about a previous early election, in 1966, "..we had given the electorate time to get to like our style and see how active we were. But they haven't had enough time to see our actions put into effect and recognise them as failures".

On election day, 10 October 1974, Labour lost another 200,000 votes. But, thanks to a low 72% turnout, it increased its share of the vote to 40.2% at the Liberals' expense, gaining 319 seats against the Tories' 277, winning and overall majority of three. A small, but sizeable section of Labour's working class electorate had stayed away from the polling stations. But this result still gave Wilson the elbow room that he needed, at least for the time being.

"Protecting" the welfare state by running it down

Having consolidated their position, the time had come for Labour to address what they considered as the really serious issues - not working class expectations but employers' demands. And one of these demands was a drastic reduction of social expenditure so that a larger share of the state resources could be used to boost capitalist profit. The main casualty of this was the "social wage", which, according to Wilson, was meant to be the reward for workers' acceptance of wage restraint under the "social contract".

In both 1974 elections, Labour had promised the working population a fairer distribution of the national wealth. Increased state spending on health, education and social services was assumed to be part of the "social background" which Labour aimed to create. These promises were to prove empty.

As far as the NHS was concerned, for example, Britain certainly had far to go if it was even to catch up with comparable countries in Europe. The number of doctors relative to the population had increased between 1960 and 1971, but only to sink again in the following years. By 1975, there were 11 doctors per 10,000 of population in Britain, compared to 14.6 in France and 19.2 in Germany. The pattern was the same in other areas of the NHS. Only the numbers of nurses expanded but even then, levels of nursing provision remained less than half those of the Scandinavian countries.

In the early years of Labour's government, the modest growth in spending which has been projected, was eroded by massive inflation. For instance, in 1975-76 NHS spending fell by 12% in real terms. Far from rebuilding the NHS, Labour hastened its decline. Between 1974 and 1979 hospital beds fell by 35,000 or an average of 7,000 beds a year. Staffing levels were frozen, posts were left unfilled and ancillary staff were reduced by centralising catering, laundry and laboratory facilities. And during the period 1975 to 1977, over 100 small hospitals were closed.

Nor did Labour sort out the inegalitarian anomalies which it had pledged to abolish in the NHS. For instance the existence of pay beds, that is, private beds for non-NHS patients. This allowed private patients to jump the queue and consultants to use NHS facilities for their own private gain. But when the Department of Health announced its plans to phase out pay beds, many consultants threatened to pull out of the NHS altogether. Of course this exodus could have been blocked by restricting licences for private hospitals. But the Minister of State, Dr David Owen, was reluctant to do this. In the end, only a few pay beds were phased out and the consultants continued as before.

The same unwillingness to tackle the vested interests of the better-off characterised Labour's education policies. Although local education authorities had been encouraged by successive Labour and Conservative governments to build comprehensive schools, which were meant to provide an all-embracing education to match different ability ranges from different backgrounds, implementation had been constantly put back due to a "shortage" of funds, while independent or semi-independent schools still siphoned off a considerable chunk of these funds. Of course had Wilson's government been determined enough, these private schools could have been brought into the state sector.

But even without doing this directly, a good start in that direction could have been to end their charitable status and other tax advantages which amounted to a massive taxpayers' top-up. This formed part of Labour's election manifesto. However once in office Labour ministers bottled out of their commitment for fear of upsetting the well- to-do.

Education became a favourite target of the Treasury's cuts. Only a few years previously, to loud fanfare, the school-leaving age had been raised to 16 years. A big expansion of education was envisaged. A-level teaching was to be expanded in comprehensives, which would send a larger share of pupils to universities. In fact the numbers of pupils staying on at school started to dwindle. Growing unemployment played its role as many working-class youth left at 16 to grab the few apprenticeships and jobs on offer. But the main factor was certainly the crumbling state of classrooms, oversized classes and underfunded curricula as diminishing local government resources were targetted at essential maintenance work.

Social housing and town planning generally also fell victim to the ruthless cuts introduced by the government. In 1975-76 planning applications were down by nearly 50% compared to 1973. In 1976, when there were an estimated 100,000 homeless, real spending on housing was down by 1% from 1974. Pre-1914 terraced housing lacking modern amenities continued to abound in the inner city areas, particularly in the North. And in the newer London overspill "new" towns, expectations were scaled back considerably. To this day, for example, Basingstoke still has the city centre which was built at the time as temporary.

