New Labour Policy, Industrial Relations

and the Trade Unions

DOI: 10.1057/9781137495754.0001
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DOI: 10.1057/9781137495754.0001
 New Labour Policy,
Industrial Relations
and the Trade Unions
Steve Coulter
LSE Fellow in the Political Economy of Europe
at the London School of Economics

DOI: 10.1057/9781137495754.0001
© Steve Coulter 2014
Softcover reprint of the hardcover 1st edition 2014 978-1-137-49574-7

All rights reserved. No reproduction, copy or transmission of this

publication may be made without written permission.
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save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The author has asserted his right to be identified as the author of this work
in accordance with the Copyright, Designs and Patents Act 1988.
First published 2014 by
PALGRAVE MACMILLAN
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registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY10010.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.

ISBN: 978–1–137–49575–4 PDF

ISBN: 978-1-349-50496-1

A catalogue record for this book is available from the British Library.
A catalog record for this book is available from the Library of Congress.
www.palgrave.com/pivot
doi: 10.1057/9781137495754
 Dedicated to Sunita, and my parents

DOI: 10.1057/9781137495754.0001
 Contents
List of Illustrations vii
1 Introduction: Political Trade Unionism
in a Cold Climate 1
2 The Political Economy of UK Industrial
Relations: A Theoretical and Historical
Overview 22
3 Loosening Party-Union Ties: Clause 4 and
OMOV 45
4 ‘Insider’ Lobbying in Action: The TUC
and New Labour’s First Term Agenda 71
5 Political Unionism and Political Exchange
in New Labour’s Second Term 103
6 Conclusion: Political Trade Unionism
Reconsidered 131
Bibliography 140
Index 151

vi DOI: 10.1057/9781137495754.0001
 List of Illustrations
Figure
5.1 Opinion polling on voters’ attitudes to trade
unions and political parties 127

Tables
1.1 Union influence over the Labour Party:
three methods 9
1.2 The ‘modernisation’ of the TUC and
Labour Party 10
1.3 New Labour’s options on the Union-Party link 14
3.1 Delegations and voting strengths of the
ten largest unions at the Labour Party
conference in 1994 53
3.2 Union voting on OMOV at Labour’s
September 1993 conference 54
3.3 Union voting on Clause 4 abolition at
Labour’s special conference on 29 April 1995 56
3.4 Percentages of voters relative to Labour’s
position on nationalisation and privatisation,
1983–1997 58
3.5 Percentages of voters relative to Labour’s
position on unemployment and inflation,
1983–1997 58
3.6 Percentages of voters relative to Labour’s
position on taxes and spending, 1983–1997 59

DOI: 10.1057/9781137495754.0002 vii

 1
Introduction: Political Trade
Unionism in a Cold Climate
Abstract: Often considered hostile or indifferent to the
concerns of trade unions, Tony Blair’s ‘New Labour’ in
fact enjoyed a complex relationship with unions based
on mutual reliance and suspicion. Far from pandering
only to the needs of business, Blair’s government
pursued a distinctive social-democratic agenda and gave
unions a genuine, if limited, role in the design of this.
The introductory chapter to the book sets out several
alternative pathways for unions to exert influence over
Labour governments and argues that one of these, ‘insider
lobbying’ by the Trades Union Congress (TUC), was crucial
in steering Blair’s free market agenda in a more collectivist
direction.

Keywords: industrial relations policy; insider lobbying;

New Labour; trade unions; TUC

Coulter, Steve. New Labour Policy, Industrial Relations and

the Trade Unions. Basingstoke: Palgrave Macmillan, 2014.
doi: 10.1057/9781137495754.0003.

DOI: 10.1057/9781137495754.0003 
 New Labour Policy, Industrial Relations and the Trade Unions

This book examines whether, and if so how, trade unions in liberal

market economies (LMEs) can influence centre-left governments over
employment relations policies. It does this through an analysis of the
relationship between the TUC, the UK’s ‘peak’ trade union association,
and Blair’s ‘New’ Labour Party from the mid-1990s to the end of Blair’s
second term in government in 2005. Much of the academic literature
from the industrial relations, political science and political economy
traditions suggests that the institutional framework of LMEs negates
any trade union influence over policymaking. However, the evidence
of political interaction between the TUC and Labour to be presented in
this book suggests otherwise.
The problem the TUC faced is that peak labour in highly liberalised
economies such as the UK, with ‘majoritarian’ political constitutions
(Lijphart 1999) and ‘pluralist’ systems of interest representation, which
together insulate governments from interest groups like unions, have
very limited mechanisms for influencing governments over policies
affecting organised labour. The absence of institutions for coordinated
bargaining in the labour market and lack of access points in the political
system severely limits their ability to steer government policy in a pro-
union direction.
Of course, in ‘normal’ circumstances the TUC could have expected
to gain leverage over policymaking by default whenever the left-leaning
Labour party was in power. This was the experience of most Labour
governments in the twentieth century, particularly during the UK’s
‘corporatist’ period of the 1960s and 1970s, when unions were consulted
widely by Labour politicians as part of the highly institutionalised inter-
play of producer groups and the state (Schmitter 1974). It owes to the
quid pro quo which normally prevails between unions and left parties,
which is a form of ‘political exchange’, whereby the former provides votes
and support in return for labour-‘decommodifying’ policies when the
latter are in government (Crouch and Pizzorno 1978, Esping-Andersen
1991). In the UK this relationship was strengthened further by historic
links between party and unions which were sustained by an enduring
web of institutional ties: the Labour Party had been founded by trade
unions in the nineteenth century to provide political representation for
organised labour and the two had had a contentious but close alliance
ever since (Minkin 1991).
However, the election of Blair as leader of the opposition Labour Party
in May 1994 changed this. Blair broke radically with ‘Old’ Labour’s pro-

DOI: 10.1057/9781137495754.0003
 Introduction 

trade union past by publicly distancing the party from organised labour.
He made it plain that globalisation made socialism impossible and
implied that henceforth employers, not unions, were Labour’s preferred
interlocutors: ‘Macro-economic policy must be kept tight, disciplined
and geared to stability ... Trade unions will be treated with fairness, but
no special favours’ (Blair 1996: 122–123). Many of the institutional ties
linking unions with parties were ostentatiously dismantled (Russell
2005). Policy positions espoused by Blair’s ‘New’ Labour in opposition
pledged to reinforce, rather than undermine or attempt to fundamentally
alter, the liberal market institutions of the UK’s economy, which for vari-
ous reasons are inhospitable to unions (Crouch 1997: 352). Several close
observers of the party-union alliance predicted its imminent demise
(Dorey 1999: 203, Ludlam 2001: 129).
The expectation was therefore that New Labour in government (from
May 1997 onwards) would maintain its distance from unions while
implementing the market-making policies suggested by its pro-business
rhetoric. The TUC would continue to be shut out of the political system
with negligible influence over policy outcomes. This would be consist-
ent with the gloomy prognosis for organised labour in highly liberalised
economies contained in much of the contemporary literature from the
political science and industrial relations tradition (cf.: Ferner and Hyman
1994, Kitschelt 1994, Piazza 2001, Martin and Ross 1999, Scharpf 1991).
This view rests, in part, on the sharp decline in union power which
has taken place since corporatism collapsed in the UK in the late 1970s.
Membership of TUC-affiliated unions in 1979 had stood at a high water
mark of 13.3m, or more than 54 per cent of the workforce. The influ-
ence of industry-level bargaining and the wages councils meant that
approximately 85 per cent of the working population were effectively
covered by collective pay-setting mechanisms. But by 2001 membership
was down to 40 per cent or 7.6m and union density was less than 30
per cent (Howell 2005: 131). Weak unions make less attractive bargaining
partners for centre-left political parties seeking the votes and quiescence
of organised labour, eroding the entire basis for political exchange.
On the other hand the UK is not the only advanced capitalist country
that has seen membership of trade unions dwindle since the 1970s: 23 out
of 30 countries surveyed by the Organisation for Economic Co-operation
and Development (OECD) saw falls in union density over the period
1970–2000, although the UK saw a sharper than average decline in
bargaining coverage.1 Much analysis has therefore focussed on the role of

DOI: 10.1057/9781137495754.0003
 New Labour Policy, Industrial Relations and the Trade Unions

nationally-specific institutions in accounting for variations in political/

economic outcomes affecting the environment for political exchange.
Two sets of institutions are particularly important.
First, labour market institutions determine the role of unions in the
political economy and their ability to act as veto players over labour
market reform. The UK’s labour market institutions are those of a LME
where wage and other forms of co-ordination between economic actors
are left largely to the market (Hall and Soskice 2001), producing decen-
tralised, un-coordinated bargaining. This deprives unions of an impor-
tant institutional role in the political economy and means that they have
to find other issues with which to try and engage politicians.
Countries also vary significantly in the political systems under which
they are governed and this has implications for the ability of inter-
est groups to gain access to policymakers. The UK is a ‘majoritarian’
political system, with few veto players and where policymaking is highly
centralised by powerful executives in usually single-party governments
(Lijphart 1999). It has, consequently, a pluralist style of interest represen-
tation where socio-economic groups are kept at bay by government and
are obliged instead to seek influence through indirect means.
Effectively, therefore, the UK’s LME-style micro-economic institu-
tions in the labour market should undermine the role of unions in the
political economy, while the configuration of its governing institutions
ought to limit their ability to lobby politicians to change this. To make
matters worse, political exigencies saw New Labour publicly shun the
trade union link to court business instead. The outlook for unions under
New Labour in the UK should therefore have been significantly worse
than for unions in other nations in similar situations: an ostensibly
centre-left government indifferent to their demands and seeking to
further marketise economic relations. However, three pieces of evidence
question this:
1 New Labour’s 1997 General Election Manifesto commitments on
industrial relations were substantially unaltered from the manifesto
on which it fought (and lost) the previous election of 1992, despite
the party apparently distancing itself considerably from the unions
during the interlude. For example, eight out of the nine industrial
relations policies which appeared in 1992 were also present in
1997.2 On the other hand, of the 37 separate policy commitments in
the economy, industry and welfare sections only 5 appear in both

DOI: 10.1057/9781137495754.0003
 Introduction 

manifestos. According to two leading analysts: ‘Labour moved

sharply rightwards with, for the first time in postwar history, a
preponderance of right wing positions over left wing ones’ (Bara
and Budge 2001: 594). What is striking, therefore, is the degree
to which New Labour’s zeal in distancing itself from its more
collectivist Old Labour predecessor did not appear to extend to
the actual content of its industrial relations program, despite its
union-sceptical rhetoric.
2 In its first term in government, New Labour’s industrial relations
program was enacted in full3 even though its main elements were
contrary to the stated preferences of employers. The main elements
of its program were: The Employment Relations Act (1999); the
creation of a National Minimum Wage (the UK’s first); and signing
the European Social Chapter. All of these were opposed, to varying
degrees, by employers.
3 There was an increase in the quantity of contacts between trade
unions, particularly the TUC, and New Labour politicians during
the party’s period in opposition to the Conservatives from 1994
to 1997 and in its first term in government (Marsh 2002, Marsh
and Savigny 2005). Marsh, Richards and Smith have suggested
that the TUC was regarded by New Labour as a valuable source of
technical advice on labour market issues and was accorded greater
consultation rights in return (2001: 207–208). Extracts from the
diary of Alistair Campbell, Blair’s communications director, reveal
first-hand the extent of contact between union leaders and senior
politicians over policy development (Campbell and Hagerty 2010).4
What tentative conclusions can be drawn from this? The first is that New
Labour in government overcame its apparent reluctance to deliver pro-
union policies, otherwise it would simply have dumped these along with
the rest of the ‘Old Labour’ baggage from 1992. This, in turn suggests
that the TUC, while clearly not enjoying anything like the prominence
under New Labour it had with previous Labour governments, never-
theless still had some success in securing union-friendly outcomes as
the main lobbyist for organised labour, as these were the policies that
it had campaigned for. Indeed, while many trade unionists predictably
complained of being sidelined by Blair, the verdict of John Monks (who
was TUC general secretary 1993–2003) was that, under Blair: ‘there have
been modest gains for unions’.5 Research interviews with New Labour

