May 8, 2010 3:00 am
Britain's last hung parliament, in 1974, offers strong parallels with the present situation, as well as some sharp distinctions.
As now, the minority Labour government that resulted took office at a time of economic crisis. Oil prices had quadrupled, inflation was rocketing, wage rises outstripped prices and the country had its worst trade deficit.
Britain had been plunged into a three-day week by a divisive miners' strike that had led Edward Heath, the Conservative prime minister, to run the election on the theme of "who governs the country?"
But in contrast to the present situation, in which the Conservatives could achieve a Commons majority with Liberal Democrat support, there was no chance in 1974 of an alliance of the main parties producing a clear majority.
When Heath resigned in March, Harold Wilson formed a minority government and instantly settled the miners' strike. Labour then produced a Queen's Speech that declared that overcoming the country's economic difficulties was "the highest priority".
However, the Budget that followed, while broadly neutral fiscally, combined sharp tax rises with record pension, child allowance and benefit increases, plus a rent freeze and £500m of food subsidies. It was followed in July by a second Budget that extended the giveaways and cut VAT, aided by a loan from Iran.
"The first months of the new government were characterised by our spending money which we did not have," Joel Barnett, the then chief secretary to the Treasury, later said, a situation that ultimately led to Britain's recourse to the International Monetary Fund in 1976 and not something the politicians today will want to repeat.
While David Cameron hopes to be able to form a stable government, it was always clear in 1974 that Wilson was likely to go for an early second election.
As early as April, he was contemplating a June or October poll, according to Bernard (now Lord) Donoghue, his then policy unit head in Downing Street.
Following the budgets and a string of green and white papers promising legislation on everything from North Sea oil to devolution for Scotland and Wales, Wilson opted to go in October.
Despite being a minority government, Labour passed 35 bills in the 184 days of the first parliament. Wilson attempted to solve the bitter industrial strife through the so-called "social contract" that was endorsed by the TUC in September. The unions agreed to moderate pay claims in return for a "social wage" - the benefit increases, rent and price controls.
The oil price rises had hammered economies around the world; the FT share index tumbled more than a third from 313 in March to 202 in September. And when Wilson went to the country, ending the shortest parliament since the 19th century, the polls proved illusory, Labour gaining a majority of only three seats. The parties today clearly hope for a much longer parliament.
Wilson's bumpy ride
March 4 1974 Harold Wilson forms minority Labour government after Edward Heath fails to do a deal with the Liberals, having lost election amid the three-day week and miners' strike
March 6 Miners settle
March 12 Queen's Speech declares "highest priority" is overcoming economic woes, which include rocketing inflation and worst balance of payments deficit yet seen March 26 Budget raises taxes but also provides record pension, child allowance and benefit rises
June Trades Union Congress agrees "social contract" with government to restrain pay claims in return for improved "social wage" affecting benefits, rents, price controls and support for public services
July Dispute over private beds in NHS. Harland and Wolff yard nationalised to save 12,000 jobs. Second Budget, with £500m loan from Iran, sees VAT cut and rent and rate rebates. Polls show Labour lead
August Green and white papers prepare ground for an election
September TUC formally backs social contract. Labour ahead in polls. Wilson calls election
October 10 Wilson wins with majority of only three
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