All in all, real social provisions declined between 1974 and 1979, reflecting the bosses' increasing reluctance to agree to high levels of state social spending as a trade-off for low wages. In that sense, the Labour governments of the 70s only paved the way for Thatcher later onslaught on welfare provisions - something which today's working class would do well to bear in mind when listening to Labour's pledges about health and education.

Labour and state intervention

One of the features of the Labour governments of the 70s was the repackaging of state intervention in the economy - effectively the channelling of public funds into private capitalists' pockets - into a radical policy. In this the so-called "left" of the Labour party played a decisive role in dressing up what was fundamentally an anti-working class, pro-business policy, into a radical and progressive one.

This political sleight of hand actually originated in 1971, following Labour's defeat by Heath. Central to it was none other than Tony Benn, then Labour's party chairman. As a minister of Mergers, Benn had rammed through the merger of the Upper Clyde Shipbuilders in 1969, to the anger of the workforce. By 1971, however, once Labour was safely in opposition, Benn went through a reconversion, arguing that the role of a Labour government could not be to provide "intensive care for capitalism".

In December 1971 a Public Sectors Group was set up under Tony Benn in which young politicians like Tony Banks of the AUEW and Margaret Jackson (later Beckett) were researchers. They proposed a National Enterprise Board (NEB) and a system of compulsory planning agreements with private industry. Powers of intervention would go much further than just doling out cash to ailing companies and acting as a merger bureau. Big firms would be legally compelled to reveal vital information about their profits and plans as part of a national plan. The NEB would have a substantial base in the 100 largest firms in the manufacturing sector and some twenty-five would be taken into public ownership. With unemployment under Heath hitting a post-war high, Labour's programme in 1973 called for no closures or redundancies until alternative jobs were available.

However by the time of the February 1974 manifesto, the threat to the twenty-five unnamed companies had been reduced to an undertaking to nationalise the shipbuilding and aircraft industries (with full compensation, of course), along with sections of several others (e.g. road haulage and pharmaceuticals).

Once in office, Wilson's first move, however, was not to implement Benn's proposals. Instead the old Tory- inspired National Economic Development Council, remained in place, providing a meeting point for ministers, employers and union leaders. Its brief was to boost competitiveness and productivity which, as Chancellor Healey liked to point out, were so low that even British multi-nationals were uncompetitive by international standards. To carry out its brief, Neddy was to remain a watchdog on wages as well. No less than thirty-nine working parties were set up on an industry by industry basis. But while creating hundreds of jobs for the boys and being a useful source of government funding for the bosses, Neddy did not create any real jobs and there was certainly no attempt to introduce so-called "industrial democracy" as had been argued for while Labour was in opposition.

As to Tony Benn, he was made minister of Trade and Industry in the new government and leftwingers such as the Liverpool MP Eric Heffer, were appointed to help him. Eventually, in August 1974, Benn produced a White Paper called the "Regeneration of British Industry" sketching out what he intended to do. Gone were the planning agreements and accountability which were supposed to be imposed on one hundred firms. This was replaced by an "explicit partnership to raise the quality of management" and boost manufacturing in the private sector. There was no element of compulsion or control left. Only the left image of Benn and Heffer remained to justify the plan.

The NEB was finally set up in November 1975. Mindful of the constant flak from the CBI about the dangers of a "major threat" to the private sector, its wings were severely trimmed. Gone were its powers of compulsory acquisition, gone was its ability to increase its stake in private companies to 51%. And, as a final gesture to the CBI, gone too was Tony Benn who was demoted by Wilson and moved to the Department of Energy.

The appointment of Sir Don Ryder, a businessman, as chairman of the NEB - instead of Jack Jones, whose name had been initially suggested - completed the transformation of the NEB in the eyes of the CBI. Especially when Ryder announced his aim of providing "funds for private companies which could not obtain enough funds from private sources".

Good commercial criteria was initially an important investment consideration for the NEB - after 13 months of existence the NEB could boast £51.3m profit from £500m of investment in 13 companies with assets of nearly £1bn. And this during a period when unemployment had risen by nearly 20% to just under 1.3m!

State-funded redundancy programmes

Thereafter the NEB became exactly what its enthusiastic supporters had always maintained it would never be - an "intensive care unit" for ailing private companies who were queueing up at the door for treatment. These included big names, such as Chrysler, Rolls Royce, ICL and British Leyland - the lamest duck of all - but also smaller companies such as Ferranti, Alfred Herbert, Triang and Harland and Wolff. The only "planning agreements" were not aimed at forcing companies to avoid redundancies and look for new ways of employing workers but rather to use government cash to underline and reinforce the need for workers to make sacrifices in a period of restructuring.

