James Callaghan threatened to resign as Prime Minister in 1977 rather than surrender to police demands for an inflationary pay rise, according to documents made public today.

That autumn it was feared that sections of the Police Federation might break the law banning industrial action by the police. Merlyn Rees, the Home Secretary, warned Callaghan that a strike could have the devastating impact of the miners’ strike that destroyed the Heath Government in 1974 and Cabinet members desperately sought a deal with the organisation.

Anger had been growing in police ranks after ministers imposed an annual pay increase of 5 per cent – well below the 15 per cent rate of inflation. The federation had demanded a rise worth between 78 and 104 per cent – an increase that would have destroyed the 10 per cent ceiling that ministers had tried to impose.

Callaghan was determined to resist any deal that would add to Britain’s economic problems by smashing his Government’s pay policy. Talks between Rees and the federation were set for October 27 and the Home Secretary met senior police officers to ask their view. They were, Rees told a Cabinet committee on October 21, unanimous that a 10 per cent offer would spark an “immediate showdown”.

An offer of 15 per cent, the senior officers had said, would “do the trick”, and Rees was minded to follow their suggestion. But a handwritten record of a telephone conversation he had with Callaghan on October 23 reveals that the Prime Minister was implacably opposed to the idea.

“The PM said that Government could not offer 15 per cent. People would laugh,” the secret note records.

On the possibility of a strike, “he was certainly prepared to face one, and prepared to resign rather than . . . give in to the threat of a strike”.

Rees said that “we did not want to let the police be our miners”, but Callaghan, fearing that giving in would open the floodgates for other public sector workers, told the Home Secretary to tell police leaders that the Government could not go beyond 10 per cent plus the promise of a commission to look at longer-term pay levels.

Callaghan asked the Home Secretary how he planned to handle the October 27 meeting. The note records: “After a sigh, the HS said that he was taking his cue from the PM.”

The next day Callaghan was sent a draft of Rees’s planned speech to the federation. One section, acknowledging “the debt which society owes you”, particularly angered him.

“Rubbish,” the Prime Minister scrawled. “He should not say this or they will chorus, ‘Well pay us then’.”

He also scribbled “NO” next to Rees’s concluding reference to law and order as “a special case”. “So is beating inflation,” Callaghan wrote. “Don’t use this terminology.”

The police finally accepted the Government’s offer. The committee of inquiry’s recommendations led to the establishment of the police pay arrangements that remain in force today.

The released documents also throw light on the Lib-Lab pact, whereby David Steel’s party propped up the minority Callaghan administration.

Having heard rumours that Labour MPs opposed to the pact were circulating a letter calling for the party’s national executive to meet, Callaghan telephoned Tony Benn, the Energy Secretary and warned him not to add his signature.

A record of their conversation, on March 24, 1977, shows that Mr Benn replied: “But I have already signed it.”

“In that case I must ask for your resignation,” replied Callaghan, remarking that while Mr Benn had “sailed close to the wind in the past” he had now “gone to the limit”.

Callaghan was being “rather hard”, Mr Benn said, adding: “Well, to get Steel in and me out would certainly complete it.”

Mr Benn removed his name, and so was at Chequers when the Cabinet met there on June 26. Ministers discussed calling an early election – and decided that Labour’s best chance lay in holding on as long as possible.

The year in brief - 1977

January 3 Roy Jenkins, ex-Home Secretary, becomes first British President of the European Commission

February 19 Tony Crosland, Foreign Secretary, dies

April 2 Red Rum becomes first horse to win Grand National three times

June 7 Britain celebrates Queen’s Silver Jubilee

July 1 Virginia Wade wins Wimbledon

August 16 Elvis Presley dies

October 10 Betty Williams and Mairead Corrigan, founders of Northern Ireland Peace Movement, awarded Nobel Peace Prize

Source: Times database

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