Remembering the Lib-Lab Pact 1977-78

Two parties working together at a time of economic crisis? An arrangement meeting scorn and abuse from the media? A new Prime Minister accused of dominating his junior partner? One party attempting and failing to achieve electoral reform? Yes, this is not 2010 – it is 1977, the year of the Lib-Lab Pact.
In 1976, the country was in economic and political crisis. Inflation ran at 25%, the country was in huge deficit, unemployment continued to creep upwards, and spending cuts were installed as a condition of a loan from the IMF. The Labour government had lost its' majority in parliament. The Conservative Party, under the leadership of Margaret Thatcher, was riding high in the polls. It was not a good time for Jim Callaghan to enter Number 10 as the successor to Harold Wilson.

The new Liberal party leader, David Steel, had worked with various Labour members on the EEC referendum campaign the year before and, using these contacts, his views were sought regarding some sort of deal to sustain the government in office. At this stage, after two general elections in 1974, the Liberal party were every short of cash and did not relish yet another election – especially as it seemed likely to send Mrs Thatcher into power with a landslide.

Like one of his successors, Steel emphasised the importance of providing a stable government at a time of economic uncertainty. For their part, the Labour cabinet generally approved the idea with some misgivings. Both sets of party members were unsure but gave the suggestion a cautious welcome.

After final negotiations, the Pact was declared in March 1977. The 13 Liberal MPs would vote with the government for the rest of the parliament in return for various policy initiatives. Mrs Thatcher immediately tabled a motion of no confidence, which the government won by 20 votes.

The media absolutely hated the Pact. The popular press hurled abuse at both parties – Steel was portrayed as a puppet in awe of his master (not for the last time!) – both leaders were accused of being scared to face the electorate. Indeed, in 1977 and 1978, local election results for both parties were very poor with many hundreds of councillors losing their seats.

For the Liberals, while a few policies were in place, there was no direct involvement in the government, apart from some cabinet committee places. The main prize of proportional representation for the first European parliament elections of 1979 was frustrated and was not achieved until 1999.

Economically, the Pact was a big success. Inflation rapidly came down, the balance of payments significantly improved, unemployment had steadied, and with Labour riding high in the polls in the autumn of 1978, the PM was widely expected to call an election. Callaghan and Steel had even discussed continuing with the Pact after the election should the result be unclear.

However Callaghan lost his nerve, the moment passed, and hence the Pact came to an end in October 1978. The winter of discontent with its' industrial unrest, was followed by the no confidence vote of March 1979 and the Liberals voted against the government - which fell by one vote. At the subsequent general election Mrs Thatcher became Prime Minister and the rest, as they say, is history.

Had the election taken place in the autumn of 1978, had Labour and the Liberals continued to work together, had Mrs Thatcher been kept out, then the subsequent years, indeed society today, could have been very different.

What lessons can we learn from that experience? The main problem the Liberals had at the time was, despite 25% of the votes at the election, its' lack of parliamentary presence. With only 13 seats there was little scope for any talk of ministers. Hence the emphasis became building up seats, not votes. Equally the fact that the two main parties had combined to frustrate any ideas of voting reform was remembered. And also the Liberal party failed to get across their own specific achievements to the electorate. But this was the only example of different parties with different beliefs working together in the national interest between 1945 and 2010.

It is said that history is written by the winners. For this reason, the Lib-Lab pact has gone down in history as a failure – the Thatcher government and the media successfully hammering home this myth throughout the 1980s – whereas in fact it was a success – by reducing the political uncertainty and providing a stable government, the markets were steadied and the country rapidly began to recover.

So while we are now again in a situation we may be reluctant to accept, we must remember to learn the lessons, hold our nerve, and emphasise the benefits we are providing by our role in providing a stable government.

(This article originally appeared in the Sittingbourne and Sheppey Liberal Democrats Members' and Supporters' Newsletter - November 2011).