In the case of Chrysler which owned Rootes plants in Coventry and Linwood, the expressed wish of the US multinational was to close down the entire lossmaking British subsidiary. But as a gesture to the workforce Chrysler actually offered to give Chrysler UK to the government and even provide £30m towards expected redundancy costs! But ministers were reluctant to take this on, not that they were against the redundancies, but they certainly did not want to take the blame for them. Instead £162m was pumped into Chrysler to keep it afloat, 8,000 workers (out of a workforce of 25,000) were made redundant and Chrysler signed a "planning agreement" with the government.

In theory this agreement should have prevented any rushed decisions such as a closure being made without full consultation with government. In practice, despite two years of speed-ups and pressure on the workforce, the situation of Chrysler UK did not improve. Eventually, in July 1978, it was sold to Peugeot without Chrysler having previously informed the government, let alone the workforce. As a result the government lost its investment and had to start negotiating again with Peugeot from scratch!

The sums involved with Chrysler were, however, small change compared to what was at stake in British Leyland - the car giant in which the NEB had a 95% stake. With Leyland sliding into the red, the government started underwriting loans which the car giant required to fund a modest modernisation programme. At the same time it commissioned the Ryder report which highlighted low productivity and "ancient equipment in badly laid out plants". So, initially huge sums were promised in a grandiose plan to regenerate Leyland, without the possibility of redundancies or closures being even mentioned. The government started providing large sums of money. Significantly, though, Wilson made future public funding dependent on improved productivity. He also attached great importance to "better industrial relations". The writing was on the wall.

The rest is well known. How management's drive for greater productivity produced unofficial strikes. How the "social contract"'s tight pay guidelines produced enormous strain amongst workers who saw their standard of living melting away. And how the inevitable confrontations between the new hard-nosed chairman, Michael Edwardes, appointed in 1977 led to BL workers being branded as wreckers by "left" trade union leaders like Jones and Scanlon, as they fought against redundancies, which were to reach a total 19,000 for the years 76-77 alone.

Although the government made no concessions to the workforce at British Leyland, they appeared, initially at any rate, to have taken a different attitude when providing money for several small enterprises which had gone under before being rescued by Benn and the Department of Trade. The Scottish Daily News, Triumph motor cycles, Meriden and KME Kirkby - which made motorcar parts, radiators and orange juice - were reborn as "workers' cooperatives". With much hypocrisy, Benn hailed these schemes as a new force "sweeping the country".

Originally these firms had collapsed because they had proved incapable of facing up to the competition. What they needed was investment, research and development. In that respect there could be no short cuts. A "drip feed" supply of cash was not enough. Several tiers of management may have been removed and workers may have been made to feel that they were running "their" company but this did not make it any easier to sell their products.

By accepting lower wages and removing the usual "them" and "us" divide, workers were led to imagine that they could somehow "save their company". In fact the sums of money invested in these companies were described as "peanuts" by Benn himself. For a while they provided some useful publicity for the government. But in the longer term they would only be kept alive if they returned to profitablity. In the circumstances this was never possible, so they were eventually allowed to go under.

Nor was the state sector spared when it came to making profits. The real role of nationalised industries, ever since they had been modernised after the war at the taxpayers expense, had been to "subsidise" private manufacturing by offering cheap supplies, rather than making big profits themselves. But in the shrunken markets of the 70s, the old operating conditions no longer applied. World-wide overproduction inevitably led to price cutting. In the case of British Steel, for example, with its old plants and large workforce, there was no way that it could compete with various low-cost producers abroad. The only reason for keeping the plants open was to stop tens of thousands more workers becoming unemployed in areas which were already experiencing recession.

Even before Labour were elected in 1974, they knew of British Steel's plans to cut the workforce by 30,000 by 1982. Labour's 1973 programme responded by saying that such plans involved "redundancies of an unacceptable scale ... without any coherent plan for providing new employment for those affected". Its "new deal for steel" promised full consultation with management and the unions "to ensure that wherever possible unavoidable redundancies are phased to link with newly available employment". This commitment enabled the postponement of 13,500 redundancies in February 1975. The destruction of a further 20,000 jobs for 1976 was halted in return for the unions agreeing to a six- point plan to cut the wage bill, boost productivity and allow voluntary redundancies. But this only amounted to treading water.

