Editing Winter of Discontent (section)

====Phase III====
On 15 July 1977, the [[Chancellor of the Exchequer]] [[Denis Healey]] announced Phase III of the incomes policy in which there was to be a phased return to free collective bargaining, without "a free-for-all". After prolonged negotiations, the TUC agreed to continue with the modest increases recommended for 1977–78 under Phase II limits and not to try to reopen pay agreements made under the previous policy, while the government agreed not to intervene in pay negotiations. The [[Conservative Party (UK)|Conservative Party]] criticised the power of the unions and lack of any stronger policy to cover the period from the summer of 1978. [[Disinflation|The inflation rate continued to fall]] through 1977 and by 1978 the annual rate was below 10 per cent.<ref name=hay/>

At the end of the year [[Bernard Donoughue]], Callaghan's chief policy advisor, sent him a memo analysing possible election dates. He concluded that the following October or November would be the best option, as the economy was likely to remain in good shape through then. After that, he wrote, the outlook was unclear, with pressure from the government's own incomes policy likely.<ref name="The Heat of the Kitchen">{{cite book |last=Donoughue |first=Bernard |author-link=Bernard Donoughue, Baron Donoughue |title=The Heat of the Kitchen: An Autobiography |url={{GBurl|yE4KAQAAMAAJ|page=298}} |page=298 |date=2003 |isbn=978-1-84275-051-3 |publisher=Politico's}}, cited at {{harvp|López|2014|page=[{{GBurl|LVy1DAAAQBAJ|page=61}} 56–57]}}</ref>