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May 1976Having won by only 9 votes in the leadership election, the trajectory of the Callaghan government becomes very clear.Once again, economic crises had knocked Wilson's government off course, and with Barbara Castle now out of the picture, there are few voices in the Cabinet to argue for leftist policies or the fast implementation of the Social Contract. Plans for the introduction of child benefit are indefinitely postponed.
June 1976The enforcement of a compulsory comprehensives policy for local authorities begins. Some councils, such as Tameside in Lancashire, are to successfully fight a bitter rearguard fight to preserve grammar schools. However, the widespread establishment of comprehensives in practice is finally enacted.As in so many other areas of the 1974-1979 government, the actual outcome is to disappoint many, with early criticism of standards in the new schools. The continuation of public and private schools sits uneasily with the abolition of the "assisted places" scheme, which has succeeded in creating upwards mobility for a number of select students from less privileged backgrounds. In addition to this, the economic hardships of the time start to adversely affect the running of the new schools and the morale of the teaching profession.
September 1976 During the summer of 1976 there is yet more economic turbulence, as the financial markets produce a massive run on sterling which threatens to reduce the overall wealth of Britain to a fraction of its former level. To prop up the pound a deal is hammered out between Chancellor Denis Healey and the International Monetary Fund. The result is a loan in accordance with IMF conditions. These conditions are to entail a 1 billion pound cut in public spending during 1977.
Despite Callaghan's confident assertion at a torrid 1976 Party Conference that "you could not spend your way out of a recession," many in the labour movement view the spending cuts with absolute horror, as a return to the days of the early 1930s. The cuts are actually based upon faulty statistics, namely an overestimation of the public sector borrowing requirement. Questions have been asked of the Bank of England and the Treasury regarding the way the currency crisis was handled. Suspicions have been aroused that there were more sinister factors than merely faulty statistics.
November 1976A new Race Relations Act is passed which establishes the Commission for Racial Equality. The CRE is able to conduct its own investigations, call people to account and enforce the law against racial discrimination. On the whole, it is regarded as a success. However, the CRE doesn't stop race becoming a political issue in the late 1970s. Local electoral successes for the far-right British National Party and National Front highlight Labour's failure to engage with many within its own core constituency. The areas where the NF vote is highest are often "heartland" Labour boroughs.
December 1976Whilst the small majority of the government doesn't help, the onset of a sort of intellectual fuzz begins to hinder government policy in many areas. Public expenditure is seen as being a "threat to democracy," in the words of Roy Jenkins. The White Paper on Public Expenditure is to enshrine slashing cuts in public services for the duration of the Parliament. The "air of confidence" which surrounds Callaghan can therefore be seen as slightly surprising. Following harshly deflationary policies and being responsible for a number of failed government initiatives and enterprises could be a stressful thing for many politicians. In addition to this, Callaghan's first reshuffle has fuelled resentment - Roy Jenkins feels particularly upset by his lack of promotion from the Home Office.
January 1977The interest rate is 15 per cent, whilst food subsidies are slashed and there are massively increased duties on alcohol and tobacco.Unemployment is now at one and a half million, a shockingly high figure. This fuels the growing discontent and "disorder" in the cities and among young people.