Losses continued as the world situation failed to improve. By the end of 1977 they had reached more than £1m a day. In February 1978 Callaghan refused to negotiate a payrise unless the unions agreed to compulsory redundancies. The unions capitulated and 17,000 jobs went - including most of those which had been "saved" in 1975.

The truth was that Labour's preoccupation with keeping British Leyland and other state-owned companies afloat was never about jobs as such. Labour's problem rather was to ensure that the large number of private subcontractors which owed most of their income to state-owned companies would carry on being profitable. Wilson thus proved prepared to "invest" public funds in massive job-cutting operations.

Significantly, it was in the same period that Wilson also carried out the first large privatisation, long before Thatcher - the sale of 17% of BP's shares, reducing the state's holding to just 51%. But then, of course, unlike so many companies bailed out by the government in that period, BP was very profitable!

Labour's drive against wages

Before 1974, the Tories' attempts at imposing wage restraint had failed because of the obstinate resistance of grassroots workers. But this resistance had been made easier by the fact that, although the union leadership never organised any systematic fightback over wages and conditions, at least they did not throw all their weight behind preventing workers from defending themselves.

This changed once Labour got into office. For almost four full years, Labour's "social contract" - i.e. the alliance between the government, the bosses and the union leadership - succeeded not just in restraining wage increases, but actually in cutting real wages, for the first time since World War II - by 11% in the three years between March 1974 and 1977.

In exchange for the unions' policing of wage demands and workers' militancy, companies provided them with all sorts of facilities at workplace level. This period saw, for instance, a large increase in the number of full-time convenors and senior stewards paid by management - so that, for the first time, they outnumbered full-time union- paid officials. In many of the larger companies, pre-entry or post-entry closed shop systems were agreed. In so far as these systems were run by the machinery rather than by the membership, they gave the bureaucracy the possibility of disciplining unruly workers. At the same time, in an even larger number of workplaces, check-off systems were introduced. They guaranteed a regular flow of money into the unions' coffers, without having to worry about the possibility of members withholding their dues as a means to put pressure on the leadership. Such facilities were by no means "workers' conquests" as they are sometimes portrayed today. Of course, without the level of militancy that existed during this period, the bosses would probably not have agreed to such facilities. But the aim of these concessions was primarily to strengthen the control of the union machineries over the membership and to give them more leverage in preventing unofficial action by the workforce.

Wilson's "honeymoon" period barely outlived his second election victory in the autumn of 1974. Already by the end of 1974 the freeze in rents came to an end and, by mid-1975, wage increases were already 2% behind inflation. On June 30, the pound came under heavy pressure. This came just after a claim of 30% for the railwaymen had been contested by the government. They had offered 21% but eventually found the extra money under the threat of strike action. Wilson decided it was time to change gear.

In the following budget, public expenditure plans for the following year were cut back by £900m at an anticipated cost of 20,000 jobs. As the pressure on the pound continued, Treasury officials proposed a statutory incomes policy.

Of course this did not fit very well with Labour's "social contract". Jack Jones, anticipating events, had already come up with the idea of a flat-rate increase. Downing Street was thinking along the same lines. The figure agreed upon was £6/week. It had a populist element in that anyone earning over £8,500 received nothing. The proposal was popular amongst the very low-paid, but it was not as large as it may seem have seemed, given the rate of inflation, running at over 24%! It meant that anyone earning over a modest £1200/yr, that is, just over a third of average take home pay, would end up with a real wage cut. Nonetheless the proposal was endorsed by the TUC's conference in September 1975.

The following year, inflation was still at 16%. Unemployment was already rising - reaching 1.2m in the summer - and strikes were declining. A second stage of the voluntary wage policy was prepared. In February, Chancellor Healey proposed a cut in income tax in return for a 3% ceiling on wage increases. This was considered too low by many trade unions but by May a new deal was struck increasing the ceiling to 4.5% but adding an upper limit of £4/w - this despite the scaling down of public expenditure plans and the ending of food subsidies. Again, what was described as "the most severe cut in real wages in 20 years" by a senior civil servant in the Department of Employment, was subsequently overwhelmingly endorsed by the TUC.

With opposition to the now discredited "Social Contract" mounting amongst the working population, the government embarked on preparations for a new stage as early as November 1976. Using the carrot of income tax reductions again, it warned that there would be "catastrophe" if wage increases were not held to a limit of 4-5%. These dire warnings were picked up and repeated by the cabinet as a whole - as much by "left" ministers such as Tony Benn and Michael Foot, as by chancellor Healey and prime minister Callaghan, who had by then taken over from Wilson.

