The Social Contract was a policy of the Labour governments of Harold Wilson and James Callaghan in 1970s Britain. The contract referred to a pact between the Labour government and the Trade Union Congress (TUC) in order to allow the former to govern the country more effectively. The main goal of the Social Contract was the control of wage inflation[1]
In return for a number of measures, such as the repeal of the Industrial Relations Act 1971, increased benefits, food subsidies, price controls and a freeze on rent increases, the trade unions would ensure that their members would cooperate with a programme of voluntary wage restraint, in which pay rises were held down to limits set down by the government.[1][2]
The idea for the contract was drawn up in January 1973 by Harold Wilson and Vic Feather of the TUC, in a document entitled Economic Policy and the Cost of Living. It was adopted as Labour Party policy soon after. When Labour returned to government in the February 1974 election it was put into practice.[1][2][3]
The Social Contract aimed to avoid the difficulty of former incomes policies, allowing the employers, who in nationalised industries were the state, to treat individual groups separately in wage negotiations. There would be 12-month interval between wage settlements to prevent repeated wage demands and allow the state some level of predictability in future wage expenses, and negotiated increases in wages should be confined either to compensating for inflation since the last settlement or for anticipated future price increases before the next settlement.
It was to be the foundation on which the Chancellor Denis Healey could introduce a stronger budget in order to control the high inflation that Britain and most other Western nations had begun to confront, which Edward Heath's previous government had failed to do.
References
edit- ^ a b c Thorpe, Andrew (2001). A History of The British Labour Party. Palgrave. pp. 166–188. ISBN 0-333-92908-X.
- ^ a b Conroy, Harry (2006). Callaghan (The 20 British Prime Ministers of the 20th Century). London: Haus Publishing. p. 93. ISBN 978-1-904950-70-7.
- ^ Sloman, Pater. "Harold Wilson, 'Selsdon Man', and the defence of social democracy in 1970s Britain". Oxford Academic. Retrieved 24 August 2024.
- The Miners Strike and the Social Contract, The National Archives
- 1974-1979 - The Social Contract, London Metropolitan University, 2012
- Thorpe, Andrew (2008). The Labour Party and the Trade Unions (PDF) (Report). University of Exeter. Retrieved 18 June 2018.
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