Obituary: Lord Callaghan

Labour prime minister who, uniquely, held all four of the great offices of state, but whose consensus politics were washed away in the late 1970s

It was a matter of quiet satisfaction to James Callaghan, who has died aged 92, that his record contained one achievement that none of the most celebrated 20th-century prime ministers - Lord Salisbury, David Lloyd George, Winston Churchill, Clement Attlee, Harold Wilson, Margaret Thatcher - could match. He had held all four of the great offices of state: chancellor of the exchequer from 1964 to 1967, home secretary from then until 1970, and the job he most coveted, foreign secretary, from 1974 to 1976, when Wilson's unexpected resignation opened the door to the premiership for him.

In the light of that long, comprehensive record, it seems unjust that the moment for which he is still perhaps best remembered was one of his bleakest. In January 1979, Callaghan returned from a week of sun and statesmanship in the Caribbean to a chilly London. At the Guadeloupe summit he had been working on relaxed and equal terms with President Jimmy Carter of the United States, President Valéry Giscard d'Estaing of France and Chancellor Helmut Schmidt of West Germany, great men communing with great men. Afterwards he took a few days' rest in Barbados.

The descent from this high world stage to the baying press pack at Heathrow airport was painful and galling. This was the winter of discontent, in which strike followed strike, essential services foundered, uncollected rubbish littered the streets, and at one point, a strike in Liverpool meant that the dead went unburied. "Crisis, what crisis?" was how the Sun's headline reported the prime minister's press conference. In fact, though that phrase would be hung round his neck for the rest of his life, he had never said it. Yet what he did say was trouble enough. "I don't think that other people in the world would share the view that there is mounting chaos," he growled at reporters. For once, his sure political touch had deserted him.

That maladroit afternoon at Heathrow, followed by electoral defeat and his party's long spell in the wilderness, left a persisting stamp of failure on the Callaghan premiership. And to make it worse, the origins of the episode had been very much Callaghan's doing. It was his decision, in 1978, against the advice of his chancellor Denis Healey, to try to impose a further pay norm of just 5%. It was he who deferred the expected election of October 1978 to the following spring. He hoped for some economic recovery, but above all, he feared that an October election would produce another hung parliament leaving Labour still dependent on fixes and deals. As it transpired, the winter of discontent and a general sense that Labour's allies and paymasters in the unions were running the country did for his party and opened the way to 18 years of Conservative rule.

Leaving power on that note tarnished his record. Subsequent reassessments have largely agreed that Labour's fourth prime minister deserved better than that. Healey, who worked more closely with him than most, rated him second only to Attlee among Labour leaders.

Leonard James Callaghan - still Leonard or Len when he entered the Commons - was born in Portsmouth. His father, who had been a chief petty officer in the Royal Navy, died suddenly when the boy was nine, of a heart attack, leaving his mother to struggle on without the aid of a pension. His education, culminating at the Portsmouth Northern secondary school, was patchy and inadequate, a fact of which he sometimes spoke bitterly and which made the right to a decent education one of his great political passions.

That, for purely financial reasons, he never went to university was one of the blights of his life. The Callaghans were Baptists. It was through his Sunday school teaching that he met his wife Audrey in Maidstone, Kent, where in 1929 he had found a job as a clerk in an Inland Revenue office. Here he became a smart, enthusiastic and disputatious trade unionist.

In 1936 he gave up his job in the Inland Revenue and became a full-time union official. He was also now increasingly involved with the Labour party. In June 1940, he volunteered for the Royal Navy, though the union contrived for a while to hang on to his services, and even thereafter he was disappointingly far from the thick of the action.

By now he hoped to make his future in parliament. In the 1945 Labour landslide he took Cardiff South off the Conservatives. By 1947 he was on the front bench as parliamentary secretary for transport; after Labour's narrow election victory three years later, he was parliamentary and financial secretary to the Admiralty.

That ended with Labour's defeat the following year, but he prospered in opposition, as opposition spokesman on transport from 1951 to 1953, and on fuel and power until 1955. Then, following Labour's defeat in the 1955 general election, in 1956 he became shadow colonial secretary and developed a useful sideline as a fluent and personable TV performer. Labour went down to a third successive election defeat in 1959 and he remained with colonial affairs until 1961, when he became shadow chancellor.

When Labour had lost in 1951, Callaghan was just short of 40. By the time the party returned to power, Callaghan was well into middle age. He had run without much success in 1960 as a compromise candidate for the deputy leadership, and, though promoted by the then Labour leader Hugh Gaitskell to shadow chancellor, he was very much the outsider in the leadership contest with Wilson and George Brown which followed Gaitskell's death in 1963.