1977 - first rebellion against the social contract

Once again, the leaders of the largest unions were in favour of reaching an agreement. But in view of their members' anger at the prospect of another year of real wage cuts, they would have liked the government to provide them with some sort of smokescreen - something like a grandiose "alternative economic policy" involving a price freeze, increased pensions, import controls, etc.. But there was no question of Callaghan making such commitments. The negotiations dragged on and with more than one million strike days recorded by nearly 200,000 workers in the first two months of 1977 alone, the union leadership gave up the search for a formal agreement - which would have been too unpopular with their membership.

This did not mean, however, that the union machineries were not determined to enforce the government's guidelines. Indeed very few strikes were ever made official during that period, leaving it to the strikers to manage on their own resources. In these strikes, key groups of skilled workers often played a decisive role. Not only were they taking on the government and the employers, but also the union officials. For instance, in February 1977, 2,635 toolmakers throughout British Leyland plants struck for one month. When the government threatened them with the sack, their union leader, Hugh Scanlon, declared that the sackings would have the full backing of the union! In March and April there were parallel strikes by skilled men at British Steel in Port Talbot, Ford and Heathrow airport, among others.

But it was not just skilled workers who had been hit by pay freezes and the bosses' attempts to turn the screw. Brewery workers at Whitbread's, workers at Massey Ferguson in Coventry, 5,000 body pressing workers at Ford Halewood and, by the end of February, some 26,000 workers from all across Leyland's scattered plants, and many others, joined the strike wave and production virtually ground to a halt in all the companies concerned.

Nonetheless what finally emerged from talks between the TUC and the government did amount to tacit support for Callaghan's incomes policy.

A twelve-month gap between wage settlements for any one group of workers was agreed - which, in view of the rate of inflation meant inevitably allowing real wages to go down. And the TUC agreed to defer raising its "low pay minimum target" from £30 to £50. This "nod and wink" support for the government's pay restraint was eventually endorsed by the TUC's conference by almost 2 to 1. The government could rest assured that union leaders would pull out all the stops to prevent a return to so-called "free-fo-all" wage bargaining - the term of abuse so beloved of employers and the right-wing press and increasingly used by the government itself.

At the same time, union leaders indicated that they would weigh in hard to oppose all attempts to breach the government's new 10% ceiling. They also agreed that employers who tried to by-pass the government ceiling with spurious productivity deals, would be blacklisted for procurements. And although by August 1978, 74 firms had been blacklisted, in general pay claims were settled at around 10%. The TUC's argument that "the approach of securing very large increases would be self-defeating" obviously had a significant impact.

The militancy which had exploded in the first months of 1977 carried on throughout the year, despite the continuous opposition of the union machineries. Three events, however, played a part in defusing this wave of militancy and dampening down expectations.

The first was the defeat of the workers at Grunwick's, a small photo-processing plant in North London. Mainly female Asian workers had been sacked for joining APEX, the technicians' union. In October 1976 the TUC had called for sympathetic action by other unions and the blacking of Grunwick's services. When this was extended to the blacking of Grunwick mail by the post office union, Grunwick's owner, George Ward, went to the courts with the assistance of the right-wing National Association for Freedom. Eventually the post office union withdrew its blacking on the understanding that the conciliation service, ACAS, would be allowed to consult with the whole workforce, both strikers and non-strikers.

But Ward refused to hand over the names of the non-strikers to ACAS. And although ACAS recommended union recognition on the information it had, Ward challenged its findings in the courts. It was at this stage that the Brent Trades Council started calling for mass pickets, culminating in a Day of Action on 11 July 1977 which attracted 11,000 demonstrators, including a contingent of miners led by Arthur Scargill. The resulting violent confrontations with the police sent there by the Home Office received widespread and, for the demonstrators, hostile publicity in the press and media. This was too much for the respectable leaders of the TUC who called off the pickets under the pretext of awaiting the result of an inquiry set up by the government. Thereafter the mass pickets were never resumed even though the inquiry reported that Ward was operating "outside the spirit of the law". The appeal courts backed Ward and the strikers were leventually defeated, having been effectively let down and isolated by the TUC leadership.

One of the consequences of the Grunwick defeat, was that it set a trend in terms of legal action against solidarity action. The strikers' defeat encouraged employers to go to the courts and it gave judges the confidence to rule in their favour.