DOI: 10.1057/9781137495754.0003
 New Labour Policy, Industrial Relations and the Trade Unions

insiders carried out for this book show that the TUC leadership was
viewed as a trusted insider by the New Labour leadership6 and was
consulted widely on the design of policy and sometimes on its imple-
mentation.7
The second is that this ‘puzzle’ concerning the unexpected resilience
of union-party cooperation in the UK means the real picture may not
after all be a straightforward story of ‘majoritarian’/liberal states blocking
political exchange and ‘consensual’/corporatist states facilitating it, but
is instead something more complex. Although the institutions govern-
ing labour markets and systems of interest representation clearly vary
between states, entailing quite different challenges for unions in influenc-
ing policymaking, the evidence presented here suggests these constrain
but do not ‘imprison’ them, that is, unions retain the capacity to adapt
their strategies and organisations to respond to changing political and
economic pressures – even in ‘union-hostile’ liberal-market states.
Against this it may reasonably be argued that New Labour’s industrial
relations reforms did not go very far in reversing the profound imbal-
ance of power between capital and labour created by the Conservative’s
industrial relations reforms. New Labour remained committed to dereg-
ulated labour markets with weak institutional foundations for collective
employment rights (Howell 2004, 2005). Delivery of reform was marred
(from the point of view of the unions) by the government’s underlying
commitment to free markets (Smith and Morton 2001). It is also the case
that access and consultation tailed off during the second term after 2001,
and some employment policy initiatives originating from the European
Union and championed by the TUC were blocked or watered down.
Clearly, the UK was not transformed into a corporatist paradise for
trade unions by Blair. This does not, however, necessarily mean that
limited union-party cooperation was not taking place – merely that it
took place under a broad set of constraints which acted to ensure that
resulting industrial relations policy worked with, rather than against,
the grain of the UK’s existing set of political economy institutions. As
argued throughout this book, the liberal market institutions of the UK
economy, as well as the structure of the union movement itself, are
simply incompatible with the centralised and/or coordinated industrial
bargaining systems which prevail on much of the continent. Much as
many union leaders might have wished to see these institutions created
in the UK, this was simply unrealistic in view of the actually existing UK
economic model.

DOI: 10.1057/9781137495754.0003
 Introduction 

New Labour was painfully aware of the failure of UK corporatism

under the previous Labour government (1974–1979). It favoured instead
a decentralised style of ‘business unionism’ which made a virtue rather
than an evil of cooperation with employers and provided an insurance
policy for the party against future industrial militancy. By recognising
these constraints, and adapting its goals and strategies to accommodate
them, the TUC came into its own as a strategic actor and was able to forge
a role in the conception and implementation of policy. Acknowledging
the limited room for manoeuvre on industrial relations policy possessed
by Blair’s government is therefore essential for understanding the extent
of the TUC’s achievement in negotiating labour market initiatives from a
position of profound weakness.

Three models of union-party interaction

If trade unions did influence New Labour, then how was this influence
exercised, and through what channels? The heavy constraints on union-
party interaction in the post-corporatist era place a question mark over
whether ‘political exchange’ in the sense originally envisaged by Crouch
and Pizzorno (1978) and Esping-Andersen (1991) is the best descrip-
tion of what took place in the UK and elsewhere in the 1990s. Political
exchange, according to these authors, occurs where wage restraint in
pursuit of low inflation is traded by unions for pro-labour government
policies. However, such arrangements have been largely superseded by
moves to depoliticise monetary policy by handing responsibility for it to
independent central banks. When an independent central bank assumes
sole responsibility for controlling inflation, its main tool for securing
wage restraint is its credibility in not springing ‘surprise’ inflation on
wage earners rather than corporatist deals with unions, although a coor-
dinated bargaining system can certainly be helpful in getting wage setters
to respond appropriately to these signals (Franzese and Hall 1998).
Analysts of the Labour Party-union link in the domestic UK context,
on the other hand, point to an alternative arena for political exchange,
whereby it is the assets necessary for political campaigning which are
exchanged for pro-union policies, rather than cooperation on wage
restraint or other macro-economic goals (Quinn 2004: 2). However,
political exchange strategies by unions may carry electoral penalties for
Labour if union-sceptical, centrist voters judge the party to have been

DOI: 10.1057/9781137495754.0003
 New Labour Policy, Industrial Relations and the Trade Unions

captured by producer interests (Hopkin 2004: 633). A less visible, but still
potentially effective, route for unions to influence Labour was, of course,
simply to use their powerful position within the party’s governing and
policymaking structures to force its leadership to adopt a union-friendly
policy platform. However, the true extent of union influence within the
Labour Party is disputed (Minkin 1991); moreover, as Meg Russell (2005)
has demonstrated, under New Labour the party’s institutions were over-
hauled to reduce the influence of unions and activists.
The drawbacks of the two strategies outlined demonstrate the potential
for a third route, which I will refer to as ‘political unionism’. This activity
is less an institutionalised form of exchange and more an ad hoc process
of political engagement with policymakers over issues salient to organ-
ised labour. For Boreham and Hall, political unionism ‘has involved an
attempt to assert the power of the peak organisation of trade unions at the
macro-level of national political institutions, to participate in the forma-
tion of public policy and thus to influence the patterns of production and
distribution that characterise national economies’ (1994: 314).
Obviously, organised labour still needs to be able to offer strategic
assets to governments if politicians are to be persuaded to deal with
them. However, these assets are more likely to consist of things such as
offering policy advice, helping to manage the party-union relationship
and seeking to reduce many of the political negatives for Labour of its
association with trade unions. The ideal organisation to pursue politi-
cal unionism was the TUC, which attempted to lobby the New Labour
leadership directly as a trusted ‘insider’ in order to advance the unions’
cause (McIlroy 2000).
These instruments of union influence over Labour are not necessarily
mutually-exclusive – more than one method may be employed at any
one time. Nevertheless, there are good grounds for believing that insider
lobbying by the TUC produced superior results in terms of policy
outcomes. The three methods are summarised in Table 1.1.

The argument in a nutshell

Thus, the key questions I address in the following chapters are as follows:
1 To what extent were UK trade unions, and in particular the TUC,
able to exert influence on New Labour over employment policy
outcomes?

DOI: 10.1057/9781137495754.0003
 Introduction 

Table 1.1 Union influence over the Labour Policy: Three methods
. Political Exchange
. Party Institutions
. Insider Lobbying
(by the TUC)
The unions, as Labour’s main paymasters, exchange money
and other valuable political resources for influence over
party policy (Kitschelt , Quinn ).
Labour’s governance and policymaking institutions
(Conference, the National Executive Committee and
National Policy Forums) are dominated by unions to
various degrees through their voting strength, augmented
by their ability to act as a bloc (Russell ).
The TUC strategically positioned itself as the main credible
interlocutor between New Labour and its affiliated trade
unions and was able to play a part in the design and
implementation of policies (Heery , Ludlam and Taylor
, McIlroy ).

2 If they did influence policy outcomes, how was this influence

exercised? What instruments were employed by trade unions to
exert influence over the party? Which were most successful and
why?
In this and subsequent chapters, I will develop an argument that the
TUC’s organisation and political strategy were modified during the
1990s to respond to negative shifts in (1) the overall political economy
environment for unions; and (2) the preferences of New Labour towards
policy collaboration with unions. The sequencing of these changes is set
out in Table 1.2.
During the UK’s corporatist phase (period A) unions and politicians
(TUC1 and LP1) collaborated freely on economic and industrial poli-
cymaking through various tripartite bodies enacted for this purpose.
Labour’s close ties with the unions underpinned this collaboration,
so the UK’s underlying pluralist system of interest representation
presented few problems for unions in presenting their demands as
formal channels could simply be bypassed if they were not working in
favour of informal ones. This phase came to a halt in 1979 with the elec-
tion of Margaret Thatcher’s Conservatives, who dismantled corporatism
and froze unions out of both politics and the management of labour
markets. After initially opposing Thatcher and supporting a series of
strikes, the TUC began to try to engage, mostly unsuccessfully, with
the Conservative government through a process it called ‘New Realism’,
even though its basic goals and organising principles remained largely
unchanged (TUC2 in period B).

DOI: 10.1057/9781137495754.0003
 New Labour Policy, Industrial Relations and the Trade Unions

Table 1.2 The ‘modernisation’ of the TUC and Labour Party

Consultation on Party – Union stance/
Period policies? relationship
A. Post-war TUC Ù LP ‘Old’ TUC: corporatist. ‘Old’ Labour
economic Keynesian/corporatist.
‘Golden Age’ to

B. The UK TUC Ù LP ‘Old’ TUC => New Realism (fails).
economic ‘Old Labour’: preference-shaping
model in strategy, but also early moves to
transition: weaken the union link.
–
C. Blair’s election TUC ≠ LP ‘Old’ TUC: but moving to new
in , organising strategies. ‘Opposition
followed by New Labour’: office-seeking;
launch of ‘new neo-liberal, employer-friendly,
unionism’ suspicious of unions.
D. – TUC Ù LP ‘New’ TUC: Employer-friendly ‘New
Unionism’ of social partnership.
‘New Labour in government’:
neo-liberal, but willing to engage in
political exchange with unions.

KEY: Ù = political exchange or political unionism taking place

Meanwhile, the Labour Party’s response to four successive election

defeats after 1979 was to embrace Thatcher’s economic reforms and
distance itself from unions in order to court anti-collectivist swing
voters (LP2 in period C). Over the course of four successive parliaments,
Labour gradually moved from what was arguably a ‘preference-shaping
strategy’, where the distribution of voter preferences was generally to the
right of the party, to a ‘preference-accommodating’ strategy, where the
two roughly coincided (Hay 1999: chap 3).
Realising that their continued isolation from the state in the UK’s plural-
ist political system (where the two main parties were now committed to
neo-liberal economic policies) spelled disaster for organised labour, the
TUC launched a ‘New Unionism’ strategy in 1994, based on demonstrating
to Blair that the TUC was a credible potential bargaining partner for New
Labour in government. The TUC itself was reorganised, abandoning its
lingering attachment to corporatist labour relations and focusing instead
on lobbying for a narrower set of rights and privileges for unions based
around the employer-friendly notion of ‘social partnership’. This caused
a preference change by New Labour, which became more amenable to
policy collaboration with unions (LP2 to LP3). Party and unions therefore
DOI: 10.1057/9781137495754.0003
 Introduction 

reached a new equilibrium relationship within which the TUC was able to
secure some limited but concrete gains for unions (period D).
What made this possible? Although the UK’s liberal/majoritarian
institutions marginalise unions in the labour market and contrive to
distance them from politics they also encourage a ‘leadership’ style
of politics which grants a high degree of executive autonomy to the
prime minister and close advisers whose preferences (which for vari-
ous reasons were initially to ignore unions) were therefore potentially
amenable to being changed. A key element of the argument of this book
is that insider lobbying by the TUC was the most effective method
of influencing the New Labour government, given the nature of the
policymaking structure in existence. The empirical chapters which
follow test this proposition against the available evidence. However, at
this stage it is worth setting out the range of strategic assets controlled
by unions which they may deploy to try to persuade New Labour to
deal with them, as well as the preferences of the party leadership itself
towards overt collaboration.

