A Revisionist View of James Callaghan
26/05/25
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JAMES CALLAGHAN, IMAGE: CHRISTIAN LAMBIOTTE
James Callaghan is often overlooked by historians as an unremarkable and ineffectual Prime Minister, who stood by the post-war consensus as its last rites were administered. However, this article will argue that this categorisation of Callaghan is too simplistic and unfair, as up to the Winter of Discontent, Callaghan was a relatively competent Prime Minister who had the ability to defeat Thatcher.
Raised primarily by his mother, Callaghan followed in his late father’s footsteps and served in the Royal Navy during WWII. At the conclusion of the war, Callaghan would stand for Labour in the 1945 General Election, where he would win the Cardiff South seat with a comfortable majority. He would remain in Parliament until his retirement from the Commons in 1987, serving as Father of the House during his final Parliament, 1983-87.
Initially on Labour’s left, Callaghan was amongst 23 Labour rebels to reject the Anglo-American loan; as well as advocating for an alternative ‘socialist foreign policy’ that would reject both American capitalism and Soviet totalitarianism. He came to support much of the domestic reforms of the Attlee government, including nationalisation of industry, the major housebuilding programme, and the establishment of the National Health Service. By the time of his appointment to the Shadow Cabinet after Labour’s defeat in 1951, Callaghan had moved drastically towards a more Gaitskellite position.
It was during Attlee’s premiership that Callaghan took his first step onto the ministerial ladder as a Parliamentary Secretary in the Ministry of Transport. He would remain in the Shadow Cabinet throughout Labour’s 13 years in opposition between 1951 and 1964, becoming Shadow Chancellor in 1961. It was also during this period that Callaghan had his first attempt at seeking the Labour leadership following the sudden death of Hugh Gaitskell in 1963, but he came a clear third to George Brown and eventual victor Harold Wilson.
Upon Wilson’s victory in the 1964 General Election, Callaghan was made Chancellor of the Exchequer, where he would serve until November 1967 and the devaluation crisis. Despite the Maudling boom during 1964, Labour had inherited a struggling economy. The early 60s saw Britain experience a recession after a relatively prosperous period of consumerism during the 50s. The economy became stagnant, massively underperforming EEC economies such as West Germany, as well as further afield nations, like Japan. Britain was at a record (for the time) balance of payments (BOP) deficit of £800m, with industry weakening in performance and the value of sterling overvalued.
Despite this overvaluing of sterling, one of the pledges Labour made on the economy was not to repeat its 1949 decision to devalue the pound, a political decision rather than an economic one. It came back to bite, as in 1967, when Britain’s economic prospects worsened due to strife and rising inflation. Resultantly, Wilson made the decision to devalue the pound by a staggering 14%. And as the economic pledges set by the party in 1964 had been broken, Callaghan offered his resignation to Wilson at “a point of honour”. Initially sceptical to accept, Wilson eventually did so due to the political realities and moved Callaghan to the Home Office, swapping him with Roy Jenkins.
HAROLD WILSON, IMAGE: ALLAN WARREN
At the Home Office, Callaghan continued the modernising social reforms started by Roy Jenkins. Amongst his credits, the Theatres Act (1968) abolished long-standing censorship in performing arts, and the Representation of the People Act (1969) reduced the voting age from 21 to 18. It was during Callaghan’s time as Home Secretary that he made the decision to deploy troops to Northern Ireland in 1969, as well as successfully leading Cabinet opposition to Barbara Castle’s ‘In Place of Strife’ paper in the same year.
Labour was defeated in the 1970 General Election, but Wilson returned to power in 1974, when Callaghan was appointed Foreign Secretary, where he served until succeeding Wilson in 1976. In becoming Prime Minister, he became the first (and so far, only) man to serve in all four Great Offices of State. The most pressing issue facing his administration in the spring of 1976 was Britain’s economic woes. Inflation was consistently in double digits and had peaked at 25% between 1974 and 1975. Britain had (another) record-breaking BOP deficit, and millions of working days annually were being lost to strike action. Little over two years earlier, Britain was in such a crisis that the Heath government had to introduce a three-day working week to conserve energy.