Then, in November 1977, the firemen struck in support of a 30% increase. They held out over Christmas but were eventually forced back after 8 weeks. The government declared a state of emergency and used the army and their "Green Goddesses" to break the strike. The TUC looked on. In fact this marked the beginning of the use of the army in all strikes affecting the emergency services. Once again Labour were laying the ground for Thatcher.

The third significant setback for workers was the way in which the miners' claim for a 90% pay rise (bearing in mind that the official price index had increased by 50% since 1974) was deflected and incentive schemes brought in through the back door during that same year.

Although the 1977 miners' conference had rejected local incentive schemes in order to avoid creating divisions between pits where coal seams were more or less rich. This rejection, however, did not prevent Tony Benn, the then Energy Secretary, from supporting these schemes actively. Nor did it prevent the NUM's right-wing leader, Joe Gormley, to go ahead regardless and negotiate them with the Coal Board. However when a ballot of the membership was taken, more than 55% voted against. Gormley simply declared the ballot "null and void" and won the backing of the courts when his decision was challenged. By this stage, the resistance of those miners who had voted emphatically against productivity bonuses was broken. The 90% universal demand was drowned in a flood of incentive schemes. This, of course, opened up enormous differentials in wages - anything up to £40/w between those working rich seams and those in the older, worn-out, often neighbouring, pits. The seeds of division for the 1984-85 strike had been sown and Benn had been instrumental in sowing them.

The TUC forced to let Callaghan down

Far from presiding over a return to collective pay bargaining as Healey had anticipated more than two years previously, the government stepped up its propaganda and argued for a fourth year of income restraint which would take it up to the next election, if not beyond. The new norm was to be 5%, with any additional increase to be self-financing through "tested" productivity deals.

But it was not to be. This time, the union leadership felt they would be risking too much by being seen to endorse this 5% limit, at a time when inflation was twice as high. Even the new right-wing leaders of the transport and engineering unions, Moss Evans and Terry Duffy, who had replaced Jack Jones and Hugh Scanlon, made fiery statements against the 5%. So, in September 1978, the 5% ceiling was neatly rejected at the TUC conference and then at the Labour party conference.

One development which was probably decisive in convincing the union leadership that they should refrain this time from supporting the government was an all-out strike which had broken out at Ford's. On September 21 the company had responded to the unions' demand of a £20/w increased with a 5% offer. Immediately, Ford's three largest plants at Dagenham, Halewood and Southampton had walked out. Within two days, all 24 Ford British factories were at a standstill, with 60,000 on strike. This was clearly an explosion of anger, but the mere fact that it spread across the country showed its depth. Neither Evans nor Duffy liked being pushed around by unofficial action. But faced with such a powerful reaction they did not dare to oppose it. Both unions made the strike official, thereby effectively signalling the end of the "social consensus". In this context, the rejection of the 5% by the TUC conference was almost a foregone conclusion.

The Ford strike was not easily won however. It is worth noting that, unlike most disputes in that period, from beginning to end the Ford strike was run by an organisation of rank-and-file stewards, the "Ford Workers' Combine", which had been set up a year earlier to prepare for the next pay round. Although this organisation did not actually lead the strike, since ultimately the union leadership retained full control of the negotiations, the fact that the strike was organised on the ground by this Combine gave to the strike an unusually militant edge and certainly made it a lot more difficult - although not impossible as the outcome showed - for the union bureaucrats to manoeuvre the strikers back to work.

It took over a month, a long series of lobbies and a full-scale march through London, before Ford management eventually made up their minds to come back with a fresh offer on October 31. This time, there was no longer any mention of the government guidelines and the 5% was replaced with a 17% increase, consisting of 9.75% on basic wages and the rest in various bonuses. This was still short of the £20/w demanded by the strikers (which amounted to a 30% increase for a line worker). But in addition, one of the new bonuses was a £4/w Attendance Payments Plan which would be withdrawn in case of "illegitimate" absence, discipline or unofficial action. Moreover, the small print of the offer included a commitment by the unions not to make any action over wages official for a full year. The offer was turned down flatly by the strikers.

After another four weeks, on November 20, the unions came back with what they described as "an honourable offer". There was no more money on the table but the Attendance Payments Plan had been replaced with a Supplementary Payments Plan which would always be paid - except in case of unofficial action. No wonder the union leaders were happy with this! In any case, this time they threw their whole weight behind recommending the deal which was narrowly accepted in a ballot.

Despite this sell-out by union leaders, the Ford strikers had effectively succeeded in cancelling for good Callaghan's incomes policy. And their breach of the wage freeze was the initial shot across the bows, heralding a powerful strike wave - the famous "Winter of Discontent".