Trade unions in liberal market economies

The political economy and industrial relations literature (discussed in
more detail in the next chapter) suggests that the union-party linkage in
a LME will come under severe strain as governing parties, particularly
those on the left, are forced to reach a new accommodation with capital.
Trade unions attempting to adapt to this will be faced with contradictory
impulses to accede to demands for flexible labour markets while continu-
ing to fight against ‘bad’ employers. ‘Exit’ from the relationship is posited
as the most likely result of this dilemma (Kitschelt 1994, Piazza 2001). I
argue instead that this analysis underestimates both the pull of ‘Loyalty’
as well as the unattractiveness of complete ‘Exit’ to both sides, which may
counteract these pressures to some extent. Possibilities for ‘Voice’ may,
paradoxically, be boosted since, as Crouch has argued, Voice flourishes
when options for Exit are ‘sticky’, not when they are absent or abundant
(1995: 68). This book explores the circumstances, if any, under which the
interests of unions and left parties in LMEs may coincide over reviving
political collaboration and trying to resolve doctrinal and policy differ-
ences through Voice in a non-corporatist industrial relations system.
Why might unions and left parties collaborate in the first place?
Under corporatism, the rationale for political exchange was relatively
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 New Labour Policy, Industrial Relations and the Trade Unions

straightforward. Left parties derived political benefits from unions

mobilising working-class voters as a social bloc. Unions did this on the
understanding that, once in office, the working classes would be the main
beneficiaries of a socialist program aiming to improve their lot through
policies geared towards ‘decommodifying’ labour (Esping-Andersen
1991). Meanwhile, trade unions would agree to moderate their claims for
better pay, conditions and benefits in order to allow social-democratic
governments to govern effectively and legitimately (Crouch and Pizzorno
1978). Underlying this was a political consensus that governments not
only could but also should act to maximise employment.
However, the erosion of corporatist labour relations because of the
introduction of monetarist macro-economic policy regimes and the
decline in class-based voting has eroded the political benefits of collabo-
ration for social-democratic parties, so these pursue more independent
and conservative policies and court other interest groups (Piazza 2001).
Kitschelt has even argued that left parties in Western Europe are now
only electable if they are able to demonstrate their independence from
organised labour (1994: 225). These developments produced an altered
set of incentives for both sides into the 1990s, without necessarily
destroying the entire basis for cooperation. For UK unions generally,
the loss of the privileged position they had under corporatism arguably
made political unionism more, not less, important in the 1990s. This is
because unions are both economic and political actors. On the one hand
the UK’s deep-seated tradition of voluntarism in industrial relations has
tended to imply a quid pro quo whereby the state refrains from interfer-
ing in bargaining systems and unions keep out of politics (Hyman 2001:
69). The reality, however, is that unions realise that they operate in an
economic and legal environment where the rules of the game are set
by politicians and so they maintain a vital interest in political organis-
ing geared to securing union-friendly outcomes from governments.
For instance, unions have abandoned their historic preference for the
negative legal immunities embodied in voluntarism to press for positive
rights, implying an acceptance of the need to be able to influence how
these rights are codified through law (Howell 2005: 159–160).
For the TUC in the 1990s this imperative was made more urgent
following the anti-union legislative onslaught under the Conservatives
and New Labour’s apparent reluctance to reverse this. The literature on
social movements has been adapted by industrial relations scholars to
explain how certain issues, particularly threats, are ‘framed’ by actors

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 Introduction 

(Frege and Kelly 2003: 13, 19–20). From this perspective the real decline
in union strength and influence was framed as a key challenge by the
TUC leadership, who deliberately counter-posed a responsible social-
partnership identity for UK unions against an older tradition of mili-
tancy. A return to the political-industrial mainstream was posited as the
best means to counter this.
The TUC’s general secretary, John Monks, put it this way: ‘It remains
axiomatic for the TUC that major national questions of labour market
policy are best solved through the engagement of government, the TUC
and CBI’ (2000: 17). This view was fully endorsed by the TUC’s General
Council, representing its member unions: ‘The best if not the only chance
we have of getting our basic aim of social justice is by the election of a
Labour government.’8 The TUC’s limited strategic goals in the run-up to
the 1997 election were therefore (1) to hold Blair to the 1997 manifesto
commitments on industrial relations and (2) to get the government to
foster European-style ‘social partnership’ (Coats 2005). However, the
mechanisms available for returning unions to the mainstream were less
straightforward.
The difficulties faced by interest groups such as trade unions in
majoritarian/pluralist political systems were noted earlier. An additional
political/constitutional issue for many UK unions was the absence of a
viable Exit option from the party-union relationship, as the majoritar-
ian, two-party system means there is no sustainable party to the left of
Labour to provide unions with an alternative political bridgehead.
An illuminating comparison can be made with the Scottish TUC (the
organisation representing Scottish trade unions) following the founda-
tion of the Scottish Parliament in 1999. Members of the Scottish Parlia-
ment (MSPs) are elected via proportional representation, which favours
coalition, rather than bare majority, governments and this arrangement
has fostered a number of alternative political parties, including the
Scottish Socialist Party which is well to the left of Labour and secured 6
seats out of 129 in the 2003 election. The Scottish Labour Party therefore
no longer enjoys a monopoly of representation of the labour interest in
Scotland, and it is interesting to note that the Scottish TUC has openly
opposed it on several occasions and publicly mooted ceasing funding
for Labour MSPs in protest at government policies towards the public
sector.9
New Labour’s potential payoff for continuing to engage with unions
was more complex, as it had multiple and often conflicting interests over

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 New Labour Policy, Industrial Relations and the Trade Unions

Table 1.3 New Labour’s options on the Union-Party link

Action Implications Benefits Costs
A. ‘Loyalty’ with Party-union link Continued party LP is fully exposed
‘voice’ stays in place funding by unions. to political fallout
and consultation Unions are potential from potential
on policy takes labour market reform union militancy.
place. partner.
B. ‘Loyalty’ No union-party Continued party No obvious costs.
without ‘voice’ divorce, but funding by unions.
no political LP is less exposed to
consultation political fallout from
either. unions militancy.
C. ‘Exit’ Party and unions LP has no exposure to LP must seek
sever all ties. political fallout from alternative sources
union militancy. of funding and
political support.

the issue. The party had to trade off its need for the resources and votes of
unions and their members against the political damage that might ensue
from an overly pro-union industrial relations policy which had tended
to be the quid pro quo for this once in office. Although Labour’s close
relationship with the unions had been electorally advantageous under
corporatism in the 1960s and 1970s, as it enabled the party to appear
as the best guarantor of industrial peace, union militancy during the
‘Winter of Discontent’ of 1978/1979 turned this into a liability (Alderman
and Carter 1994: 321).
Blair’s fear was that exercising Voice with the unions over and above
the minimum on previous occasions had too often proven futile, if not
damaging, to the country and his party, and hinted on several occasions
at Exit from the relationship, telling unions they would have ‘no special
or privileged place within the Labour Party’.10
New Labour’s strategic dilemma is illustrated in Table 1.3. Three
options for the party are posited. One (C) is complete Exit from the
party-union relationship, as occurred in Spain in the 1980s (Astudillo-
Ruiz 2001). But persisting with the link (Loyalty) presents the further
dilemma of whether to engage in Voice (A) or not (B).
So far, Labour has not pursued the Exit option and the party-union
relationship remains intact, albeit diminished, because the link contin-
ued to offer the party with a number of strategic assets which enhanced
party-union loyalty:

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 Introduction 

1. Votes
Notwithstanding the decline in class-based voting, members of trade
unions are still more likely to vote for parties of the Left than the Right.
Webb has calculated that the net effect of union membership on voting
behaviour (expressed as the percentage difference in rates of party align-
ments between members and non-members) averaged +13.8 per cent
between 1979 and 1987 (Webb 1992: 128, table 5.1a). Although significant,
this was down from +25.6 per cent in 1974 and Labour remained acutely
aware of its failure to harness this electoral bloc during the 1980s.

2. Political ‘Ballast’
Unions have provided stability for a party lacking the mass membership
of either the British Conservative Party or other European left parties.
For instance, centre-right unions helped to block an attempted takeover
of the party by the Bennite left in the 1980s (Hayter 2005: 5, 98–126).
An internal party memorandum authored by Minkin in the course of
the work of a review group set up in 1992 to consider party/union links
argued that ‘Trade unions tend to be ‘feet on the ground’ organisations
strongly concerned with practicability and deliverability, and with
preserving unity during periods of change and adversity.’11 Although
fewer union officials were elected to parliament as members of Parlia-
ment (MPs) in 1997 compared with 1992, virtually all 418 Labour MPs
belonged to trade unions, including 48 in the Transport and General
Workers’ Union(TGWU) alone (Butler and Kavanagh 1997: 206).

3. Finance/Organisation
On the eve of the 1997 General Election campaign unions still contrib-
uted 54 per cent of central party finances (Fisher 1997: 241–242). In
addition to this another £5m of union money was funnelled directly to
individual Labour parliamentary candidates that year (Taylor 1998: 293).
Logistical and financial support was channelled to the party via umbrella
organisations such as Trade Unions for a Labour Victory and, from 1996,
the Trade Union and Labour Party Liaison Organisation. ‘It is not really
too great an exaggeration to say that Labour’s (electoral) organisation is
provided by the unions’ (Webb 1992: 202). The party has subsequently
sought to reduce its reliance on union funding, with the probable aim
of increasing the viability of the Exit option. It has done this by moving
towards the Conservative’s model of sourcing funding from business
and wealthy individuals, rather than trade unions. However, subsequent

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 New Labour Policy, Industrial Relations and the Trade Unions

scandals over political donations, for instance ‘cash for peerages’ have
revealed the limitations of this approach and trade unions remain
Labour’s dominant source of finance (Heffernan 2007: 159).
The three strategic assets detailed above indicate the residual impor-
tance of Loyalty in sustaining the union-party relationship, despite the
abandonment of incomes policies and dismantling of corporatist labour
market institutions which had previously provided the main rationale for
policy concertation. They explain why Exit, despite its political attrac-
tiveness and congruence with New Labour’s vision of itself as a mass
social-democratic party independent of sectional interests, remained
unattainable in the absence of a system of state funding for political
parties. What are the two remaining options: Loyalty with, and with-
out, Voice? The former was obviously the TUC’s favoured option as it
institutionalised political unionism. Moreover, policy collaboration with
unions potentially offered a Labour government a fourth strategic asset
to do with assisting in policy design and delivery, which is considered in
the following text.
4. Policy Collaboration with unions as a potential Strategic Asset
On a theoretical level, the literature on governance argues that the
complexity of modern economic systems means governments may have
to rely on economic actors in devising and implementing their strategies
because of the near monopoly of information these actors enjoy about
their members (Culpepper 2002: 778). Consultation and collaboration
with interest groups also has a potentially advantageous legitimising effect
(Bekkers 2007: 50). Unlike Thatcherism, New Labour was willing to engage
with the industrial problems thrown up by post-Fordism and recognised
the role of the state in coaxing improvements in productivity from both
unions and employers (Howell 2005: chap 5). ‘New Growth Theory’, which
emphasises endogenous drivers of economic performance and became
the Treasury orthodoxy under New Labour, implies that governments
can provide public goods for industry, such as training. Social-democratic
governments may be in a better position to make this work because of
their relative closeness to unions (Wickham-Jones 2000).
Senior Labour ministers grudgingly acknowledged that unions had
a potential role in supply-side policy delivery, even in the liberalised
and de-collectivised UK economy. Although by 1997 union members
represented only one-third of the overall workforce this figure rose to
more than 70 per cent in large private sector manufacturing plants and,

