Prime Minister James Callaghan, using a blend of threats and appeals, yesterday told the British labor movement his government will use every weapon it commands to stifle inflation.
Callaghan issued his warning at the annual conference of the Labor Party in the wake of trade union rejection of a government plea for a fourth consecutive year of voluntary wage restraint.
The government, Callaghan told the conference in a hoarse, but emphatic shout, has "an inescapable responsibility to keep down inflation in the interest of the whole of the people of this country."
If unfettered wage demands threaten to push inflation over 10 percent again, Callaghan warned, he will squeeze the supply of money and curb government spending as an offset. Both these measures, the Labor premier said, would restrict the wages employers could afford to pay and the jobs they could offer.
All this was strikingly blunt and conservative language for the Labor Party Conference being held at the seaside resort of Blackpool.
On Monday, the conference voted two to one to junk Callaghan's proposed pay increase limit of 5 percent. Big, bloc votes from the unions dominated the count. Callaghan readily acknowledged that the device won't work in Britain without union assent.
"We've failed this year," he said grimly. "The government's failed. We haven't got it."
Callaghan's central theme was basically that modern governments have been made responsible for high employment and a minimum of social welfare. To achieve both, wages can't be omitted from the calculation.
At the same time, he said, "society today is so organized that every individual group almost has the power to disrupt it." Somehow, he contended, this power must be reconciled with the other demands on government. The Monday vote, he implied, was a step backward.
The Prime Minister made clear he has not abandoned his pay policy, twice insisting it was still part of his anti-inflation arsenal and vastly to be preferred to deflation. But whether in fact he will now use the government's power to punish employers who settle above 5 percent is far from certain.
He urged union chief's to discuss the dilemma with him and a meeting is expected soon at 10 Downing Street.
Whatever happens to pay, Callaghan is determined to minimize friction with the unions, his chief political allies, especially with an election about six months away. It was Callaghan who persuaded former Prime Minister Harold Wilson to draw back from another collission with the unions nearly ten years ago.
The forthcoming election should help Callaghan with union leaders. However much they oppose pay restrains, they fear far more a Conservative government under Margaret Thatcher. This will act as a curb of sorts on bargaining demands, at least until the election is held.