for the bill to cancel out the Conservative anti-
marketeers and the majority of Labour members
who voted against. Wilson held his party skilfully
together by promising to negotiate better terms
and then to submit the decision to the nation in
a referendum. The bill passed through the
Commons on 13 July 1972 and Britain entered
the EEC on 1 January 1973.
In February 1974 it fell to a minority Labour
government to try to solve Britain’s problems and
to halt its economic decline. During the election
campaign, Labour had offered the country some-
thing new: the so-called Social Contract between
the government and the trade unions. In return
for repealing Heath’s 1971 Industrial Relations
Act and so freeing the unions from the threat of
legal action, the unions promised voluntarywage
restraint. By the time Wilson called another elec-
tion in October 1974 the worst industrial trou-
bles were over. The need to secure a Labour
victory acted as a restraint on the unions. The
miners’ strike had been settled and the country
was back to a full working week. This time, in
October, Labour gained a small working major-
ity. But by 1975 inflation had rocketed to 24 per
cent, and wage settlements were even higher. The
Social Contract was not working. Once more
Wilson had to resort to what amounted to a
virtually compulsory pay policy.
Wilson was also confronted with the divisive
European issue. He had promised to renegotiate
the terms of entry to the EEC and to submit
them to a referendum as the best means to rec-
oncile his divided party. He secured significant
concessions in the negotiations and by a two-
thirds majority the electorate endorsed Britain’s
membership of the Community.
In March 1976, Wilson unexpectedly resigned.
After a total of eight years at 10 Downing Street
trying to manoeuvre between the left and right of
his party and the trade unions, he apparently lost
his zest for politics. The economic crisis facing the
country was the most severe since 1947. His
hopes of regenerating British industry from the
left had been dashed. But he had provided a
steadying influence and in his way he had as
unflappable an air as Macmillan. His administra-
tion bequeathed the National Enterprise Board,
whose purpose was to stimulate growth in prof-
itable new industry through government invest-
ment, in return for a share of the profits. The
government had also established the British
National Oil Corporation, taking a majority stake
in it to ensure that the state would profit from
the forthcoming bonanza of North Sea oil. But
the extension of state intervention in industry was
bitterly attacked by the Conservative opposition.
When James Callaghan took over the reins of
government in April 1976 he found the Labour
majority precarious and the country in deep eco-
nomic trouble. He secured his parliamentary posi-
tion by entering into a pact with the Liberal
Party, allowing its leader David Steel to exercise
a major influence on government legislation
without entering the government itself. In this
way Callaghan was able to soldier on until 1979.
Once more in the forefront of policy objectives
was wage restraint, and fresh negotiations were
held with the Trades Union Congress (TUC) in
- But in trying to maintain for too long ster-
ling’s dollar exchange rate, Britain faced a serious
financial crisis in its balance of payments in 1976
and had to take a large loan from the Inter-
national Monetary Fund on condition that cuts
were made in public spending. The economy
began to fare better, inflation came down to just
below 16 per cent in 1977 and to 8 per cent in
1978, but unemployment stubbornly remained
around 1.5 million (about 8 per cent). Working
people had taken cuts in their living standards
under successive phases of pay restraint; in the
winter of 1978–9 pressure mounted to retrieve
lost ground in past wage settlements. When
Callaghan tried to bring down inflation further
by announcing a wage-rise norm of 5 per cent,
which would have entailed further cuts in
living standards, there was widespread revolt. If
Callaghan had gone to the country in the autumn
of 1978 when the country appeared to be at last
out of crisis and on a steady course, he might have
won the election. The pervasive industrial unrest
of what became known as the ‘winter of discon-
tent’ destroyed his chance of victory. Even the
gravediggers struck. It seemed to working people
that they were being called upon to ‘solve’
Britain’s problems by depressing their living
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HOW TO MAKE BRITAIN MORE PROSPEROUS 853