Prime minister James Callaghan went before a suspicious and restless labor union movement today to plead for the heart of his economic policy - a third year of "descending spiral," Callaghan claimed, if unions will again forego "excessive" pay claims. Inflation is already "going down fast," he said, and another year of restraint would enable him to stimualte the economy - probably through a tax cut - perhaps as early as this fall.
Callaghan had been warned that he would be booed and shouted down when he addressed the Trades Union Congress at its annual meeting in Blackpool today. Apart from scattered heckling from the gallery, however, the union chiefs and their lieutenants warmly applauded Labor's prime minister. Some were slow to rise to their feet for the ritual standing ovation at the end of Callaghan's address, but on the whole he got a better audience than predicted.
Callaghan was talking to leaders whose rank-and-file have suffered three continuous years of declining living standards. Many in the factories balme their unions, who helped the Labor Party fight one of Europe's worst inflations by deliberately holding wage gains below price increases for two succesive years.
"I would have like a third year," said Callaghan, "But I am told it is not on."
He was right. The nation's biggest union, the Transport and General Workers, told its leaders it would not stand another 12 months of a fixed limit on wage gains. That marked the end of any specific pay policy.
(Electrical workers at 40 of the nation's 137 power stations began a wildcat strike Tuesdayto demand higher fringe benefits, UPI reported.)
Today Callaghan carefully avoided defining the size of "moderate" settlement. Instead, he simply urged unions to limit increases to one every 12 months.
Wednesday the TUC is expected to approve this 12-month guideline, but it is not clear how effective it will be.
Some unions have already said they will ignore it. Leaders of others may not be able to resist rand-and-file pressure for more frequent gains.
Unlike the United States, collective bargaining here is a jumble of tens of thousands of deals. Apart from the coal miners, few make industry-wide agreements. Even company-wide deals are rare, and most are made with in a department or craft in each plant.
A key factor in the willingness of workers to heed Callaghan's plea is the rate of inflation. It is still running close to 15 per cent a year, double the U.S. level, but some leading price indicators suggest that the government could see its interim goal of a 10 per cent rate achieved before the end of the year.
"The rate of inflation is going down," Callaghan told the union men. "It is going down."
British unions, like those elsewhere, do not like to be told that wage increases cause inflation. They are doubly suspicious here, since they held pay gains last year to about 10 per cent while prices jumped 17 per cent. Callaghan argued today that the sliding pound was responsible, and that that period is now behind the county. The big foreign-exchange saving from the swelling flow of North Sea oil has turned the pound into a hard currency, he said, but whether he was believed is not clear.
There are cross-currents on the factory floors, however. High unemployment, 6 per cent, is cleary frightening some workers. Ten days ago, rank -and-filers in a Leyland auto plant refused to follow a strike call by their leaders and successfully demanded to stay at work.
Whether this mood will prevail over the attempt to make up and better the decline in living standardsis the question that most preoccupies Callaghan.