Andrew Nutter
amfn2@cam.ac.uk
Economics
Mr. Jobblings
09/12/98
“Conservative governments from 1979 sought to reform industrial relations.
What prompted the changes? Where they justified? Is there evidence that they are
having the intended effects? ”
Over the last 30 years, industrial relations have been subjected to violent swings in government
policy, highlighting the existence of differing theoretical perspectives on the matter, a changing socioeconomic environment and the end of the post-war consensus. After the failure of successive governments
to offer suitable solutions to ever mounting difficulties, and in particular, the retreat of the Heath
administration on its plan to reform industrial relations, Conservative governments since 1979 finally
succeeded in producing a set of coherent policies. These policies were based on the Thatcherite ideals of
laissez-faire liberalism, tight monetarism and a strong focus on the smooth operation of the supply side of
the economy. As a result, industrial relations, demonised by the high levels of strike activity and wage
inflation of the late 70’s, were actively targeted and reformed.
Before shedding some light on to the exact nature of these reforms, it is important to examine
what circumstances prompted the reforms. From the start of the post-war consensus up to the mid-1960’s,
the UK enjoyed its longest period of economic growth coupled with very high levels of employment. The
traditional collective bargaining system, whereby a group, representing employees, reached agreements on
a range of employment issues with employers, arguably worked smoothly as a result of this growing
prosperity. However, from 1960 onwards, fractures appeared throughout this stable framework as
increasing foreign competition put pressure on employers to cut costs and improve efficiency. Employers
complained that collective bargaining was the cause of inflexibility, conflict and unwarranted pressure on
wages. Employees, deceived by wage inflation, felt their own wages were not keeping up and their
disposable incomes were insufficient. The public saw an increasing number of strikes as a breakdown of
industrial relations and was immersed in the deluge of media attention on the subject. Lastly, governments
became concerned with inflationary pressures, excessive demands from the public sector and continually
declining international competitiveness. By the late 1970’s, these difficulties were exacerbated by
unemployment rising to new heights and wage inflation and retail inflation spiralling out of control.
The election of the Conservative government under Mrs Thatcher in May 1979 is widely seen as
the turning point in British industrial relations. Faith in market forces and liberal individualism was central
to the new government’s philosophy and entailed a wide range of “radical” policies; Government would no
longer directly intervene in the economy via incomes policy designed to control inflation. Instead, tight
monetary policy through high interest rates coupled with the acceptance that unemployment was the right
price to pay for low inflation, where deemed capable of reigning in wage and price increases. Moreover,
Andrew Nutter
amfn2@cam.ac.uk
Economics
Mr. Jobblings
09/12/98
the Government sought to reduce state intervention to a minimum and hence, reduced the size and scope of
the public sector.
Industrial relations where therefore a major target to achieve these policy aims, with the purpose
of reform to shift power from employee organisations to employers and curtail the right for trade unions to
strike legitimately. The extensive new framework of collective labour law was created through a series of
five Employment Acts, dating from 1980 through to 1990. The main ideas behind these Acts where that
trade unions lost much of their legal immunity and became liable for damages if they instigated unlawful
industrial action. Lawful industrial action, in turn, became more difficult as the democratic processes within
trade unions were improved and individual union member rights were strengthened at the expense of union
official’s rights. Moreover, closed shops and secondary action were also made unlawful by the 1990
Employment Act. The eventual results of the changes were to reduce strike activity and trade union
membership, thus satisfying the Conservative government aim to reduce the power trade unions.
To answer the question as to whether the reforms were justified, it is useful to formally define and
sense the purpose of industrial relations. Howard Gospel defines the subject of industrial relations as that
which is “concerned with the processes of control over the employment relationship, the organisation of
work, and relations between employers and their employees.” 1 Using this definition, it is possible to
separate the scope of industrial relations into substantive agreements, dealing with details of wage levels,
benefits, etc, and procedural agreements, dealing with how the substantive agreements are reached.
