Part Two of our series on post-war Prime Ministers. Conservative dominance is ended, with the economy replacing foreign affairs as Britain's political centre. And it's economic decline which is the story here, as balancing sterling and union-driven inflation creates an intractable mess.
By 1974 Britain was the sick man of Europe. With unemployment persistently above a million, inflation at 16%, sterling collapsing, interest rates useless and government spending 'out of control', an IMF bailout was required, savaging confidence and government budgets.
Callaghan was a 'political animal' but also a trusted, capable figure, adept at compromise. Yet attempts to freeze wages (and curb inflation) angered the unions who, commanding half the workforce, went on a general strike in late 1978.
Months before, the Prime Minister, overseeing a recovery and optimistic polls, looked set to call a general election. But he backed off just before the unions shut down the country for a 'winter of discontent'. And from then on he was doomed; no-one wanted to vote for a government that left rubbish uncollected and trains idle.
His thin majority gone in by-elections, Callaghan lost a vote of non confidence in Parliament; this forced an election. The Conservatives ran out easy winners under a formidable leader. Labour were out, and would remain in the wilderness for 18 years.
Harold Wilson: 1964-70 (Lab)
Harold Wilson came to power inheriting an economy with a £400 million trade deficit and without the majority to do much about it. Stop-gap measures bought time until, in 1965 a 'National Plan' was implemented, steadying the economy and giving the government breathing space.
Wilson was a smart tactician, and in 1966 used this relative calm to call an election that swung decisively his way, allowing him to lead a more confident government.
Social spending shot up, amidst growing awareness of poverty, while Roy Jenkins, one of history's few memorable Home Secretaries, introduced greater freedom for abortions, gay rights and literary publishing.
However, any attempts at long-term strategy were blown apart by strikes wobbling the pound.
To stabilise sterling, it had to be devalued, requiring sharp cuts and damaging the party's reputation. To make matters worse, Wilson botched new industrial action regulations, which irritated the unions. (This was to prove fateful.) And then - of course - we failed to join the EEC again.
Thankfully for Labour, economic recovery beckoned, with the balance of payments going into the black. Buoyed by this, with an upbeat national mood, glorious weather, and a mediocre opposition, Wilson called an election for the summer of 1970. And we're still not quite sure how he lost it.
Social spending shot up, amidst growing awareness of poverty, while Roy Jenkins, one of history's few memorable Home Secretaries, introduced greater freedom for abortions, gay rights and literary publishing.
However, any attempts at long-term strategy were blown apart by strikes wobbling the pound.
To stabilise sterling, it had to be devalued, requiring sharp cuts and damaging the party's reputation. To make matters worse, Wilson botched new industrial action regulations, which irritated the unions. (This was to prove fateful.) And then - of course - we failed to join the EEC again.
Thankfully for Labour, economic recovery beckoned, with the balance of payments going into the black. Buoyed by this, with an upbeat national mood, glorious weather, and a mediocre opposition, Wilson called an election for the summer of 1970. And we're still not quite sure how he lost it.
Ted Heath: 1970-74 (Cons)
It was Ted Heath, the quiet Conservative, who ended remaining British imperial delusions. Continuing the military retreat from bases east of Suez, letting the pound sink in value, and finally - finally! - joining the EEC all in retrospect began to create a new vision of Britain as a modern trading nation.
However, a vision was as far as Heath got.
Major strikes by the powerful National Union of Mineworkers crippled government influence and drove up inflation, while unemployment rose significantly for the first time since the 1930s; these twin crises destroyed government plans to reform the economy.
An intelligent but solitary leader, Heath struggled to cope, especially when the NUM, on its second strike in early 1974, blocked government access to coal.
During winter.
In response, he reduced electricity access to just three days each week (the 'three-day week)', and called an election. Where he lost his majority in a hung parliament.
However, a vision was as far as Heath got.Major strikes by the powerful National Union of Mineworkers crippled government influence and drove up inflation, while unemployment rose significantly for the first time since the 1930s; these twin crises destroyed government plans to reform the economy.
An intelligent but solitary leader, Heath struggled to cope, especially when the NUM, on its second strike in early 1974, blocked government access to coal.
During winter.
In response, he reduced electricity access to just three days each week (the 'three-day week)', and called an election. Where he lost his majority in a hung parliament.
Harold Wilson pt.2: 1974-76 (Lab)
The Labour Party had to govern for eight months as a minority administration, before another election in October yielded a majority of just three seats.
The one success of Wilson's second premiership was approval for EEC membership in a 1975 referendum. And even that split the Labour Party, now a constant sore for Wilson, who won tactical victories but failed to implement any coherent strategy.
