The Conservatives’ “Labour Isn’t Working” poster with its image of a snaking dole queue was one of the most iconic political images of the late 1970s and right from the outset it caused consternation within James Callaghan’s Government.

Saatchi and Saatchi, the advertising agency that devised the famous slogan to highlight the growing unemployment problem in 1978, had been devising campaigns for publicly-funded bodies including the Manpower Services Commission.

The agency’s new role for the Conservatives, which it accepted on March 30, irritated Labour politicians including John Prescott, who tabled and Early Day Motion calling for Saatchi and Saatchi’s Government contracts to be terminated.

John Grant, the Parliamentary Under Secretary of State in the Department of Employment, also argued there was a contradiction in the company working on both Government campaigns and the Conservative account.

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According to a letter written by Charles Morris, the Civil Service minister, Grant and others in his department took the view “that it is impossible for an agency to achieve an acceptable intellectual separation of accounts in these circumstances, especially as unemployment is likely to be at the heart of the debate in the coming months”.

After some discussion, however, it was conceded that there was nothing to stop Saatchi and Saatchi working for both the Government and Mrs Thatcher.

Tom McCaffery, a Number 10 press secretary, contacted Central Office of Information, which oversees Government communications and was monitoring Saatchi and Saatchi’s work for both the Government bodies and the Conservatives.

Morris then quoted the press secretary in an August 3 letter to Callaghan. McCaffery noted that the COI “can find no sign that the Agency is not keeping strictly to their undertakings... Much as I would like to take action against Saatchi and Saatchi, I can see no grounds for doing so. Further, to do so would mean going outside the normal machinery and to be blunt 'bending the rules'. This would be counter-productive in publicity terms, create a row, and we would have little public sympathy.”

The Prime Minister agreed, noting on the top of another letter on the subject: “No action.”

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