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 Introduction 

crucially, the public sector, which had been targeted for substantial extra
investment. Once Labour was in power, there was cooperation at the
micro-level with the unions on training, for instance with the National
Skills Alliance and new Sector Skills Councils. Gordon Brown, the Chan-
cellor of the Exchequer, wrote to the Confederation of British Industry
(CBI) and TUC on 19 October 2000 urging them to work together and
with the government in tackling the skills gap and poor productivity
performance.12
Also striking is the convergence in views between New Labour and
the TUC over key issues in the run-up to the 1997 election. The TUC
endorsed the centrality of controlling inflation and securing economic
growth through supply-side policies geared towards boosting industrial
competitiveness. Its pre-election document, ‘Partners for Progress’ was a
clear statement of ‘New Unionism’ (see Chapter 3), with calls for active
labour market policies alongside a restatement of a new union-govern-
ment quid pro quo including, for the first time, a specific pledge by the
TUC to act to curb strikes: ‘Inherent in the social partnership model ... is
the need to minimise industrial disputes’.13
However, barriers to the ‘Loyalty with Voice’ arrangement favoured
by the TUC initially existed in the form of employers’ preference for
depoliticised ‘business unions’(McIlroy 1988: 47–48) and Blair’s mistrust
of the extent to which the unions had reformed themselves. The issue of
whether Labour chose to grant Voice to the unions therefore hinged on
whether the benefits of this in terms of policy collaboration outweighed
the potential political costs stemming from the risk that renewed union
militancy could wreck its relationship with business and destroy its
reputation for economic competence. Unfortunately for the TUC, Blair
was inclined to adopt a risk-averse outlook on union-party collabora-
tion, entailing the default strategy of distancing the party from the
unions regardless of the potential benefits. In game theoretical terms,
this relationship may be viewed as a prisoner’s dilemma played between
New Labour and the unions, with a payoff structure for New Labour that
encourages them to repeatedly defect (Quinn 2004).
The implication of such a game would obviously be that the equilib-
rium relationship between Labour and the unions is therefore that of
‘Loyalty without Voice’, where Labour enjoys the strategic assets provided
by the unions of electoral, political and financial support but is able to
minimise the electoral damage from potential industrial unrest by shun-
ning the unions. This situation would be likely to persist unless the TUC

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 New Labour Policy, Industrial Relations and the Trade Unions

can persuade it otherwise. The onus on unions was therefore to persuade

New Labour to change strategy by altering the payoff structure in favour
of cooperation. How this was done is the subject of the rest of this book.

Outline and aims of the book

This introductory chapter has identified the empirical puzzle to be
examined in the book and outlined the theoretical approach to be taken.
It also set out several propositions regarding the conditions under which
political unionism may take place and the observable implications of
these.
Chapter 2, which follows, places this theory within its theoretical and
historical context. The chapter begins by examining the academic litera-
ture on trade unions and the state and assesses approaches to the viabil-
ity of policy collaboration between unions and parties in a globalised
economy.
The empirical section of the book, which follows, examines in detail
the arguments presented earlier. Chapter 3 covers the constitutional
changes to the Labour party which altered the entire basis of its relation-
ship with the trade unions and placed the TUC in a strategic position to
be able to largely monopolise contact between trade unions and Labour.
Chapter 4 brings in employers and gauges the success of the TUC’s
insider strategy in an analysis of New Labour’s first term industrial rela-
tions program, focusing on the negotiations over the national minimum
wage and statutory union recognition.
Chapter 5 examines the period after 2001, focusing on New Labour’s
second term in office. During this period, the TUC was arguably less
successful in influencing government policy, and other trade unions
reacted by trying to renew political exchange. This provides a contrast
between the two lobbying methods, and the chapter argues that the
outcome demonstrates the superiority of political unionism via insider
lobbying over political exchange. Chapter 6 concludes.
The empirical data gathered for Chapters 3–5 has come from a broad
range of sources. Three dozen interviews were conducted with key
figures involved in formulating employment relations policies, mainly
from the trade unions, government and business organisations, as well as
senior Labour Party politicians. A large number of official archives were
consulted, including the Modern Records Centre at Warwick University;

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 Introduction 

the official TUC archive held at London MetropolitanUniversity; the

Neil Kinnock archives at Churchill College, Cambridge; and the Labour
History Archive and Study Centre in Manchester. These contained a large
amount of material relating to employment policies, and policy formula-
tion generally, from the three main actors: the Labour Party, trade unions
and business. There was also some use of private papers connected with
the topic that are not generally available to the public. A wide range of
journalistic sources was also consulted, including national newspapers,
the left-wing press, internal Labour Party publications, trade union and
business journals, newsletters, pamphlets and annual reports.
In terms of its intended impact, the book has empirical and theo-
retical implications potentially of interest to political scientists as well
as industrial relations scholars. First, it offers an alternative commentary
on the industrial politics of Britain in the 1990s. Far from being, at best,
the continuation under another guise of Thatcherite neo-liberalism or, at
worst, the compliant tool of business and financial interests (Hay 1999,
Marquese 1997, Panitch and Leys 1997) my argument is that New Labour
in government sought to carve out a distinctive variant of the existing
social-democratic model. This model might not have pleased its left-
wing critics but it was perhaps the best available, recognising, as it did,
the structural-economic constraints that New Labour operated under.
In terms of content, the Blairite compromise was about exchanging
a limited platform of reformist industrial relations policies for a co-op-
erative and employer-friendly trade union movement which served to
neutralise previous political negatives attached to Labour over militant
unions allegedly controlling policy. My argument takes this further,
however, by showing that it was the trade unions themselves, and
especially the TUC, which took the lead in remaking the party-union
relationship in ways which helped to make this compromise possible.
As such, the second main contribution of the book is that it offers
a case-study of how weak interest groups can succeed in a ‘hostile’
political-economic environment. The book challenges the notion, preva-
lent in much of the industrial relations literature and strongly implied
by new institutionalist political economy, that unions will inevitably be
marginalised in LMEs. This chimes with a growing literature arguing
that social-democratic governments continue to have an interest in an
institutionalised compromise between capital and labour necessary for
the orderly provision of supply-side collective goods such as investment
in human capital (Boix 1998, Garrett 1998, Simoni 2007, Wickham-Jones

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 New Labour Policy, Industrial Relations and the Trade Unions

2000). A moderate and credible peak trade union association may there-
fore be in a position to compensate to some extent for the UK’s lack of
encompassing labour market institutions which have helped to wreck
such compromises in the past.
Third, it addresses some grey areas in the new institutionalist political
economy literature on comparative capitalisms, particularly the influen-
tial Varieties of Capitalism (VoC) strand of this. VoC implies that busi-
ness, whose preferences in a LME are for flexible and de-institutionalised
industrial relations, will forge an alliance with the state (irrespective of the
governing party) to press for deregulated labour markets and the weakest
possible trade unions (King and Wood 1999, Wood 2001a). However, a
weakness of VoC analysis, particularly when it comes to LMEs, is its thin
treatment of politics, and so the ‘black box’ within which business alleg-
edly accomplishes this is under-theorised. By unpicking the complex
process by which labour market actors – not just business – actually
contribute to the formation of policy my research adds to a promising
new avenue for new institutionalist political analysis.
What are the limitations of the study? These are, necessarily, numer-
ous. As already stated I do not attempt a comprehensive overview of
either recent British political history or developments in industrial rela-
tions. The study focuses on New Labour’s first two terms in office, as this
was the period which saw the bulk of its industrial relations legislation
enacted and which provides a contrast between the insider and political
exchange models of influencing governments which is the subject of
the book. It also operates at a fairly elite level, with the focus of analysis
being on the ability of union general secretaries to bring influence to
bear on cabinet ministers and the prime minister, and vice versa. This
elitist focus necessarily overlooks industrial relations developments
taking place within the firm and obscures other strategies for union
revitalisation pursued from the ‘ground up’ through a renewed emphasis
on shop-floor organising.

Notes
1 OECD Employment Outlook 2004: 145, table 3.3.
2 These were a national minimum wage, European Social Chapter, statutory
union recognition, union rights at GCHQ, equal rights for part-time and
temporary workers, employee share ownership rights, subsidised childcare,
and pension reforms.

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 Introduction 

3 This was the verdict of Labour Research, 1 June 2001. It should also be
noted that the New Labour government did not always stick to its manifesto
commitments. For instance, it broke a pledge in its 2001 General Election
Manifesto not to introduce tuition fees for university students.
4 See, for example, the diary entries for the five month period from May to
September 1995: 17 May p203; 26 July, p255; 1 September, p269; 5 September,
p271; 9 September, p275; 25 September, p285.
5 ‘How was Blair for You?’ New Statesman 7 May 2007.
6 Interview with former No.10 official.
7 Interview with former DTI minister.
8 ‘General Council Report.’ TUC 1995: 112.
9 The Scotsman, 5 February 2002.
10 FT 23 July 1994.
11 ‘The Case for Labour’s Links with the Trade Unions.’ Labour Party 1992: 14.
12 ‘Productivity in the UK. The Evidence and the Government’s Approach.’ HM
Treasury 2000: 27.
13 ‘Partners for Progress: Next Steps for the New Unionism.’ TUC 1997: section 58.

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 2
The Political Economy of
UK Industrial Relations:
A Theoretical and
Historical Overview
Abstract: The theoretical and historical literature on Labour
Party and interest group politics in a globalised world is
concisely reviewed in this chapter. Three main propositions
are set out which frame the overall argument of the book.
First, governments of the Left are not imprisoned, either by
globalisation or by their specific ‘Varieties of Capitalism’
(VoC), and retain the ability to pursue partisan policies
potentially favourable to unions. Second, the UK’s political
system prevents the open formation of a ‘progressive alliance’
in which trade unions could play an open and constructive
part in national politics. Third, the fragmented structure
of UK trade unions renders the Labour-union alliance
inherently unstable. Taken together, these arguments suggest
that insider lobbying out of the public eye by the Trades
Union Congress (TUC) may be the least destabilising
method of conducting the alliance.

Keywords: corporatism; globalisation; New Labour;

TUC; varieties of capitalism

Coulter, Steve. New Labour Policy, Industrial Relations and

the Trade Unions. Basingstoke: Palgrave Macmillan, 2014.
doi: 10.1057/9781137495754.0004.

