By the summer of 1978, Jim Callaghan had a big decision to make. After four tumultuous years in power, his party had finally nudged ahead in the opinion polls. An election was expected, but to the shock of the world, Callaghan abandoned his plan. It became the most significant miscalculation in Labour’s history
For most of 1976 and 1977 Labour trailed Thatcher’s Tories by double digits, as the minority government held on by a thread. I have documented this chaotic period in Callaghan’s Minority Government Divided Labour For 18 Years – So What Chance Does The Maybot Have?
Jim Callaghan’s stature had grown following the dark days of the IMF crisis, as he began to tackle the post-war economic orthodoxy. He set out on a collision course with the trade unions over his inflation policy, which he, and Margaret Thatcher, believed had to be brought under control. A social conservative, he focused on ‘bread and butter’ issues, such as enhancing teaching standards and reaffirming a strong commitment to law and order. Unlike the radical proposals espoused by Tony Benn, Callaghan was attuned to the wider public mood – and they liked what they saw.
Callaghan studied the opinion polls extensively, with Labour holding a lead of around 7%. By September 1978, Thatcher’s net rating was -13 (38% satisfied and 51% dissatisfied) and she was widely seen as being much more unpopular than her party. Labour would need to run a presidential style campaign against Thatcher. But as Theresa May found out in June, this strategy is fraught with unknown pitfalls. Although he was way ahead of Thatcher in personal ratings, there was still the possibility of a hung parliament.
Jim Callaghan hesitated. He needed a clear majority, for the next election would not be an ordinary one. It would be the election to change history, and every politician had waited their whole lives for it. The winners would have North Sea Oil revenue at their disposal and this ‘Black Gold’ would give the next prime minister the greatest economic windfall since the war. In preparation for the Oil use, the No 10 policy unit assessed that Labour could reduce income tax to just 15% – and still invest in the ailing public services if re-elected. When, in 1975, Tony Benn pumped the first barrel, he told the oil workers “I hold the future of Britain in my hand.” Over in America, Henry Kissinger told Gerald Ford that, ‘Britain is in tragedy- it has sunk to begging, borrowing and stealing until the North Sea oil comes in.” Somehow Labour held on.
The government had been able to last longer than expected with the support of 13 Liberal MPs. Yet once the ‘Lib-Lab’ pact collapsed, experts predicted an election would be imminent. In March 1978 Callaghan told his staff that he had a date in mind for the election but would not reveal it to anyone. The Tories were preparing for a June dissolution of parliament. In July, Bernard Donoughue, head of the downing street policy unit, noted “with the election ahead, it was probably my final parliamentary questions briefing.”
Discussion about an election dominated the summer, as Callaghan decamped to Upper Clay Hill Farm to finalise his decision. In normal circumstances, Callaghan could work on it behind closed doors and strike at the most supreme moment for the party. Yet the 1974-79 parliament was like no other. Callaghan was relying on the support of Scottish Nationalists and Ulster Unionists in order to survive day by day. He needed to reassure them that he would continue to flight on, and push through the proposed devolution for Wales and Scotland. If he lost their support, the Tories would be able to win a no confidence vote.
On the 1st September, Callaghan invited six of the biggest trade union leaders down to the farm to discuss the election. They included the then household names of Len Murray (TUC), Moss Evans (Transport & General Worker) and Hugh Scanlon (Engineering Workers). Of the six leaders in attendance, five felt that Callaghan should go for it in October, with Scanlon the sole voice suggesting he defer until 1979. As the union leaders left that evening, confident that they had pushed him to an early date, they failed to recognise the historical significance it. For it would mark the end of trade union influence on British politics. Never again would union leaders enjoy such influence over a prime minister.
Four days later, Callaghan addressed the TUC conference, in what would become his most famous speech as prime minister. They expected him to announce the election. Instead, he cryptically sang a verse from an old music hall song:
There was I waiting at the Church, waiting at the Church, waiting at the Church,
When I found he’d left me waiting in the lurch, Lor’ how it did upset me.
All at once, he sent me round a note, Here’s the very note, this is what he wrote,
‘Can’t get away to marry you today, My wife won’t let me.
The clip is now used to emphasise Callaghan rejecting an early election. Yet immediately after the speech, most observers felt it was a rallying call for an election. The Glasgow Herald reported that “only the actual day for an October election now seems undecided” whilst The Times reassured its readers that their sources could guarantee an election, and that the 5th October remained the likely date. The trade unions took the song as a code for the Tories being ‘left in the lurch’ and donated £1m to Labour’s election fund.
On the 7th September, Callaghan finally informed cabinet of his decision. He was to defer the election until the spring, and allow the Welsh and Scottish devolution referendums to take place. So widespread was the expectation of an election, that Bill Rodgers claims that there ‘was a moment’s silence, then every cabinet minister fell off his chair.” The Glasgow Herald wrote that he had “astonished his own cabinet colleagues” underneath a headline of “Callaghan digs in for a hard winter”
Callaghan took to the TV to justify his decision to the electorate:
“I have seen it said, that I have rigged a temporary boom in order to win an election. That is false. The benefit that the country is experiencing today is the result of your efforts. And the government has eased the situation because we thought the economy could stand it and for no other reason. So I am not proposing to seek your votes because there is some blue sky ahead.”
Thatcher immediately accused him of running scared. Making a speech in Lichfield, she called members of the government “chickens” and criticised the Labour leader’s broadcast. In an echo of David Cameron to Gordon Brown nearly 30 years later, she claimed “The real reason he isn’t having an election is because he thinks he’ll lose,”.
The trade unions also felt betrayed by the decision. The union leaders argued that they had stage-managed the TUC congress in order to provide a smooth election launch for Callaghan. They had worked hard to manage the delegates in order to present a united front and delayed discussion on big issues, in order to prevent further division.
Callaghan subsequently claimed that he had come to a decision by the 17 August, but the only person he had told was the chancellor Denis Healey. According to Tom McNally, a key advisor, a private MORI poll of 70 marginal seats conducted in July 1978 was crucial in persuading Callaghan not to press ahead. They showed a potential hung parliament, with lost seats in the Midlands. Callaghan couldn’t bear the thought of another knife edge parliament, and he believed that a new electoral register in February 1979 could hand the party six extra seats.
Until recently, the gamble went down in history as ‘the biggest political miscalculation of all time’. Cameron, thanks to Brexit, and May, thanks to the 2017 election, will now assume the mantle. Just two months after Callaghan’s indecision, at the end of January 1979, the Tories had opened up a 19-point gap (55% to 36%) – thanks to the ‘Winter of Discontent’.
The election for the North Sea oil revenue was won by Margaret Thatcher, and for the first time, millions of working class voters turned their back on Labour. By the mid-1980s, North Sea oil contributed £8 billion to the Exchequer, equivalent to £20 billion today. At 10 % of the government’s tax revenue, it amounted to the largest electoral gift in history – and for the next 18 years Labour didn’t see a single penny of it.