2S - Heath’s government: Heath as leader
Learn why Heath’s attempt to change economic management and industrial relations gave way to intervention and confrontation, and why his Northern Ireland settlement remained fragile.
Heath and a new direction
Edward Heath became prime minister after the Conservatives won the June 1970 election. A grammar-school and Oxford education and wartime service distinguished his background from that of many earlier Conservative leaders. This mattered politically: he could present leadership as a matter of ability and modern management rather than inherited position. He was serious, determined and closely involved in policy, but less comfortable with informal bargaining and public communication. Personality helped shape his approach; it cannot by itself explain an international economic crisis or the strength of particular unions.
The Conservatives’ discussions at Selsdon Park before the election signalled a more competitive economy. Heath wanted firms to become efficient through market pressure, taxes to encourage initiative, and a clearer legal framework to restrain industrial conflict. The contrast with Labour was strongest in methods and emphasis. The government still operated within expectations of full employment, public welfare and a large state sector. It did not begin with Thatcher’s later sustained willingness to accept mass unemployment as a cost of defeating inflation.
Heath’s parliamentary majority allowed an initially forceful programme. His commitment to entering the European Economic Community was also central: access to a larger market and a place in European decision-making offered an answer to Britain’s diminished global influence. Entry in January 1973 was a lasting achievement even though his domestic authority collapsed the following year.
The useful historical problem is therefore not whether Heath was simply a strong or weak leader. He was capable of pursuing a difficult long-term objective in Europe, yet found that governing an economy depended on cooperation from firms, unions and voters that legal authority alone could not secure.
Competition and intervention
Heath initially tried to reduce subsidies to struggling businesses and to avoid continually rescuing inefficient firms. The phrase lame ducks expressed the argument that public support could keep resources tied to uncompetitive production. But a closure also threatened jobs, skilled workers and nationally important industries. The policy therefore faced a political test whenever the market outcome appeared unacceptable.
Rolls-Royce entered receivership in 1971, and the government nationalised the strategically important aero-engine business. The Upper Clyde Shipbuilders crisis produced a workers’ work-in rather than simply a withdrawal of labour: workers continued production to demonstrate that the yards deserved to survive. Government support for shipbuilding showed how unemployment, strategic interests and effective protest could override its original free-market emphasis.
By 1972 unemployment had passed one million and the government changed course. Chancellor Anthony Barber encouraged faster growth through tax reductions and increased demand. Easier credit helped spending and property speculation. The pound was allowed to float in June 1972 rather than remain at a fixed exchange rate. Growth accelerated, but demand ran ahead of the economy’s capacity to supply goods efficiently. Rising imports and wages, and a weaker currency making some imports dearer, increased pressure on prices.
Demand and inflation
When spending grows faster than output can respond, competition for goods and workers can push prices and wages upwards. Imported costs can also raise prices even without an increase in domestic demand.
The government’s U-turn was wider than business rescues. In November 1972 it imposed a temporary freeze on prices and pay, followed by staged controls. A government elected to reduce intervention was now trying directly to manage wages and prices. The 1973 international oil shock then raised energy costs sharply and intensified inflation. It worsened problems already present; it did not create every weakness of the Barber boom.
Law and union resistance
The Industrial Relations Act 1971 attempted to make industrial relations more predictable through law. It provided for union registration, a National Industrial Relations Court and restrictions on some industrial action. The government regarded unofficial strikes and disrupted production as problems that voluntary negotiation had failed to control. It expected legal rules to protect the wider public as well as employers and workers.
Many unions instead saw the Act as an attack on their independence and ability to bargain. The Trades Union Congress opposed registration, and unions resisted cooperating with the new system. This distinction matters: a legal framework is difficult to operate if organisations with extensive workplace power refuse to regard it as legitimate. The Act could therefore turn a dispute over wages or working arrangements into a wider conflict over the right to organise.
The imprisonment of the Pentonville Five dockers in 1972 for defying an industrial-court order prompted solidarity stoppages. Their release through legal intervention avoided a wider general strike, but damaged the impression that the government’s system could settle disputes effectively. It is misleading to say that the Act simply abolished strikes or defeated the unions. Its practical effect was limited, and the next Labour government repealed it.
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