Political and economic problems of the 1970s
Economic Crisis and Industrial Conflict
The affluence of the late 1950s and 1960s gave way in the 1970s to a period of severe economic difficulty. Britain faced a toxic combination of rising stagflation — simultaneously rising prices and rising unemployment — an industrial relations crisis, and the shock of rapidly rising oil prices. The 1973 OPEC oil embargo, following the Arab-Israeli war, quadrupled oil prices almost overnight. For an oil-importing economy like Britain, this was devastating.
Under both Heath (Conservative, 1970–1974) and Callaghan (Labour, 1976–1979), governments tried and failed to control wage rises, reduce inflation, and maintain industrial peace. Trade union power was at its peak. Britain’s unions had three million members in coal, steel, transport, and the public sector, and were willing to use strikes to pursue wage demands that governments believed were inflationary.
The three-day week was introduced on 1 January 1974. Edward Heath’s government ordered that commercial and industrial electricity use be limited to three days per week to conserve coal stocks during the miners’ strike. Television broadcasts ended at 10:30 pm. Offices worked by candlelight. The measure was a dramatic symbol of the state’s inability to keep modern Britain functioning in the face of industrial action.
Edward Heath and the Miners
Edward Heath came to power in June 1970 promising a more market-oriented approach to the economy. His government introduced the Industrial Relations Act 1971, designed to control union power through legal regulation of strikes. The unions refused to recognise the new Industrial Relations Court and the Act largely failed.
In January 1972, the National Union of Mineworkers (NUM) called its first national strike since 1926. Miners picketed power stations to prevent coal deliveries. At Saltley coke depot in Birmingham, mass picketing by thousands of workers (the “Battle of Saltley Gate”) forced police to close the gates. The government capitulated: the Wilberforce Report recommended pay rises of up to 20%. The miners’ victory showed that determined industrial action could defeat a government.
In late 1973, the NUM imposed an overtime ban, followed by an all-out strike in February 1974. Combined with the OPEC oil shock, this created an energy crisis so severe that Heath introduced the three-day week. Heath called a general election for February 1974 on the question “Who governs Britain?” — expecting public support. The result was inconclusive: the Conservatives won more votes but Labour won more seats. Harold Wilson formed a minority government. Heath had gambled and lost.
A second general election in October 1974 gave Labour a small working majority. Heath’s experiment in confronting the unions had ended in defeat. The episode became a defining reference point: throughout the 1970s, trade union power was seen by many Conservatives as the central problem facing Britain.
The Wilson and Callaghan Governments, 1974–1979
Harold Wilson’s Labour government (1974–1976) tried to manage industrial relations through the “Social Contract” — a voluntary agreement with the unions to moderate wage demands in exchange for social policies favourable to workers. Inflation reached 25% in 1975, one of the highest rates in post-war British history. Wilson resigned unexpectedly in March 1976 and was succeeded by James Callaghan.
Callaghan’s government faced an immediate financial crisis. By September 1976, the pound had fallen sharply and the government was forced to seek a loan from the International Monetary Fund (IMF), accepting harsh conditions — including public spending cuts — to secure it. This was a national humiliation and shook confidence in Labour’s economic management. Callaghan told the Labour Party Conference in September 1976 that governments could no longer spend their way out of recession — a significant break with post-war Keynesian orthodoxy.
The Winter of Discontent (1978–79) began when Callaghan’s government tried to hold pay rises to 5%. Lorry drivers, gravediggers, and refuse collectors went on strike. Bodies lay unburied in some areas. Mountains of rubbish piled up in parks and squares. The press gave the strikes devastating coverage. The Sun headline “Crisis? What crisis?” (attributed, possibly inaccurately, to Callaghan) summed up public contempt for the government’s response.
The 1979 General Election and Thatcher’s Victory
On 28 March 1979, a motion of no confidence in the Callaghan government passed by one vote — the first time a British government had fallen on such a vote since 1924. A general election was called for 3 May 1979. The Conservatives, now led by Margaret Thatcher, ran on a platform promising to control inflation, reduce union power, cut taxes, and reduce government spending. Their campaign used the slogan “Labour isn’t working” alongside an image of a long unemployment queue.
Thatcher won a majority of 43 seats. Her victory marked the end of the political era covered in this unit and the beginning of a new chapter in British political history. The post-war consensus — acceptance of the welfare state, mixed economy, and a degree of trade union power — that had underpinned British politics since 1945 was about to be challenged fundamentally.
Underlying the immediate crises was a deeper problem of industrial decline. British manufacturing — steel, shipbuilding, textiles, and cars — was losing competitiveness to West Germany, Japan, and other economies that had modernised more rapidly. British Leyland, the nationalised car manufacturer, was particularly troubled, with poor industrial relations, outdated models, and low productivity. The British car industry’s share of both domestic and export markets fell consistently through the 1970s.
Unemployment, which had been under 3% for most of the post-war period, reached over 1.5 million by the end of the 1970s. Long-term structural unemployment in former industrial regions — South Wales, the north-east of England, Clydeside in Scotland — was becoming visible. The optimism of Macmillan’s “never had it so good” years seemed a distant memory.