Britain’s problems were so great that the government had to apply for a third IMF loan in just 15 years. The IMF was initially set up to support developing countries, particularly those that had gained independence in the decades following WWII. Now Britain, which once controlled 25% of the planet, was forced to go cap in hand to an international body to receive crucial finance. In return for a loan, Healey was forced to make several billion in spending cuts, which earned him several heckles in his speech to that year’s party conference. This austerity was entirely necessary and ultimately successful, as Britain did not need the full $3.9bn it had initially asked for, with the 1976 crisis concluding with the pound stabilised.
Over the first two years in office, Callaghan had begun to reduce inflation, and by 1978 it sat around 8-10%. This was in part due to a 5% cap on annual wage increases for public sector workers, as well as the discovery of North Sea oil and gas reserves, which were immediately tapped into. Consequently, Britain recorded a strong BOP surplus in 1978 of over £500m, the first of its kind for over a decade and a half. There were signs that the economy really had turned a corner, with inflation under control and fewer days being lost to strikes. Indeed, if Callaghan had called an election in the autumn of 1978, he likely would have defeated Thatcher’s Conservatives and, as such, seen off Thatcherism. However, he wasn’t politically astute enough, despite his decades of experience, to read the impending situation and rolled the dice, continuing into 1979, which proved to be a major miscalculation.
Although public sector pay rise caps had been an effective counter-inflation measure, there was no such ability to restrict private sector pay rises. In the autumn of 1978, after a walkout at Ford plants in both Dagenham and Southampton, workers eventually received a 17% pay rise, over triple what the public sector was able to receive. This and similar private sector pay rises acted as a domino effect, and by the end of January 1979, 1.5 million workers were on strike demanding pay increases. Schools closed, NHS services were cut, and the dead went unburied. Leicester Square was dubbed ‘Fester Square’ as it became a landfill site for excess waste not collected by striking waste collectors. Britain was in a crisis, but where was ‘Sunny Jim’ in all of this?
A NEW LANDFILL DURING THE WINTER OF DISCONTENT, IMAGE: ALAN DENNEY
Well, Callaghan was attending a conference 4,000 miles away in Guadeloupe with the American, French and West German premiers, a paradisiacal backdrop that was a complete juxtaposition to life in the UK that winter. It was on this trip that photos of Callaghan emerged in the papers of him enjoying a swim in the crystal-clear Caribbean Sea, all the while at home, the grimmest winter for over three decades dragged on. If that didn’t go down well with a public struggling to make ends meet, Callaghan’s response upon returning to Britain did not go down well either. It is not known what Callaghan really said, but his spokesperson, Lord McNally, stated that he had uttered “Crisis? What Crisis? (as infamously misquoted in The Sun’s headline). His jovial nature had made him look out of touch with the grim reality of what Britain had endured over that winter, and gave no assurance that the situation would improve soon.
Two months later, Callaghan lost a vote of no confidence. His government had long since lost its slim majority from the October 1974 election, and attempts through confidence and supply motions with other parties to prop up the government had broken down. The final straw for the nationalists was the failed devolution elections in 1979. Scottish voters who had turned out in the March 1979 ballot favoured a devolved legislature north of the border, but 40% of eligible voters had not turned out to support a devolved assembly. Callaghan thus refused to enact it, culminating in the calling of a general election by just 1 vote. He would have won it if Sir Alfred Broughton had been fit enough to make the journey from his Yorkshire constituency to Westminster; he was on his deathbed, and the journey was deemed too perilous for him to chance it.
Consequently, the government resigned, and Callaghan called an election, pledging to “take our case to the country”. Despite the Winter of Discontent, inflation soaring to 17% at the time of the election and being outmanoeuvred on the media savviness of Thatcher and the Conservatives, the Tories only won a majority of 43. The morning after the election, Callaghan tendered his resignation as Prime Minister to allow the smooth transition of power to the new government.
Despite the appalling state Britain found itself in over the winter of 1978-79, history should not forget the successful two and a half years Callaghan had initially presided over. He had got a grip on inflation, by far the biggest challenge Britain had faced throughout the 1970s. He achieved the first BOP surplus for over a decade and successfully navigated Britain out of the 1976 sterling crisis, not requiring the full $3.9bn dollar loan from the IMF. Further, he had worked effectively with the unions and managed to get working days lost to strikes to fall by millions by mid-1978, whilst maintaining disciplined counter-inflationary measures.
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