March 1977The crisis is resolved and pressure is reduced, yet a few legacies remain; that of working class alienation from a "pink monetarist" Labour government, public perception of total economic chaos and the onset of a real underinvestment in some of the post-war public services. It is this last legacy which is to make embryonic Thatcherism particularly potent in the 1970s, as many state-funded services become inextricably linked with industrial conflict, poor service and gross inefficiency. In the government's defence, they can see no practical alternative at the time, and in pure economic terms there is success in driving down inflation. By March 1977 the inflation rate is down to 9 per cent.
Despite the harsh economics, the PLP remains grudgingly supportive of the government, thanks largely to the efforts of Michael Foot in acting as the arbitrator between the varying factions in Parliament. This becomes increasingly important after the majority of seven evaporates by March 1977 after a string of byelection defeats. Labour becomes dependent upon Liberal support, in the first official Lib-Lab pact since 1931.
May 1977Whilst economic planning is fast becoming politically unfashionable, to some extent the work of the NEDC alleviates some of the worst effects of the spending cuts in the regions, and subsidies still remain for those companies involved in socially and technologically useful work. These subsidies are to be attacked by those on the right and left of politics, for rather different reasons.
Cuts in public spending demand a programme for the regeneration of urban areas, and whilst the administration falls well short of this, the Home Office does begin co-operation with local authorities and local groups to combat the worst of the growing urban decay.
With some amount of foresight, a few in the government are beginning to place more emphasis on the scientific, technical and cultural industries. The results of this are seen in the early eighties. What eventually emerges were a number of computer companies, such as Sinclair, which owe their existence to the government's policy of supporting new industries. There is a new and sometimes innovative independent television channel, Channel 4, and an energetic drive to develop general fitness, Denis Howell's "Sport for All" campaign.
September 1977As Energy Minister Tony Benn has some stressful moments, such as dealing with a strike at a nuclear power station, but it is from his ministry that the best economic news emerges. North Sea oil and gas starts to be extracted in serious quantities. By 1980 this is noticeably improving the balance of payments and providing a an excellent source of revenue after Benn's struggle with the oil companies for the government's fair share.
October 1977Child benefit is introduced, offering universal payments to families with children.
December 1977Constituency branches have become stagnated and often polarised between generations and ideology. As the Cabinet seems to move to the right of politics, it has failed to carry the majority of Labour members, who had joined the Party to achieve rather different results to what they are now seeing.
Sitting Labour MP Reg Prentice is deselected by his constituency. In this case, the sitting MP is generally disliked, and soon runs off to join the Conservatives, but it sets an uncomfortable precedant for many MPs on the Right of the party.
Dissent springs from New Left circles. Whilst Foot remains entirely loyal, a group develops around Vladimir and Vera Dererer. The Campaign for Labour Party Democracy develops as a way of giving the rank and file more control over the Labour Party. A major aim is to bring all sections of the movement together in choosing the leader, rather than restricting voting rights to MPs. Elesewhere on the Left, factional groups tend to dominate in some areas. In a situation with an ageing and declining membership, it becomes quite easy for a few younger, politically streetwise people to move in and assume effective control of branches. This causes MPs some amount of fear.
May 1978The Conservatives are becoming increasingly focused towards a new right-wing dynamic. Academics such as Keith Joseph provide a coherent and radical if often electorally reckless programme. This contributes to a general rise in Tory confidence, echoed in massive local government and by-election victories. The fact that Mrs Thatcher is apparently failing to make much of a personal impact does not delay what now seems an inevitable growth of neo-liberalism. The ideas of Hayek and Freidman are on the ascendant.
July 1978The mood of disgruntlement in branches and trade unions is beginning to turn to outright rebellion by mid-1978. When the Liberals walk out from the coalition the legislative power of the Labour Party has all but withered.
October 1978This does not deter the Party Conference at the time from continuing to demand massive programmes and huge spending increases in various fields. It is in the 1975-1979 period that Labour Party conferences develop their fearsome reputation for heckling, rowdiness and chaos. It could be argued that this is a sign of democratic health, but the level and tone of the "debates" often becomes feverish. Right-wingers such as Denis Healey often seem to enjoy goading the delegations, which largely consist of earnest lefties.
None of this greatly appeals to the public, although it is always more uncomfortable for politicians than electors, and by the autumn of 1978 Labour maintain a slight lead over the Conservatives. It is felt that the gradually improving economy bolstered by revenues from the North Sea will see a returned Labour government in the following year.
December 1978Callaghan is a rather inflexible and austere Prime Minister, and having taken a personal interest in the fight against inflation, directs his policies towards this aim. Despite the economy moving back into growth, a surplus in the balance of payments and a borrowing situation well under control, the TUC Liason Committee is asked at the end of 1978 to control wage increases to a "norm" of five per cent. With little goodwill remaining among public-sector rank-and-file trade unionists, the demand for higher wages is to take precedant over loyalty to a Government which has arguably reneged on the majority of its promises and failed to deliver much of the Social Contract. With inflation running at over 8 per cent, a 5 per cent pay rise is a real cut in wages and the trade union leaders are unable to justify this to their members.

January 1979Lorry drivers go on strike and achieve a settlement of 14 per cent. In a matter of days, millions of water workers, ambulance drivers, dustmen and sewerage men follow suit. The settlements are higher than the 5 per cent initially offered, but the public suffers massive shortages and risks to general health. Jim Callaghan is caught out by the speed in which the incomes policy collapses, being at a conference in the Carribbean. Tory newspapers are quick to magnify this apparent impotence into being a damaging complacency. Rubbish piles up on the streets and bodies wait to be buried.
One of the most potent weapons against the labour movement, the collective memory of a "winter of discontent," is fashioned, aided by the economic orthodoxy of a right-wing Labour Prime Minister. The trade unions are to lose much of their public sympathy because of this. To some extent this brings to a head the simmering media dislike of militant trade unionism, which has brought individuals such Red Robbo at British Leyland onto a national stage. Underlying much of this negative press coverage is the old spectre of Communism, now wheeled gleefully into the open at the beginning of an election year.

March 1979The final downfall of this struggling Labour government happens as a result of the 1978 Scotland Bill. An amendment is inserted requiring the devolution referendum to have 40 per cent of the total electorate vote in favour. Any less than 40 per cent and devolution wouldn't become effective. On 1 March 1979, 32.85 per cent vote in favour, and 30.78 vote against. In a state of fury, the Scottish Nationalist Party soon tables a motion of no-confidence in the government, and are supported by Liberals, most Ulster Unionists and the Conservatives. The government loses the vote - and being unable to govern, Callaghan calls a dissolution of Parliament.

May 1979A General Election is called for the 3rd May, with Labour fighting on a very moderate, multilateralist manifesto with few concrete promises. The personal appeal of Jim Callaghan is highlighted in broadcasts, as being a "safe pair of hands" who would hold the ship of state "steady as she goes." In this intense period of politics, this is probably not the best way of proceeding - there have been many mistakes in the previous years. It also seems to target the older electors rather more closely than younger people.
More damaging are the fresh memories of rubbish on streets and a politically chaotic time. The rise of the National Front in the late 1970s reflects fears about the economy, people's living standards and national uncertainty. The Conservatives are able to make muffled, opportunistic soundbites implying that concerns about immigration would be heeded by an incoming administration. This helps in building the Conservative base of working-class support - to an unknown extent.Promising law and order, and a largely unspecified "radical" approach, the Conservatives win a majority of 43 seats.

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