 DOI: 10.1057/9781137495754.0004
 The Political Economy of UK Industrial Relations 

This book examines a set of related empirical and theoretical issues. It

poses the general question: under what circumstances is ‘political union-
ism’ between trade unions and politicians feasible in a liberal-market
economy (LME) such as the UK? This is explored through another,
more specific, question: how was the British trade union movement
able to secure pro-trade unions concessions from Tony Blair’s New
Labour, despite the party leadership’s apparent pro-business orientation?
Answering these questions, in turn, may suggest new perspectives on
underlying theoretical issues to do with: the relationship between politi-
cal and economic actors; the role of institutions in structuring these;
and the conditions under which producer groups are able to influence
government policies affecting them.
This chapter sets out the theoretical framework of the argument. In
the first part, the overall debate on the politics of industrial relations
under New Labour is explored through a discussion of leading political
science and industrial relations theories. The second part applies some
of the conclusions suggested by this debate to an analysis of the UK’s
economic and political institutions and considers the extent to which
the organisation of the UK’s economic and political system helps to
determine the kind of bargains that are possible between unions and
politicians.

New Labour and industrial relations: determinism

versus policy autonomy
What constraints do centre-left governments operate under when
formulating and implementing economic and industrial policy? Are
these constraints largely endogenous or exogenous to the domestic
political economy? Do they ‘imprison’ governments, or can policymak-
ers successfully subvert or avoid them?
In one of the most influential formulations of this question, Przeworski
argued that it was impossible in capitalist democracies for governments
to promote significant income redistribution in the long run, let alone
pursue more ambitious socialist objectives. This was because working-
class parties were unable to win power on their own without the
support of middle-class voters. The resulting trade-off weakened their
commitment to socialism and so Przeworski declared the era of ‘socialist
democracy’ to be over (1985: 185).

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 New Labour Policy, Industrial Relations and the Trade Unions

A clear divide continues to exist between opposing camps in political

economy which emphasise either the structural determinants of govern-
ment action, or the autonomy of politics and scope for strategic choice.
Generally, deterministic accounts of New Labour take two forms. One is
based on the International Political Economy (IPE) analysis of globalisa-
tion and its tendency to recast domestic economies in the free market,
deregulated model. The second, from the perspective of comparative
political economy, also concedes that international trade and finance
affect the inner workings of nation states; however, these effects are
filtered through embedded domestic institutions. This negates the IPE
prediction of convergence around the free market model but can substi-
tute its own form of determinism, stemming from the organisation of
domestic productive relations. Both views are evaluated in turn.

International political economy

Critiques of New Labour from an IPE perspective cast it as meekly
surrendering to the logic of globalisation (defined here as the interna-
tionalisation of capital with the threat of Exit). This entails abandoning
any attempt to construct a sustainable centre-left alternative to free
market capitalism.
Arguments about globalisation predict that advanced economies will
converge around a single economic model of privatised and deregulated
financial and product markets, low inflation rather than high employ-
ment as the primary macro-economic goal, minimal welfare states and
fluid, de-collectivised labour markets. The consequences of this for trade
unions are marginalisation from the operation of the political economy
(Ferner and Hyman 1994, Kitschelt 1994, Martin and Ross 1999, Scharpf
1991) and a concomitant death of the post-war alliance between unions
and left parties (Piazza 2001). The UK is seen as particularly susceptible
to these pressures because of its historic openness to trade and presence
of a large financial sector. New Labour’s friendliness to business and
apparent antipathy to organised labour is therefore explained by the
country’s dependence on international capital and trade flows. Posi-
tioning the UK to prosper in global markets through deregulation and
privatisation is depicted as the dominant theme of its economic policy
(Alexander and Moran 2000: 109, Daniels and McIlroy 2009: 11, Coates
and Hay 2001: 454, Leys and Panitch 2001: 250). Ultimately, the increas-
ingly integrated global economy offers fewer and fewer niches for social
democratic models of capitalism (Coates 1999: 658).

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 The Political Economy of UK Industrial Relations 

However, there are important flaws in the IPE perspective, not the
least of which is that it fails to account for the divergent outcomes that
occur. For a start, real convergence around the neo-liberal model does
not appear to have taken place (Hirst and Thompson 1996). Even where
the position of unions has been significantly eroded (as in the UK), they
may still retain the strategic capacity to negotiate improved outcomes for
workers through political activities.
An important but latent assumption of the ‘unions in decline’ thesis
is that the union-social democratic alliance is conditional on a set of
traditional Keynesian economic policies within a corporatist industrial
relations framework; in particular that governments act to manipulate
aggregate demand to secure full employment, with unions delivering
their side of the bargain through real wage restraint to curb inflation.
The basis for this arrangement has obviously been eliminated by the
liberalisation of capital controls and the trend to independent central
banks (the Bank of England was given operational independence by
New Labour in 1997).
But this does not preclude the possibility that unions operating in non-
Keynesian policy environments that are now largely the norm may strike
other kinds of deals (cf. Boix 1998, Fishman 1997, Garrett 1998, Simoni
2007, Wickham-Jones 2000). These might be based on the exchange of
a different set of benefits for both sides and be less tied to the traditional
‘power-resources’ conception of union power (Esping-Andersen 1985,
Korpi 1983), which views industrial muscle as the key determinant of
their success in bargaining.
Another reason to question the IPE thesis is that the impact of
globalisation is filtered through nationally-distinct sets of institutions
and these produce divergent economic outcomes that are not necessar-
ily uniformly hostile to unions. Recent work in comparative political
economy illustrates this, while introducing its own form of determinism,
and I turn to this next.

Varieties of capitalism
New institutionalist political economy employs rational choice and
institutional theories to explain why political economies in advanced
democracies are organised in different ways. A prominent strand is the
literature on ‘comparative capitalisms’ which emerged in the 1990s in
an attempt to provide a synthetic understanding of divergence in the

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 New Labour Policy, Industrial Relations and the Trade Unions

structures and performance of national economic systems. Within this

tradition, the ‘Varieties of Capitalism’ (VoC) analysis of Hall and Soskice
(2001) is particularly important because it directly addresses the power
relations between labour market actors in the political economy.
In a nutshell, VoC is concerned with the macro-structures of national
political economies, analysed according to variations in the micro-
foundations of comparative advantage and centring on the activities
and preferences of firms (Hancké, Rhodes and Thatcher 2007: 5). From
this perspective, countries can be divided according to whether either
market or non-market modes of coordination between economic actors
predominate. These are labelled liberal (LME) and coordinated (CME)
market economies respectively.
The VoC approach has been attacked from various quarters. Three sets
of critiques in particular are worth mentioning at this point. The first is
that VoC artificially creates ‘types’ by reading back from these the char-
acteristics of the countries it chooses to make paradigm cases – prima-
rily the US and Germany – and then applying these rigidly, but often
unsuccessfully, to other countries (Crouch 2005: 28). There is some truth
in this: of VoC’s two main national types (LMEs and CMEs), the former
tend to be drawn much more sketchily. Its main archetypes, the UK
and US, are characterised largely by their lack of the political economy
institutions which constitute CMEs. However, this simply underlines the
need for more research on LMEs.
The second is that, because it emphasises institutional stability, VoC
is static and path-dependent, missing important elements of economic
and political change (Crouch 2005: 31, Streeck and Thelen 2005: 8). VoC
has been criticised – even by contributors to the original volume – for its
thin treatment of politics, Wood noting, for instance, that VoC ‘tends to
underplay the importance of the political dimensions of political economies’
(2001a: 247, emphasis in the original).
A third criticism is that VoC’s functionalist view of institutions
suppresses undercurrents of unequal power relations and class conflict
which are equally important determinants of national economic systems.
This is reflected in its treatment of organised labour. VoC places firms,
not unions, centre stage, as it is firms’ preferences which shape the solu-
tions to coordination problems that emerge from economic activity and
which provide the institutional characteristics of different economies.
Labour is simply seen as a constraint on business, rather than an equal
partner, although national settlements can still result from ‘a confluence

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 The Political Economy of UK Industrial Relations 

of equilibrium strategies on both sides’ (Hancké, Rhodes and Thatcher

2007: 19).
But while this may be largely true in CMEs the suspicion lingers that
elsewhere VoC’s emphasis on stability is at odds with the real course of
industrial relations, which in LMEs is both more contestatory and less
predictable (Howell 2005: 28). Although arguably merely a reflection
of power differentials between the two sides the firm-centred approach
inevitably marginalises organised labour, which is regarded as passively
responding to the preferences of business and denied any real autonomy
or independent interests.
These criticisms each have some validity; nevertheless I argue that
VoC can still offer several important insights into the politics of labour
markets. First, it provides a more detailed and convincing account of
how institutions shape these than that of the corporatist literature (cf:
Schmitter 1974). Rather than assuming that the nexus of the state-society
relationship lies in an instrumentalised interplay between monolithic
producer groups and the state, it examines the way in which institutional
rules define the terms under which cooperation or competition takes
place. Where corporatism assumes actors’ preferences are known and
fixed, VoC regards them as contingent and amenable to change. It also
challenges the notion that the state has a monopoly on governance,
showing that a wide variety of mechanisms are likely to be in place which
devise, enforce and sustain patterns of economic behaviour.
Second, the issue of power relations in VoC is not necessarily ducked
entirely, and it is certainly taken more seriously than in the complacent
assumptions about countervailing power in much pluralist theory. VoC,
in fact, makes predictions about actor preferences and the political coali-
tions which coalesce around labour market regimes in particular models
of capitalism which offer systematic explanations for cross-national
variations in labour politics. Specifically, the UK’s LME institutions are
understood to foster an alliance between the state and business which
pushes for deregulated labour markets and weak unions. In CMEs, by
contrast, a cross-class coalition forms between labour and capital that
fosters coordination.
The difference is because strong unions within a market-based, volun-
tarist industrial relations system bid up wages and so increase the costs
of production without offering any of the benefits accruing to firms in
CMEs in terms of solving potential coordination problems such as the
collective provision of firm-specific skills (Thelen 2001: 80). Employers in

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 New Labour Policy, Industrial Relations and the Trade Unions

LMEs therefore require the maximum degree of management autonomy.

