The Social Contract was a policy implemented by Harold Wilson’s Labour Government in 1970s Britain.
The Social Contract was an agreement between the British Government and the Trades Union Congress (TUC) by which the government agreed to adopt economic and social policies favoured by the trade unions in exchange for voluntary wage control. The Social Contract originated from the joint TUC-Labour Party discussions and was outlined in a pamphlet published in February 1973 in the context of the Conservative Governments implementation of a statutory wage freeze.
The document detailed that the Labour Party would enforce price and rent control, public transport and housing subsidies, improvements in social welfare provisions, measures to redistribute income and wealth, public control of capital investment, an active labour market policy, the maintenance of full employment by encouragement of economic growth, repealing the repressive trade union legislation passed by the Conservative government, and the fostering of industrial democracy. There was no incomes policy which was favoured by the Trade Unions. The successful 1974 Labour manifesto led to Harold Wilsons rise to Prime Minster. The TUC successfully implemented their side of the agreement from 1974 ensuring wage increases did not exceed the agreed level.
However, the government immediately began to marginalise these commitments in favour of preferences for incomes policy and public expenditure cuts, which has led the Social Contract to be described as the ‘Social Contrick’. 7 September 1977 the TUC withdrew from the agreement, demand returned to free collective bargaining. The politics of depoliticisation was employed to introduce incomes policy in July 1975 and public expenditure cuts from the 1976 public expenditure White Paper in December 1975.
Although the £6 wage policy held reasonably well for a period and reaction to the cuts in the 1976 public expenditure White Paper were effectively silence, it did not significantly delay a political crisis that presented itself as the Winter of Discontent in 1979. A crisis which tainted the Labour Party’s respect and appeal significantly due to this betrayal of working-class values.
Tarling, Roger, and Frank Wilkinson. “The Social Contract: Post-War Incomes Policies and Their Inflationary Impact.” Cambridge Journal of Economics, vol. 1, no. 4, 1977, pp. 395–414. JSTOR, www.jstor.org/stable/23596385.
Rogers, C. (2009). From Social Contract to ‘Social Contrick’: The Depoliticisation of Economic Policy-Making under Harold Wilson, 1974–75. The British Journal of Politics and International Relations, 11(4), 634–651. https://doi.org/10.1111/j.1467-856X.2009.00382.x