Editing Winter of Discontent (section)

====Five per cent limit====
At a May 1978 Downing Street lunch with editors and reporters from the ''[[Daily Mirror]]'', Callaghan asked if they believed it was possible that the planned Phase IV would succeed, as he believed it would if the unions and their members understood it was the best way to keep Labour in power. Most told him that it would be difficult, but not impossible. [[Geoffrey Goodman]] disagreed, saying in his view it would be impossible for the union leaders to keep their membership from demanding higher pay increases. "If that is the case, then I will go over the heads of the trade union leadership and appeal directly to their members—and the voters", the prime minister responded. "We have to hold the line on pay or else the government will fall."<ref name="Goodman 220–21">{{cite book |last1=Goodman |first1=Geoffrey |author-link1=Geoffrey Goodman |title=From Bevan to Blair: Fifty Years Reporting from the Political Frontline |date=2003 |publisher=Pluto Press |isbn=978-0-7453-2178-3 |pages=220–21 |url={{GBurl|VqlZAAAAMAAJ}}}}, cited at {{harvp|López|2014|pages=[{{GBurl|LVy1DAAAQBAJ|page=60}} 60–61]}}</ref>

On 21 July 1978 [[Chancellor of the Exchequer]] [[Denis Healey]] introduced a new white paper which set a guideline for pay rises of 5 per cent in the year from 1 August. Callaghan was determined to keep inflation down to single figures; however, trade union leaders warned the government that the 5 per cent limit was unachievable, and urged a more flexible approach with a range of settlements between 5 and 8 per cent. [[Terry Duffy]], president of the AUEW, described the limit as 'political suicide'. Healey also privately expressed scepticism about the achievability of the limit. The TUC voted overwhelmingly on 26 July to reject the limit and insist on a return to [[collective bargaining|free collective bargaining]] as they were promised.<ref name="Conroy">{{cite book |last1=Conroy |first1=Harry |title=Callaghan |date=2006 |publisher=Haus Publishing |isbn=978-1-904950-70-7 |url={{GBurl|txFwUINNlpAC|page=109}} |pages=109–124}}</ref><ref name=hay/>

It had been widely expected that Callaghan would call a general election in the autumn, and that the 5 per cent limit would be revised if Labour won. At a private dinner before that year's TUC conference, Callaghan discussed election strategy with the leaders of major unions. He asked whether he should call an autumn election; with the exception of [[Hugh Scanlon]], the president of the [[Confederation of Shipbuilding and Engineering Unions]], they all urged him to call for one no later than November. Any later, they said, and they could not guarantee their memberships would remain on the job and off the picket line through the winter.<ref name="Goodman 226–27">{{harvp|Goodman|2003|pages=226–27}}, cited at {{harvp|López|2014|pages=[{{GBurl|LVy1DAAAQBAJ|page=60}} 60–61]}}</ref>

Unexpectedly, however, on 7 September, Callaghan announced that he would not be calling a general election that autumn but seeking to go through the winter with continued pay restraint so that the economy would be in a better state in preparation for a spring election, therefore the 5 per cent limit stood. The pay limit was officially termed "Phase IV" but most referred to it as "the 5 per cent limit". Although the government did not make the 5 per cent limit a legal requirement, it decided to impose penalties on private and public government contractors who broke the limit.<ref name=hay/><ref name="Davies">{{cite book |last1=Davies |first1=Andrew J. |title=To Build a New Jerusalem |date=1996 |isbn=978-0-349-10809-4 |url={{GBurl|ClNyQgAACAAJ|page=363}} |publisher=Abacus |pages=363–368}}</ref>