‘In the industrial relations arena, firms in LMEs generally rely heavily
on the market relationship between individual worker and employer to
organize relations with their labour force. Top management normally
has unilateral control over the firm, including substantial freedom to
hire and fire’ (Hall and Soskice 2001: 21).
Thelen argues that this management structure requires the weakest
possible trade unions. In LMEs, ‘we find widespread attempts to impose
unilateral managerial control, and where there are attempts at fostering
cooperation with labour, these are more often undertaken in conflict
with (and directed against) unions.’ Hence, employers are: ‘likely to
try to stabilize their core workforce and to try to enhance peace on the
shop floor through strategies built on strong internal controls’ (Thelen
2001: 78).
Furthermore, Wood has suggested that UK employers forged a coali-
tion with the ruling Conservative party from the 1980s to mid-1990s
to secure legislation providing for minimal job protection and labour
market deregulation (Wood 1997). But why would firms in LMEs neces-
sarily get what they want? The answer provided by VoC lies in the way
the institutional logic of LMEs shapes incentives for economic actors in
the face of various exogenous shocks. For example, holders of mobile
assets (workers with general skills, short-term investors etc.) in LMEs
enjoy greater options for Exit in order to seek better returns elsewhere
than, say, holders of specific assets (workers with industry-specific skills,
investors in long-term, fixed assets etc.) associated with CMEs (Hall and
Gingerich 2004: 32).
It is important to note here that an exogenous shock can mean a shift
in government policy as well as a change in the overall competitive
environment. This provides a further source of variation between CMEs
and LMEs, as it implies that economic policy in the latter needs to be
incentive-compatible with the interests and views of business in order
to avert a potential flight of capital and jobs. This will be particularly
so in LMEs, as opposed to CMEs in which firms’ and workers’ greater
investment in their domestic economic capacities will limit the ability of
capital to ‘blackmail’ politicians.
Another characteristic of LMEs fostering a close relationship of mutual
reliance between business and government is the lack of coordination
at the firm level. Grant observes that business lobbying in the UK has
the characteristics of a ‘company state’ that is, contact with politicians is

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 The Political Economy of UK Industrial Relations 

through individual firms without intermediaries due to the weakness of

business associations and the dominance of large firms (1993: 14). This
means that the government may have to step in regularly to tackle collec-
tive action problems among firms which lack the capacity to resolve by
themselves, such as vocational training or the drafting of framework
legislation to support competitiveness (Wood 2001a: 250–251).
However, at the same time, governments remain strictly limited in
their ability to effect change in the institutions of their political econo-
mies. The role of the state in VoC is apparently confined to fostering
coordination among private sector actors by providing and supporting
appropriate institutions (Hall and Soskice 2001: 45). Since these are
mutually interlocking and interdependent, change in one area – for
instance corporate governance – affects other areas – vocational training
and/or labour relations. As LMEs lack the collectivist structures which,
in CMEs, enable the government to build interest coalitions which might
assist them in overcoming the collective action problems that otherwise
stymie reform, governments in LMEs will be forced to work with, rather
than against, the existing grain of their political economy institutions.
Howell characterises New Labour’s industrial relations programme as
a pragmatic and specific policy adaptation by a centre-left government
to the realities imposed by the UK’s LME political economy institu-
tions (2004: 16–19). New Labour, he argues, has a unitarist conception
of industrial relations – implying no difference between the interests
of firms and their workers – and so has pushed for its de-politicisation.
Policy is tasked with creating the context in which the productivity
and effort of workers are harnessed for the good of the firm (2000:
223). Moreover, despite the voluntarist leanings of both employers and
unions, UK industrial relations remain heavily dependent on the state
to set the institutional environment in which bargaining takes place. The
goals and strategies of the state in the realm of industrial relations are, in
turn, dictated by the exigencies of its periodic attempts to restructure the
economy in times of crisis (Howell 2005: 15).
Although Howell is critical of the determinism of VoC (2003: 113) and
affirms that industrial relations institutions are rarely uncontested, his
work still emphasises a tight connection between economic structure
and the scope and behaviour of government. As such, New Labour’s
moderately collectivist industrial relations interventions are judged
to be almost automatically unsuccessful because they fit badly with an
economy that is primarily coordinated through markets.

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 New Labour Policy, Industrial Relations and the Trade Unions

On the other hand, other recent contributions to the debate on VoC

have stressed the potential mutability of institutions. These may be
remade through purposive action at historic choice points even where
the overall analysis emphasises a view of institutions as self-reinforcing
equilibria, argues Katznelson (2003: 277). Streeck and Thelen also take
issue with VoC’s emphasis on stability, as well as Katznelson’s assertion
that the status quo is only periodically contested, to argue that endog-
enous change can occur gradually and incrementally. Political institu-
tions: ‘are the object of ongoing skirmishing as actors try to achieve
advantage by interpreting or redirecting institutions in pursuit of their
goal, or by subverting or circumventing rules that clash with their inter-
ests’ (Streeck and Thelen 2005: 19).
Recent assessments of New Labour’s record in government argue that
pessimism over lack of alternatives is overplayed. Eric Shaw argues that
political parties, and particularly their leaders, face real choices about
strategies to follow in the global economy, with the implication that
political actors are amenable to persuasion by interest groups when the
time comes. New Labour represented a break with Labour’s past, but
one that was structured by electoral calculation as much as external
economic forces (Shaw 2007: 15).

Policymaking under New Labour: political exchange

versus political unionism
Given the conclusion of the section above – that New Labour did, after
all, enjoy a degree of policy autonomy – how, then, should the construc-
tion of its industrial relations policy be viewed? One way of answering
this question is to identify the main methods of interest representation
deployed by labour movement factions, including the unions, as well as
the party and government institutions mediating these.
Debate has long raged among analysts of left politics in the UK
over whether trade unions control the Labour Party (Kitschelt 1994,
Marquand 1991) or vice versa (Minkin 1991). Since the advent of New
Labour in the early 1990s, a parallel controversy has also emerged as to
whether Labour is really in hock to the interests of business (Edmonds
2007, Osler 2002, Panitch and Leys 1997). Yet another literature cautions
against both these views by stressing that the party is dominated by the
views and preferences of its leadership (McKenzie 1982). Finally, within

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 The Political Economy of UK Industrial Relations 

the UK union movement itself, attention has recently focused on the

growing desire and ability of the TUC to behave ‘strategically’ by acting
independently of its own member unions (Heery 1998, McIlroy 1998).
Most recent assessments of the literature on trade union influence
over the Labour Party begin with Minkin’s seminal work, The Contentious
Alliance (1991). Minkin sought to falsify empirically the then prevail-
ing notion that unions ‘controlled’ the Labour Party through financial
contributions and their voting bloc in key party institutions. This
‘baronial’ view of union-party politics came to prominence during the
1970s when the general secretary of the Transport and General Work-
ers’ Union (TGWU), Jack Jones, was regularly dubbed the party’s most
important politician (Barnes and Reid 1980: 191). Minkin claimed this
view rested on a mistaken, instrumentalist view of power that assumes
that influence depends upon the amount of power resources (votes and
money) deployed. Instead, it is the institutional matrix which is impor-
tant. Power relations between unions and Labour ‘cannot be understood
without appreciating the inhibitions, restrictions and constraints that the
“rules” provided’ (Minkin 1991: 45). Minkin defined rules as norms and
conventions which set roles and constrain behaviour.
Minkin found that, although the unions provided Labour with the
bulk of its funding through donations and mass subscriptions, there
was no clear instance of cash ever being traded for control over policy
(ibid: 626). Instead, their most notable lever of influence was providing
political ‘ballast’ by acting as a pro-leadership group via their formal
domination of party institutions of control such as the National Execu-
tive Committee (NEC) (ibid: 404). Unions provided these functions out
of concern for the advancement of a shared historical project and, more
prosaically, for enhanced access to state policymaking processes when
Labour was in power.
However, political friction between Labour and the unions, which
intensified during the 1980s, has undoubtedly changed the structure of
the political representation of the labour interest. The party’s leftward
shift in the early 1980s, blamed on excessive concessions made to the
unions (Marquand 1991: 199), provided renewed traction for the
‘baronial’ thesis. It also gave the New Labour modernisers a rationale
for mobilising to dismantle the institutions linking the party with the
unions, as Blair himself recognised (2010: 40).
A number of authors have therefore reopened the question of
whether the link has survived intact and, if so, whether it has reverted

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 New Labour Policy, Industrial Relations and the Trade Unions

to the power-resources/political exchange model rejected by Minkin.

Various cross-national typologies have been constructed, spanning a
range of dimensions, which have sought to place union-party links on a
spectrum. These typically range from party (and especially partyleader-
ship) domination of the entire labour movement on one hand, to union
control of the party on the other. Kitschelt, for instance, characterised the
UK Labour Party as the epitome of a party controlled by unions (1994:
249–252). Another typology, by Ludlam et al., which explicitly addresses
Minkin’s framework, characterised the link as ‘bonding’ between party
and unions, where unions enjoy exalted status within the party without
being dominant (2001: 233–238). Ludlam later revisited the model to
argue that the link softened during Labour’s second term in government
and verges in many respects on an ‘insider lobbying’ setup of close ties
but minus the institutional architecture of the bonding arrangement
(Ludlam and Taylor 2003: 749).
The issue of whether unions exert pressure on Labour internally via
lobbying, or by bonding through shared institutions (and norms), is far
from trivial and determines the organisation(s) best suited to carrying
out these functions. McIlroy has argued that New Labour’s antipathy
to dealing directly with trade unions, because of its nervousness that
they remain closer to and more influential over the party than it would
like, has opened up a space for the TUC to pursue policy concessions
for unions through a pure insider lobbying strategy (2000: 2). Interest
groups enjoying ‘insiderist’ status are those which cultivate close contacts
with the executive and are, in turn, largely accepted by governments; an
‘outsiderist’ strategy, by contrast, eschews the inside track and relies on
external pressure, such as unofficial strikes and protests.
A possible weakness of this approach, however, is its concentration on
unions’ strategies and what they expect to gain from the party link. It
provides little in the way of a convincing rationale for New Labour to
have any dealings with unions, particularly when doing so clashes with
its supply-side ethos of flexible, unfettered markets. What, then, contin-
ues to motivate the party-union relationship?

‘Homo economicus’ and ‘Homo sociologicus’

Shaw has pointed out that differences between Minkin’s characterisation
of the link and that of his power-resources rivals rest on a more funda-
mental schism in social science: that between rival ‘sociological’ and

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 The Political Economy of UK Industrial Relations 

‘rational choice’ conceptions of social action (2003: 168–177). Whereas

Minkin emphasises the norms and conventions which structure actors’
behaviour, rational choice draws attention to their interests and strate-
gies.
Rational choice has two key precepts. First, methodological indi-
vidualism reduces social action to individual action and views social
organisations as mechanisms to aggregate the behaviour of individuals.
Second, actors are utility maximisers, with clear and stable preferences,
who act instrumentally in pursuit of their goals. This is obviously differ-
ent to Minkin’s ‘sociological’ concern with the informal rules and duties
imposed on each side by the party-union link. These impose particular
‘roles’ on each side which are not dependent on immediate and tangible
rewards.
There are a number of reasons why developments in the link under
New Labour are explicable in rational choice terms. For a start, all of
the formal institutions managing the alliance on which Minkin places so
much emphasis have come under sustained assault under Blair (Russell
2005). Procedurally, the party’s attitude is increasingly to view unions
and the TUC as simply another pressure group, rather than automati-
cally according them ‘insider’ status. Moreover, this shift is not unique
to the UK. It exemplifies a growing Europe-wide divergence between
the ‘interests’ of defensive-minded unions and those of vote-maximising
social democratic parties which has negated the idea of an automatic
alliance (Kitschelt 1994: 225, Piazza 2001).
The outcome of this has arguably been a new ‘distance’ in the party-
union relationship which encourages both sides to act with less refer-
ence to ‘rules’ and more to their own strategic interests. New Labour’s
move to detach itself from the unions to court the union-sceptical
median voter is well documented (Hay 1999: 95–100). Scholars track-
ing the trajectory of unions’ political strategies in the 1990s note
a similar shift of emphasis away from an automatic identification of
workers’ interests with the Labour Party. Once the message sunk in
that a Labour government would not legislate to reverse the Conserva-
tives’ industrial relations reforms, which had stripped unions of many
of their legal immunities, their response was to reverse to some extent
the traditional concern with shop-floor bargaining to the exclusion of
economy-wide legal and industrial issues (Coates, Bodha and Ludlam
2000, McIlroy 1998, Howell 2005). A wave of union mergers during
the decade also began to address their age-old lobbying problem of a