The "Winter of Discontent"

In January 1979 tanker drivers' and lorry drivers began an all-out strike, while train drivers staged two-day a week stoppages, all of which caused disruption to food supplies and brought a large number of factories to a standstill for lack of parts. Further strikes by low-paid public sector workers such as water and sewage workers, local government manual workers, including grave diggers, civil servants and ambulance workers meant that more workers were on strike in January 1979 than at any time in nearly a decade.

Like in the Ford dispute, the union leadership did not dare to appear openly as opposing the strike wave. The lorry drivers' strike, for instance, started in Scotland on January 2 and was made official by the TGWU. Immediately the tanker drivers, who were not meant to go on strike for a week, joined ranks with the Scottish drivers unofficially. Within a few days, the strike had spread like wildfire to 70,000 drivers throughout Britain. Because of the particular nature of the trade, it was difficult for the union machinery to control the strike - which is probably why the TGWU refused initially to make it official outside Scotland. But on January 12, seeing that the strike was showing no sign of weakness, a high-powered TUC committee decided that it was safer to make it official, so that the TUC could pretend to represent the strikers. Even then, the TGWU still refused to call a national truck drivers' strike. Thus the 12,000 drivers of the state-owned National Freight Corporation were carefully kept out of it, at least until 2,000 of them took the initiative to disregard the TGWU's instructions.

The aim of the TUC's move was clearly to enable the TGWU leadership to regain control of the strike - which, by then was effectively run by locally elected strike committees. But what had probably prompted the TUC's U-turn was the fact that these strike committees were now beginning to talk about the need to elect a national strike committee, which would have bypassed entirely the union structure. Within a few days of the strike's endorsement by the TUC, full-timers flooded the country with a "strike rule-book" which stated that strike pickets were under the exclusive responsibility of TGWU full-timers, that the size of pickets should be limited and that they should only involve union members (in an industry where union members were in a minority!). Besides, anyone ignoring these instructions was threatened with disciplinary action by the TGWU leaders.

Meanwhile, union officials were busy trying to reach local agreements with as many of the large number of truck operators as they could. The fact that the TGWU never sought a national agreement with the Road Haulage Association, the bosses' organisation - which had always been the union's official policy and was certainly in the leadership's own interest too - showed how determined they were to bring the strike to an end as quickly as possible. Moreover, by seeking local agreements, the TGWU tried to create the impression that the strike was crumbling, thereby depriving the strikers of any sense of victory. In this, the union bureaucrats were only half- successful, because most of the deals were made on similar terms - with a 20% or so increase, or 5% more than the original offer made by the bosses' association, which was not bad at all for a 3-week strike in an industry where employers have a long record of toughness.

Overall, several hundred thousand workers were involved in this "Winter of Discontent". Following the truck drivers' strike, the union bureaucrats learned their lesson. Every time a large group of workers got involved, through isolated walkouts usually involving a small number of workers, the national leadership rushed to propose some form of national action - usually limited or staggered stoppages, but always short of an all-out strike. And apart from a single nationwide day of action organised by the public sector unions, nothing was done to build up joint action between the various groups of workers involved in disputes. This led to angry meetings across the country, against the way in which union leaders were disorganising the workers instead of organising them. But the strikers had no organisation capable of overcoming the blockade of the union bureaucrats. In the end, a chance for the working class to stage a fightback, not only on the scale of the country as a whole, but across all industries, welding all its sections together in a direct attack against the bosses and their trustees in government - the first such chance since the 1926 general strike - was lost.

The winter strikes produced a torrent of abuse from the government against the strikers. Ministers disciplined civil servants who went on strike, authorised scabbing on the part of hospital authorities and crossed picket lines themselves. But this did not prevent Callaghan's incomes policy from being killed. And, just as workers' militancy had succeeded in raising real wages by 5% through the 1977 strike wave, this time the average real increase was nearly 7%.

Ironically, the dismal collapse of Labour's "social consensus" did not prevent, however, the signing of a "concordat" between the government and the TUC in advance of the 1979 general election. In return for tougher price controls and the promise of comparability studies, union leaders agreed to bring down pay rises to 5% by 1982, participate in an annual national assessment before Easter each year and issue tighter guidelines encouraging strike ballots, more flexibility in the closed shop and controls on picketing. To all intents and purposes, this amounted to getting the unions to agree to implement voluntarily the provisions of the Tory Industrial Relations Act which had been repealed by Labour in 1974!

