The history of incomes policy and the ‘Social Contract’


There has been much debate prompted by the Chancellor’s recent announcement of a statutory National Living Wage, rising to £9 an hour by 2020. This has re-opened the debate about whether there should be a government Incomes Policy, whether it should be dictated from the centre by legislation, or left to be negotiated in a decentralised manner at the level of the firm by unions and employers.

This week we have had a visitor to the library undertaking research on the historical development of this topic. Mr Hitoshi Kiriya, Professor of Comparative (Labour) Politics at Shizuoka University, Japan, is engaged in a research project studying corporatism and incomes policies in the OECD countries since the 1970s. Mr Kiriya was visiting the TUC Library to research the “Social Contract”, agreed between the TUC and the Labour Government c.1974-1977.

The “Social Contract” developed from a document published by the TUC-Labour Party Liaison Committee in 1973 (see below).

1973 document from the TUC-Labour Party Liaison Committee that would form the basis of the Social Contract

When the Labour Party formed a minority government following the February 1974 general election, and then a small majority government following the October 1974 election, this agreement began to be implemented. In exchange for repealing the controversial 1971 Industrial Relations Act (see our previous blog post on this topic), the TUC agreed to an Incomes Policy involving voluntary wage restraint in order to combat rising inflation. A second and third ‘Phase’ of the Social Contract followed in 1975-6 and 1976-77.

The details of Phase 2 of the Social Contract, 1976, limiting pay rises to £2.50-£4 per week.

More information on the Social Contract can be found on our history website here, and a summary of UK incomes policies from 1948-1977 here.

The Conservative Government of 1979, under the leadership of Margaret Thatcher, would begin to dismantle this ‘corporatist’ structure of wage negotations and incomes policy, in favour of a more ‘neo-liberal’ regime.

To find out more, or arrange an appointment to visit the TUC Library, get in touch.


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