Worldwide 'stagflation' set in, with high living costs (inflation hit 20% in the UK) alongside unemployment and recession, something economists hadn't thought possible. Wilson was unable to respond effectively to these crises and resigned that year with health concerns. Foreign Secretary James Callaghan easily won the party ballot.
James Callaghan: 1974-79 (Lab)
By 1974 Britain was the sick man of Europe. With unemployment persistently above a million, inflation at 16%, sterling collapsing, interest rates useless and government spending 'out of control', an IMF bailout was required, savaging confidence and government budgets.
Callaghan was a 'political animal' but also a trusted, capable figure, adept at compromise. Yet attempts to freeze wages (and curb inflation) angered the unions who, commanding half the workforce, went on a general strike in late 1978.
His thin majority gone in by-elections, Callaghan lost a vote of non confidence in Parliament; this forced an election. The Conservatives ran out easy winners under a formidable leader. Labour were out, and would remain in the wilderness for 18 years.
Margaret Thatcher: 1979-1990 (Cons)
Unlike that other great post-war Tory leader, Macmillan, Margaret Thatcher was not a grand schemer. Her leadership was a blatant opportunism that rammed through action by force of will, chopping and changing ideas and ministers as she liked. She would start with economic reform.
'Thatcherites' believed that if inflation could be reduced, everything else would fall into place. The 1981 budget is famous for its financial harshness in that respect. Despite a recession and collapsing employment, spending was cut to the bone, and the government started haemorrhaging support.
Not that Thatcher cared. Although she probably appreciated what victory in the Falklands did to Conservative fortunes. With national morale up, and with her determined leadership on display, 1983 was a landslide against the divided Labour Party.
This gave her a mandate to face down the trade unions; mining and newspaper printing strikes in 1984/5 were bloodily crushed, and the unions have never recovered. And anyway, the economy started to boom, which swung Britain back into optimism.
That 1983 victory also allowed Thatcher to consolidate power and act on her own judgement. Firms were privatised, council housing stock sold-off, income tax slashed twice. Never mind that the new British Telecom and British Airways were monopolies, that there was now precious little housing available for those who needed it most, and that welfare cuts accompanied tax cuts.
Thatcher knew the consequences and, frankly, didn't care. The poor were their own fault, lazy and idle, and didn't deserve government help.
And then she overreached. Nigel Lawson's hubristic tax cuts in 1988 unleashed inflation again and interest rates had to be jacked up.
Thatcher herself rolled out an unpopular, regressive 'Poll Tax', which surmised the story of the decade as the 'rich getting richer and the poor getting poorer'.
And her quiet Deputy Prime Minister, Nigel Howe, frustrated at Thatcher's behaviour towards Europe and ground down by a decade of her self-interested bullying, resigned. The party was shocked into moving against her, and very quickly manoeuvred her out of office.
That was that.
But her legacy remains. A neoliberal, market-centered economy. Union power broken. Politics split on a north-south, rich-poor divide. Inequality entrenched. And a fresh recession for her successor. Read on here, or go back here.
'Thatcherites' believed that if inflation could be reduced, everything else would fall into place. The 1981 budget is famous for its financial harshness in that respect. Despite a recession and collapsing employment, spending was cut to the bone, and the government started haemorrhaging support.
Not that Thatcher cared. Although she probably appreciated what victory in the Falklands did to Conservative fortunes. With national morale up, and with her determined leadership on display, 1983 was a landslide against the divided Labour Party.
This gave her a mandate to face down the trade unions; mining and newspaper printing strikes in 1984/5 were bloodily crushed, and the unions have never recovered. And anyway, the economy started to boom, which swung Britain back into optimism.
That 1983 victory also allowed Thatcher to consolidate power and act on her own judgement. Firms were privatised, council housing stock sold-off, income tax slashed twice. Never mind that the new British Telecom and British Airways were monopolies, that there was now precious little housing available for those who needed it most, and that welfare cuts accompanied tax cuts.
Thatcher knew the consequences and, frankly, didn't care. The poor were their own fault, lazy and idle, and didn't deserve government help.
And then she overreached. Nigel Lawson's hubristic tax cuts in 1988 unleashed inflation again and interest rates had to be jacked up.
Thatcher herself rolled out an unpopular, regressive 'Poll Tax', which surmised the story of the decade as the 'rich getting richer and the poor getting poorer'.
And her quiet Deputy Prime Minister, Nigel Howe, frustrated at Thatcher's behaviour towards Europe and ground down by a decade of her self-interested bullying, resigned. The party was shocked into moving against her, and very quickly manoeuvred her out of office.
That was that.
But her legacy remains. A neoliberal, market-centered economy. Union power broken. Politics split on a north-south, rich-poor divide. Inequality entrenched. And a fresh recession for her successor. Read on here, or go back here.
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