With Labour back in office in 1964 with a tiny majority, Wilson installed him as chancellor. He inherited a negligently managed economy and a balance of payments deficit of £800m, a frightening sum in those days and requiring an emergency budget with stringent public spending cuts and a hike in interest rates to stem a panic selling of sterling.

In 1966, Labour was re-elected with a 100-seat majority. Callaghan returned to the Treasury - slightly sadly perhaps, as his deepest interest was always in foreign affairs - and again was soon engulfed in a crisis that led to devaluation in October 1967. Labour had long been taunted by the Tories as the party of devaluation, which made them delay the decision far longer than was advisable, and Callaghan was deeply upset at being its agent now. He offered his resignation, which Wilson refused, but insisted on leaving the Treasury. A straight swap with Roy Jenkins made him home secretary.

Jenkins's term in that office had done much to establish what was later tagged "the permissive society". But Callaghan was never a man for permissive societies: his background in working-class Portsmouth, his bent for the practical rather than the philosophical, and a sense of nonconformist morality which persisted when his churchgoing days were over, marked him down as conservative rather than as progressive. His inclinations on law and order were cautious too, all the more so since he had served while in opposition as the adviser to the Police Federation. But his biggest preoccupation was Northern Ireland, to which he dispatched British troops in August 1969. (Some ministers gloomily predicted they might need to stay for as long as six months.)

His calm, constructive approach won him admirers in disparate political camps. "Jim Callaghan," said Healey in his memoirs The Time Of My Life, first published in 1989, "handled the situation with incomparable skill and understanding, both on the spot and in Westminster."

Earlier that year his edgy relations with Wilson spilled into outright hostility when he felt himself bound to oppose the plans for trade union reform in Barbara Castle's white paper called In Place Of Strife. Callaghan, the old union hand, was opposed to the use of new laws to shackle unions. He wasn't against reform, but was certain that those specific reforms were not going to work. Additionally, as the party's treasurer, he feared the loss of union funding.

Accordingly, to his leader's fury he spoke and voted against the white paper when it came up for debate at the party's national executive council. He bore, with his usual fortitude, his consequent expulsion from Wilson's inner cabinet, though much later, reflecting perhaps on the calamitous winter of 1978-79 he came to believe that he might have been wrong on this issue.

Labour's unexpected defeat at the 1970 election at the hands of Edward Heath's Conservatives pitched Callaghan, now 58, back into the impotent opposition, with a sense by now that time might be running out. At one point it seemed he might leave British politics to run the International Monetary Fund (IMF), but he didn't.

He was shadow home secretary from 1970 to 1971, opposition spokesman on employment from 1971 to 1972 and shadow foreign secretary from 1972 to 1974. And when Labour returned to office in 1974, a reconciled Wilson gave him the foreign secretaryship, and the chance to develop his interests: especially Africa, the Atlantic alliance, and its changing nature as Britain grew closer to Europe, and other causes from defence and security to third world poverty.

He engineered the successful result of the 1975 referendum which was supposed to settle for good Britain's place in the European community; it was he who, by inviting West Germany's Social Democrat chancellor, Helmut Schmidt, to address a Labour party special conference on the issue swung Labour out of its long coolness on Europe to positive support. And with Wilson's surprise resignation in March 1976, he became the overwhelming favourite for the succession. He won the deciding round on April 5 -nine days after his 64th birthday.

"Prime minister! And I never went to university!" he is said characteristically to have exclaimed when he heard the result.

But, just as when he had arrived at the Treasury nine years earlier to face a burgeoning balance of payments crisis, his prospects now were unenviable. Inflation had broken all records under the Wilson government. The scandal around the former Labour minister John Stonehouse and his defection and imprisonment obliterated Labour's majority as he arrived. The left was perpetually restive with a new leader too closely identified for their tastes with the party's right - all the more so when in his opening reshuffle Callaghan sacked one of those it loved most, Barbara Castle.

And once again the economy was running into deep trouble - so deep that Callaghan's chancellor Healey was forced in the autumn of Callaghan's first year in office to turn to the IMF for help and to pay the alarming price, in terms of severe public spending cuts, which the IMF demanded. But Callaghan adroitly pulled together a majority within the cabinet in support of the chancellor. "The consummate skill with which he handled the Cabinet was an object lesson for all prime ministers," a grateful Healey wrote later.