Inevitably and as with any social relationship, employment relationships involve both co-operation and a
certain degree of conflict. It is the balance between the two which governments can attempt to influence.
The Government’s justification for reforming industrial relations was made on three points; first, the legacy
of industrial relations from the post-war period was suited for an environment of benign economic
conditions and relatively low competition from abroad. The argument put forward for the reforms was that
the Government was seeking to modernise industrial relations in line with the contemporary economic
situations of more highly cost sensitive industries facing very competitive world markets. Had the
modernisation not taken place, British industries would have lost all competitiveness and inevitably,
workers and employees would have had to face the consequences. Second, reforming industrial relations
was justified on the fact that it fitted in the general scheme of minimising government intervention and
promoting freely functioning markets that the Thatcher government had promised to undertake. Indeed, it
was argued that British industrial relations where a remnant, and possibly one of the main causes, of the
failure of previous demand management to rectify high levels of stagflation and rising unemployment.
Finally, the justification could be made on a purely theoretical basis, by looking at the details surrounding
the inherent nature of social relations. Since, as mentioned above, employment relationships always
involved both co-operation and a certain degree of conflict, the Thatcher government could be seen to have
been attempting to shift the balance away from conflict towards co-operation. Previously, it was asserted
that the employee side of the relationship, through trade unions, held too much power and used this power
to generate conflict rather than co-operation. Moreover, individual employees were in a way forced to
1
British Industrial Relations. Gill Palmer 1983
Andrew Nutter
amfn2@cam.ac.uk
Economics
Mr. Jobblings
09/12/98
adhere to the will of the union, rendering the process highly undemocratic. By ensuring new legislation
shifted some of the burden of industrial action onto the unions, through the risk of being the target of
employer litigation, the government hoped to seriously reduce the scope and cost of industrial conflict.
Also, much of the new legislation went on the increase the rights of the individual employee, giving him
more democratic rights to manage his union and protection from employee discrimination. The end result
of Government industrial relation reforms was to promote a competitive labour market where employee
associations would attempt to work with, rather than against, the management, hence changing the nature
of procedural agreements.
Although the reforms put through fitted in to the clear and coherent strategy of the Conservative
government, many commentators are dubious of their success and end effect. There are two points that
seem to undermine the success of reform. First, the long series of legislative changes that occurred over the
80’s were based on the presumption that the trade unions were undemocratic and out of touch with
members. However, certain aspects of industrial relations might have exacerbated the problems. Pre-strike
ballots, for example, have tended to strengthen the hand of unions in industrial disputes because a
convincing majority would have given them more credibility in the bargaining process. Second, by
increasing the cost to unions if they broke the law, legislative changes may have played a part in reducing
the incidence of strikes. However, the evidence linking the Conservative reforms to this reduction is too
thin to imply causality. Indeed, strike incidence had been falling before the reforms were put through, strike
incidence in other European countries had been falling even though they had no such legislation and other
factors reducing strike incidence such as high unemployment, low price inflation expectation and reduced
union membership do not lend much evidence to the success of legislation.
On the other hand, the relative success of the UK over the last five to six years may be evidence
that industrial relation reforms achieved their initial aims. International commentators hail Britain as a
success story relative to its European counterparts, succeeding in combining growth, low inflation and low
unemployment. Much praise goes to the Thatcher government of 1979 for reducing the power of trade
unions and allowing the supply side of the economy to cope with above trend growth. As an international
comparison, countries such as France and Germany find themselves at the mercy of sour industrial relations
and a higher incidence of strike action, arguably caused by the legal, and to a certain extent, political
immunity they receive.
To conclude, Conservative governments since 1979 have actively pursued widespread industrial
relation reforms, prompted by the high levels of unemployment and new free market principles. The
justifications for these reforms are plenty and some inevitably tend to be of a contentious nature. However,
even though the evidence to back the success of these reforms is difficult to analyse, the present nature of
industrial relations seems to have shifted towards co-operation, hence creating a more efficient labour
market and improving Britain’s international competitiveness.