From 1974 to 1997 - a warning

By 1979, therefore, everything was ready for Thatcher to take over from Labour and pursue the very same policies much further. The initial and most difficult stage lay behind. Unemployment had been allowed to double and to start biting on workers' ability to fight back without this resulting in a major confrontation. The way was paved for the bourgeoisie to push its advantage, this time with the aim of crushing the resistance of the working class.

All was not over by a long way, of course. As was shown by a series of major disputes over the next eight years, it took a lot more for the bosses to get their way. In particular it took the determination of the union leadership to control the fights of the working class at any cost, including that of allowing entire sections to be defeated - like the steelworkers in 1980 and the miners in 1984-85.

Whatever the illusions - or lack of them - among workers in 1974, certainly very few of them expected such an outcome. Many of them probably had very clear memories of the austerity imposed by Wilson's governments in the 60s, of his attempts at curbing the right to strike and of the heavy industrial confrontations of the late 60s. On the other hand, after nearly four years of Heath's arrogant turning of the screw, most workers probably thought that anything, even Wilson's pro-business austerity, would be preferable to Heath. And whatever the reservations they may have had about Labour, they certainly did not expect Labour to be harder on the working class than Heath.

Yet, this was exactly what happened. Wilson and Callaghan imposed what Heath had failed to impose. They drove down the standard of living of the working class through five years of sytematic wage restraint. They imposed hundreds of thousands of job cuts in the major industries, precisely where the working class had its most powerful strongholds. They weakened the largest and most confident section of the working class - the public sector workers. Finally, they effectively initiated the rolling back of the welfare state. And Labour did all this without resorting to the bureacratic minefield of Thatcher's anti-union laws, and all the propaganda machinery which was developed later under the Tories to drive home the idea that there was no point for the working class to put up any resistance.

In retrospect, in view of the abysmal passivity of the union leadership today, the fact that during the '70s, union leaders seem to have initiated, or in any case at least allowed, strikes - and sometimes very large ones - against the very same wage restraint they had themselves agreed with the Labour government, may seem surprising. But it should not be. It was not that the union leadership "bowed" to the militancy of the membership and went along with their wish to fight wholeheartedly - there were a lot more unofficial strikes that they savagely opposed than there were official ones endorsed by them. When the union leadership initiated or endorsed strikes, it was always with the same purpose - to keep control of the membership. And every time they ended up selling their members down the river.

Throughout this period the working class was faced with a division of labour between the Labour leadership in government and the union leaders. How many times were workers hooked by militant speeches made by the likes of Jack Jones or Hugh Scanlon, thereby forgetting that the same union leaders would probably be chatting away with ministers within hours about the best way to "deal" with trouble makers? Without the division of labour, the TUC leaders would have been unable to keep workers' militancy within limits which did not put the policies of the Labour government at risk.

One of the most striking features of the two main waves of strikes of the period, first in 1977 then during the Winter of Discontent, was how on both occasions, many different disputes aiming at the same objectives, were kept separate and, in fact, insulated from one another. This was what made it impossible for the strikers to measure their strength, gain confidence out of it and see the possibility of taking their fight one stage further - by transforming it into a confrontation between the working class as a whole, on the one hand, and the bosses and their Labour ministers on the other. Without the active intervention of the union bureaucracy, including its occasional militant stand, and the absence of an effective challenge to it, it would probably have been impossible to contain workers militancy in this way.

Beyond the obvious differences, there are striking similarities between the situation in 1974 and that of today, in the wake of Labour's return to office. Few workers expect the situation to become worse under Blair. And yet there is no question as to what Labour has in store. Unless a sudden worldwide economic recovery takes place rapidly - and there are certainly no signs of this - the bosses are aiming at continuing to increase their share of the national income at the expense of the working population. Blair is committed to delivering what Major has been unable to deliver during his two terms in office - total labour flexibility and a massive cut in social expenditure. Just as Wilson did Heath's job, so will Blair do Major's.

This does not mean that the working class is defenceless, far from it. Blair has fewer reasons to fear workers' reactions. That is his weakness, just as the bourgeoisie's over-confidence is their main weakness. At some stage they will overdo it and trigger a reaction among large layers of the working class. It is at that point that the lessons of the 70s will be vital and that the working class will have to remember that, even when making the most militant speeches, the union bureaucracy belongs to the other side. It is at that point that the need for the working class to act as a class, against the capitalists and their various agents in government and in the unions, will become vital. So that the explosion of anger of the exploited is not remembered this time as a mere "winter".