The polls at this stage were putting the Tories more than 20 points in the lead, with fewer than 20% of voters approving the government's record. But as time went on the old navy man, as true as his father to the motto "steady as she goes", began to turn things around.

Conscious, as others sometimes all too obviously and woundingly were, of his lack of intellectual firepower, Callaghan had surrounded himself with shrewd academic advisers, while Nuffield College, Oxford, had perceptively made him a visiting fellow.

Now, as prime minister, he continued that practice, recruiting bright young people who furnished some of his more offbeat ideas and drafted some of his most telling speeches. He might sometimes rail at the other foibles of middle-class intellectuals, but he saw the value of having such people around.

His call in a speech at Ruskin College, Oxford, for a radical lifting, across the board, of educational standards and the reinstatement of traditional values like a knowledge of the three Rs, reflected both his own instincts and sense of the deprivation he had suffered from incompetent teaching, and the guidance of close advisers.

His then son-in-law Peter Jay closely influenced his near-repudiation of some favourite Keynesian teaching in a speech which was later seen by some as a foretaste of Thatcherite economics. His choice after Anthony Crosland's early death in 1977 of the young David Owen as foreign secretary hardly fitted Callaghan's reputation for playing safe; his appointment of Jay as ambassador to Washington in 1977 was even more unexpectedly dashing and controversial.

But Labour was making progress under his stewardship. The carefully crafted pay policy agreed with trade union leaders, his characteristically consensual response to runaway inflation, was bringing inflation back under control. By January 1978 the rate was down to single figures for the first time since October 1973.

The pact with David Steel's Liberals had disposed of the constant threat that the government might collapse at any moment. And the people were coming to like their new prime minister. They liked his straightness after the twists and turns of the Wilson years. They liked his candour. Where Wilson seemed to aspire to omniscience, Callaghan was humanly fallible. "I'm afraid I don't know the answer to that," he would sometimes say to some hopelessly detailed Commons question.

By the autumn of 1977, Labour's recovery looked quite astonishing, with the party now level pegging on the polls with the Tories, its record approved by 41% of electors, and the prime minister's own popularity ratings topping 50%. A year later, after he had turned down the option of an October election, Labour were well ahead on the polls, with the PM's rating pushing up towards 60%.

And then the dam burst, and Callaghan and his government, along with the gentler, consensual, non-confrontational approach that he represented, were swept away for good by the tide of triumphal Thatcherism.

He stayed on as leader after his defeat in May 1979, while the party indulged in a bout of vindictive blood-letting which came very close to breaking it. Callaghan himself was the target of much of the vitriol. "Why does the Guardian keep running headlines saying I've been humiliated at the NEC?" he once complained to this newspaper. "Just look at the numbers: I'm certain to be humiliated." He seems to have hoped that by staying in post and taking the flak he could boost the prospects of Healey, the obvious choice as leader when passions abated.

But his hand was forced by the party's decision to switch the choice of leader from the party's MPs to an electoral college, where the unions would command 40% of the vote, the constituency parties 30% and the parliamentary party 30% also. So he stepped down to ensure a contest under the old system, not the new. But the tactic failed: on November 4 1980 the party's MPs chose Michael Foot rather than Healey.

Jim Callaghan remained in the Commons for a further seven years. He was Father of the House - its respected Oldest Inhabitant - through the 1983 parliament. After that he gave up the seat he had represented in Cardiff for more than 40 years and went to the Lords. Now he could spend more time, as he had long dreamed of doing, on his Sussex farm and with his family.

He began to display a new serenity which justified at last the affectionate term "Sunny Jim". It had been a description which surprised those around him over the years who had frequently found him to be tetchy and even bruising: "A bit of a bully,"his victims sometimes said.

He spoke rarely, though tellingly. During the 1987 election campaign he surprised and dismayed his successors in the party leadership with a full-blooded speech against Labour unilateralism on defence. He celebrated his 80th birthday, then his 90th. He still appeared at Westminster for both formal and informal occasions, often supported by Margaret, Baroness Jay, his elder daughter, who was the party's leader in the Lords. These late days were clouded, though, by the illness of his wife Audrey, to whom he remained incomparably devoted, as she was to him. Her death on March 15 after a long and distressing illness seemed to knock the remaining fight out of him.

He is survived by his two daughters, Margaret and Julia, and his son Michael.

· Leonard James Callaghan, Baron Callaghan of Cardiff, statesman, born March 27 1912; died March 26 2005

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David McKie

The GuardianTramp

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