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 New Labour Policy, Industrial Relations and the Trade Unions

fragmented and un-cohesive union movement with a highly diverse

set of preferences.
Rational choice analysts of the union-party link tend to explain it as
a form of ‘political exchange’. ‘Political exchange’ in this context occurs
when the assets necessary for a modern electoral campaign (money,
organisation, volunteers) are traded by those who hold these for influence
over policymaking (Coleman 1990: 28). Quinn describes this transaction
as: ‘The cornerstone of the party-union link’ (2004: 2). Within political
parties, the activists and pressure groups which provide electoral assets
prefer political exchange to electoral exchange (where policies are traded
for votes) because their preferences, which may be more radical and
extreme than those of the median voter, are more likely to be accommo-
dated. Moreover, time-inconsistency problems which might foster unac-
ceptable tensions between vote and office-seeking Labour politicians on
one side, and policy-seeking trade unions on the other, may be resolved
via a set of party institutions – conference, the NEC and National Policy
Forum (NPF) – which guarantee that exchange is mutually beneficial.
Political exchange models therefore provide a more transparent set of
incentives for both sides, and seemingly more testable conclusions.
The main effect of the Labour Party’s centralising reforms in the 1990s
under Blair was to rebalance political exchange in favour of the leader-
ship. However, Labour’s reliance on union funding remained acute and
unions’ opposition to state funding for political parties shows their inter-
ests lie in maintaining Labour’s dependence on them (ibid: 187). Quinn
also claims that unions’ donations became increasingly politicised under
Blair, as they attempted to block or promote certain policies.
Rational choice analysis offers an alternative to Minkin’s sociological
approach that is convincing in many ways. There are good reasons for
supposing that instrumental calculation is supplanting the shared ethos
of the labour movement that existed before New Labour, and unions’
control of party finance is bound to loom large in this. This view is also
endorsed by scholars operating outside the rational choice framework
(cf. Ludlam and Taylor 2003).
However, the rational choice approach is overly prescriptive in its
conclusions and the exchange model inadequate in many ways. The key
problem with political exchange as a framework for explaining policy
outcomes is its causal opacity. A ‘black box’ lies at the heart of the model
within which money is allegedly turned into pro-union policy. But
which policies, in return for which particular contributions, and when?

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 The Political Economy of UK Industrial Relations 

Detailed empirical analysis is surely required to confirm a link between

donations and policies, yet when this has been done – by Minkin – no
such link was found.
It is also unclear when electoral considerations exogenous to the politi-
cal exchange model will trump unions’ ability to instrumentally shape
the party agenda. When, in other words, do the Labour leadership’s
office-seeking interests predominate over the unions’ policy-seeking
interests? This ambiguity confronts unions with a strategic dilemma.
Although they naturally preferred Labour to campaign with pro-union
policies they also recognised, pragmatically, that these could only be put
into effect when the party was in government, as the UK’s majoritarian
political system deprives opposition parties of any agenda-setting power
(Lijphart 1999: 10–11). Unions’ desire to hold Labour to a left-wing,
collectivist industrial relations program therefore had to be traded off
against the possibility that agitating for this to too great a degree might
prove self-defeating if it sabotaged the party’s chances of actually gaining
office.

The organisation of UK industrial relations

The above sections hinted at reasons for the collective weakness of trade
unions which sprang from the organisation of the political economy.
However, this weakness also owes much to problems inherent in the
organisation of business and labour interests themselves. These prevented
the UK from developing labour market institutions which might have
allowed trade unions to play a less destabilising role in industrial
politics.

The rise and fall of UK corporatism

The recent institutional trajectory of UK industrial relations may be
related to structural economic change, but its exact form was shaped by
repeated attempts by the state to adapt it to its purposes, as well as the
responses of unions and employers to these initiatives.
Prior to the 1960s industrial relations in the UK had been character-
ised by the relative absence of the state from the bargaining environment
and a low level of legal regulation in a system known as ‘voluntarism’
(Flanders 1970: 100–101, Hyman 2001: 69). Voluntarism was rooted

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 New Labour Policy, Industrial Relations and the Trade Unions

in the origins and development of UK capitalism and, while favoured

until recently by both unions and employers, it produces two problems.
The first is a coordination problem, to do with the absence of sufficient
incentives for labour market actors – firms and unions – to abide by
collective agreements. The second problem revolves around the attend-
ant weakness of trade union and employer peak associations, the TUC
and Confederation of British Industry (CBI), which lack the authority to
compensate for the first problem by negotiating and enforcing binding
agreements with each other and with the state.
However, the perception gradually dawned on policymakers that the
lack of effective industrial relations institutions was generating unrest
and hampering economic performance. The government-sponsored
Donovan Commission, which reported its findings on this in 1968, put
the blame on a paucity of firm-level mechanisms of collective regulation.
Unions and management were too focused on industry-level bargaining
at the expense of what was happening inside the firm, so the necessary
corporate restructuring in response to post-Fordism and changing world
markets took place in a non-consensual manner which stoked industrial
unrest (Howell 2006: 149).
Unfortunately, subsequent government responses to the problems
identified by Donovan were half-hearted and contradictory. The 1970–
1974 Conservative government of Ted Heath attempted, unsuccessfully,
to impose a ‘German’ style solution on the UK private sector by weaken-
ing the influence of shop stewards at the plant level in order to transform
national unions into responsible ‘social partners’ (Soskice 1984: 309). The
Wilson/Callaghan Labour government which followed Heath into power
in1974 reversed direction with new legislation designed to increase the
power of unions within the firm in what was described approvingly by
Jack Jones, the General Secretary of the TGWU, as a ‘shop-stewards’
charter (1986: 285).
However, neither intervention significantly undermined voluntarism
per se (McIlroy 1988:74), and the attitude of successive British govern-
ments to the matter continued to be to let sleeping dogs lie, up to the
point where macro-economic policies began to be introduced in the
1970s requiring coordinated responses to economic shocks. These were
intended to curb the OPEC (Organization of the Petroleum Export-
ing Countries)-inspired hike in inflation after 1973 by imposing wage
restraint through centralised incomes policies.

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 The Political Economy of UK Industrial Relations 

Labour initially relied on a voluntary ‘Social Contract’ negotiated with

individual unions to control inflation, but the failure of this prompted
the government to bring in the TUC to negotiate a more restrictive statu-
tory incomes policy, backed up by a set of ad hoc sanctions. However,
the institutional mismatch between, on one hand, the macro-corporatist
ambitions of the government, CBI and TUC to reign in wage claims
from the centre, and the voluntarist approach of employers and unions at
the sectoral/firm level on the other, saw unions continually defect from
agreements. The TUC found itself at the eye of the storm as it had just
enough authority over its member unions to persuade them to accept
wage restraint in the face of periodic economic crises, but not enough to
prevent the erosion of this within a year or two of the crisis passing (Hall
1986: 83). Stagflation and mounting industrial unrest over pay, reaching
a peak in the winter of 1978/1979, produced a heavy General Election
defeat for Labour and its replacement by Margaret Thatcher’s Conserva-
tive government. What had gone wrong?
Two main problems, which were related, had come to the fore. The
first was the limited capacity for coordination of the TUC itself, which is
much weaker in comparison with its union affiliates than, for instance,
the German DGB (Frege and Kelly 2003: 19). Although capable of taking
the initiative on policy ideas it is, and always has been, a voluntary and
weakly-organised federation of disparate producer interests. Cleavages
between the TUC, in its role as the main interlocutor with the govern-
ment/employers’ organisations, and the trade union movement itself,
were reflected organisationally in the division between the TUC’s
full-time secretariat, and the General Council and Congress. TUC
general secretaries regularly faced difficult choices between constructive
engagement with policymakers and the need to keep the major union
affiliates on board. This balancing act was particularly difficult during
the protracted negotiations over wage restraint in the mid-1970s (Taylor
2000: 238). A 1970 TUC interim policy document readily acknowledged
the problem:
The TUC is primarily concerned with developing policy rather than acting
as a general body ... [It] has the perennial problem of reconciling the special
interests of particular unions, or groups of members, with the general inter-
ests of the trade union movement.1

The second problem was the mirror image of the first: that of strong
sectoral unions with considerable veto power but lacking the cohesion for

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 New Labour Policy, Industrial Relations and the Trade Unions

a more proactive strategy. As Crouch has noted, the central conundrum

of UK industrial relations is that the union movement is comprised of a
number of powerful but decentralised unions that never advanced from
the industry level to more encompassing forms of collective bargain-
ing (Crouch 1992: 337). This arrangement caused various problems for
both the government and the TUC. Among these was undoubtedly the
dominance within this structure of the TGWU, which emerged as an
effective veto player over the negotiations on the Social Contract, and
other issues.
The TGWU was extremely powerful because of both its size (1.3m
members at its peak, with 1m block votes at Labour Congress out of
a total vote of 6m) and concentration: Ernest Bevin, its legendary
wartime general secretary, had centralised power in order to counter the
perceived weakness of it being a general rather than craft union (Taylor
2000: 103). However, the ‘insider’ status of the TGWU undermined
cohesion within the rest of the union movement, as other union leaders
felt shut out of critical decisions being taken by an inner cabal on behalf
of unions and the country as a whole. One rival leader complained: ‘The
truth is that for decades, a small group of Cabinet Ministers and union
barons have sewn together Labour government policy with the vote
at (Labour) Conference merely a rubber stamp’ (Hammond 1992: 161).
This problem was compounded by the TGWU’s swing to the left during
the 1970s. Activist shop stewards forced the TGWU leadership, which
had backed voluntary pay restraint in 1975 and 1976, to break ranks the
year after, bringing the rest of the TUC with it and causing the collapse
of Labour’s Incomes Policy. The failure of the Social Contract was not
exclusively the fault of the unions – employers also opposed state control
over bargaining (Cox and Hayward 1983: 228). However, their apparent
power without responsibility was a major embarrassment for their allies
in the Labour government, contributing to its heavy General Election
defeat in 1979.

The retreat from corporatism

The incoming Conservative Prime Minister, Margaret Thatcher,
concluded that both the managed capitalism of her immediate pred-
ecessor, Ted Heath, as well as the mixed economy and social welfarism
pursued by consensus-oriented Conservative governments in the 1950s
and 1960s, were inadequate for solving the UK’s inflation, competitive-

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 The Political Economy of UK Industrial Relations 

ness and balance of payments problems. The main option remaining

was a return to free market capitalism (Graham 1997: 118). The 18 years
that followed saw the rapid deregulation of finance and withdrawal of
the state from the market through extensive privatisation. Keynesian
demand management was replaced by supply side and monetarist
inflation-fighting tools which stripped unions of their role in securing
wage restraint and handed these to monetary authorities.
In the sphere of industrial relations, Thatcher was more intervention-
ist (and, indeed, more successful in her interventions) than previous
governments. Overall, the Conservative’s labour market strategy was
to replace the adversarial and chaotic industrial relations systems it
inherited not with a move to cohesive, industrial unions, but with
a non-political style of ‘business unionism’ (McIlroy 1988: 47–48).
Heath’s ambitions (shared at that time by the CBI), which had been to
provide UK firms with the correctly calibrated labour market institu-
tions needed to pursue German-style industrial production strategies,
were abandoned as these entailed the accretion of power to disciplined,
centralised trade unions whom Thatcher blamed for the industrial chaos
of the 1970s. Labour market policy was directed instead towards equip-
ping private industry with flexible labour markets, thereby maximising
management autonomy to allow firms to respond rapidly to changing
markets. This policy overcame the prisoner’s dilemma stemming from
the inability of individual firms to initiate uncoordinated change in the
absence of cohesive industrial associations, a failure which largely closed
off the German path as a viable industrial strategy (Soskice 1984: 318). It
also, of course, meshed with Thatcherism’s election-winning diagnosis
of over-mighty trade unions as the main threat to national prosperity,
and political redefinition of itself as the party of the individual over the
producer group.
However, the continued weakness of employers’ associations meant
that the de-collectivisation of industrial relations envisaged on their
behalf required the state to enter the industrial relations arena decisively
in order to confront and defeat implacable opposition from the unions
themselves (Gamble 1994: 101–103, Howell 2005: 142). Although not the
prime movers in the dramatic reconstruction of labour relations which
took place under the Conservatives, employers’ attitudes nevertheless
quickly hardened towards a preference for weak unions and decentral-
ised bargaining in line with the institutional changes being instigated by
the government (Wood 1997: 302). For instance, surveys of managerial

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 New Labour Policy, Industrial Relations and the Trade Unions

attitudes during the 1980s showed a marked inclination towards ‘unitar-

ist’ conceptions of the firm, which regard strong trade unions as a threat
to company ‘unity’ (Poole and Mansfield 1993: 12).
Thatcher’s assault on institutionalised organised labour, spanning
five separate Acts of Parliament, comprised three main planks: (1) to
dismantle corporatist institutions for consultation over macro-economic
policy; (2) strengthening management autonomy by eliminating unions
as veto players over corporate restructuring; and (3) undermining union
solidarity. Corporatism was phased out by sidelining the National
Economic Development Council (NEDC), reforming the Manpower
Services Commission (MSC) and ending formal contacts with TUC
leaders. Measures to increase the power of managers over unions took
the form of restricting trade union powers and immunities in common
law (Young 1989: chap 9), while a ‘divide and rule’ strategy was also put
in place centring on rigid enforcement of pre-strike ballots to prevent
‘sympathy’ strikes. Rising unemployment, engendering a split between
skilled and semi-skilled unions (manifested in damaging divisions
between the skilled engineers of the Amalgamated Union of Engineer-
ing Workers [AUEW], who benefited from rising wage differentials, and
the TGWU), together with a series of disastrous strikes, magnified inter-
union cleavages. These reforms exacerbated the structural weakness of
UK unions, preventing them from mobilising effectively to oppose these
reforms and generating friction, born of impotence, with their political
allies in the Labour Party.
In other words, as predicted by VoC, a coalition formed between
employers and the state with the aim of undermining the ability of trade
unions to recruit, organise and take strike action. Second, as argued by
the industrial relations literature, the union movement itself increasingly
lacked the industrial strength and internal cohesion to mobilise effec-
tively to oppose this.

The organisation of political power in the UK

If some of the arguments presented above are correct then the overall
conclusion of this book – that effective political unionism took place
between trade unions and politicians in the UK in the late 1990s – obviously
presents a challenge to the VoC model of labour politics in LMEs: recall
that the introductory chapter argued that New Labour went against the

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 The Political Economy of UK Industrial Relations 

preferences of employers in its first-term industrial relations program. How

can this fact be reconciled with the new institutionalist arguments that have
been considered: that a coalition between business and the state will form
in LMEs to ensure that organised labour remains as weak as possible?
The answer to this apparent conundrum lies in the fact that political
systems in established democracies are more than simply mechanisms
of preference aggregation. The preferences of firms, or other actors with
an interest in shaping policy outcomes, are not transformed un-prob-
lematically into policy but are subject to interpretation and evaluation
by politicians. This takes place, in turn, in an institutional setting
dictated by the constitutional arrangements of the polity in question.
Newinstitutionalist political economy, in other words, indicates which
non-state economic actors will be politically dominant and what their
policy preferences will be, but not necessarily whether or how these will
be realised. In order to understand how labour market policy is actually
formed it is therefore necessary to consider a country’s political, as well
as its economic, regime.
This section integrates the propositions developed above about the
political-economic determinants of industrial relations policy with an
analysis of the constitutional features of national political systems which
determine the extent to which actors may be able to intervene strategi-
cally to shape these. I argue that they provide a potential avenue for a
credible union association to push for pro-union measures, even where
these run contrary to the overall thrust of economic and industrial
policy, which in the UK during the 1990s, was geared towards maintain-
ing very competitive labour and product markets. What, then, are the
salient features of political constitutions?

1 The ‘Madisonian’ view of institutions as providing external constraints

on governments. Is power concentrated centrally (as in the UK) or
diffused among competing institutions and/or regions (Germany)?
2 The structure of political parties. The constitution of party
government also exerts internal constraints on the decisional
autonomy of executives. Coalition governments comprising several
parties may be vulnerable to exit by disgruntled coalition members
and hence are more constrained in their room for manoeuvre than
‘majority’ systems with bipolar party structures.
3 The ‘credibility’ properties of constitutions. Owing to time-
inconsistency problems of preferences actors in states governed

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 New Labour Policy, Industrial Relations and the Trade Unions

by relatively unconstrained executives may be inhibited from

entering into long-term arrangements with other actors because of
uncertainty over whether the government will act consistently. In
other words it is the strength of the government, not its weakness,
that may produce sub-optimal outcomes.
Arend Lijphart has incorporated many of these features into his influ-
ential typology of democracies. Lijphart divides political systems into
‘Westminster’ and ‘consensual’ systems. The former are based on a
‘majoritarian’ electoral system in which governments are chosen by ‘first
past the post’ voting arrangements. Majoritarian systems tend to produce
single-party cabinet government with few veto players where policymak-
ing is highly centralised by powerful executives (Lijphart 1999: 10, 181).
Westminster regimes are explicitly contrasted with consensual systems,
such as Germany. These are usually multi-actor systems with many veto
players where power is spread out among the government branches.
Voting systems are usually based on proportional representation (PR)
which is noted for producing coalitions rather than single-party govern-
ments (ibid: 110–111).
Predictably, the UK is the archetypical Westminster system, charac-
terised by a paucity of external and internal constraints on the executive.
The British state is unitary and centralised, and the Cabinet dominates
parliament, rather than vice versa, as it comprises members of a cohesive
majority party (ibid: 12). True to form, British politics has been domi-
nated by just two main parties – Labour and the Conservatives – since
the early twentieth century. The third party, the Liberals (now Liberal-
Democrats) last held office on its own in 1915, although it has entered
into coalition governments with Labour in 1977–1978 and the Conserva-
tives from 2010.
The UK is also distinctive in terms of the credibility properties of its
political institutions. As already argued, voting in Westminster systems
produces ‘strong’ executives which monopolise policymaking. Power
also oscillates between a small number of political parties whose electoral
strategies hinge on offering mutually distinctive programs of reform.
This tends to result in a minimalist welfare state consistent with flexible
production regimes requiring only general skills as the electoral system
magnifies the impact of small shifts in votes, allowing large and rapid
swings in policy. The credible-commitment argument therefore makes it
unlikely that governments will be able to foster CME-type institutions,

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 The Political Economy of UK Industrial Relations 

and so Westminster/majoritarian constitutions are associated with LME-

style production regimes.
An illustration of this is provided by the UK’s failure to develop a
coordinated system of industrial training. This failure has led to the UK
being trapped in a ‘low skills equilibrium’ (Finegold and Soskice 1988:
22), despite repeated intervention by policymakers. For example, the
MSC, set up in 1973 to upgrade skills, was phased out under Thatcher,
while New Labour’s ‘Welfare to Work’ scheme similarly foundered upon
the non-compliance of unions and employers (Wood 2001b: 56).
For these reasons the arrangement of political power is pivotal in deter-
mining interest group politics. Due to the political centralisation and
absence of constraints on the executive it fosters, majoritarian systems
exhibit a pluralist style of interest representation where socio-economic
groups are kept at bay by government and are obliged instead to seek
influence through indirect means. Conversely, the diffusion of power in
consensus systems provides more of a framework for interest groups to
take part in policymaking. Employers and unions share broad goals in
terms of the provision of training systems, employee representation and
so on. As a consequence trade unions, which already have an important
position in CME/consensual systems due to their role in coordinating
bargaining, may therefore be granted better access to policymakers as
well.
On the face of it, therefore, interest groups would appear to have
an easier time of it in consensual, rather than majoritarian, systems.
However, this is not automatically the case. An additional implication of
Lijphart’s argument is that a big party in a majoritarian system needs to
be a ‘leadership’ party in which the leader and those around him or her
largely monopolise policymaking. This is so that the median voter can
see that the ideological wings of the party have no significant input into
policies and is a particularly important factor for Labour Party leaders
whom middle-class swing voters instinctively distrust. Moreover, due to
the absence of internal and external constraints on the executive which
are the salient features of Westminster systems there are few limitations
on the decisional autonomy of prime ministers. It is surely no coinci-
dence that the two longest-serving prime ministers in British politics
over the last 30 years – Margaret Thatcher and Tony Blair – were noted
for their personal dominance over their parties as well as the levers of
government.

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 New Labour Policy, Industrial Relations and the Trade Unions

Interest group pluralism, therefore, replaces the corporatist balance

of power with an interest group ‘free for all’ where the fluid allegiances
to causes and interests of office-seeking parties mean that politics is
amenable to determined lobbying by cohesive and pragmatic groups who
are prepared to act strategically. Moreover, the flipside of the credible-
commitment deficit of governments in LME/Westminster systems is that
economic actors shun investments in specific assets which render them
vulnerable to arbitrary policy changes, thereby removing many of the
structural impediments to rapid changes in policies by governments.
In other words, although new institutionalist arguments strongly
suggest that, other things being equal, policymakers in LMEs will pursue
a broadly free market agenda in accordance with the preferences of
business, there is nothing to suggest that such coalitions are always and
everywhere immutable. Nor does it mean that space does not exist for
union negotiators to attempt to act as institutional innovators in ensur-
ing that the pro-market policies which are introduced are still compatible
with the interests of moderate, pro-enterprise trade unions.

Note
1 Cited in: Taylor 1977: 38.

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 3
Loosening Party-Union
Ties: Clause 4 and OMOV
Abstract: From the late 1980s the Labour Party responded
to a series of crushing electoral defeats by reforming party
structures to make itself electable. Many of these changes
were directed at reducing its financial dependence on the
trade unions and bolstering the control of the leadership
over party governance and policy development. The
chapter addresses the question of why the trade unions
acquiesced in this diminution of their influence over the
party they had founded in the nineteenth century, and
what alternative means became available to them to lobby
party and government leaders in the growing absence of
formal channels of influence.

Keywords: Clause 4; New Labour; OMOV; Tony Blair;

TUC

Coulter, Steve. New Labour Policy, Industrial Relations and

the Trade Unions. Basingstoke: Palgrave Macmillan, 2014.
doi: 10.1057/9781137495754.0005.

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 New Labour Policy, Industrial Relations and the Trade Unions

A key element of the development of the Labour party during the

Thatcher/Major era is its gradual reinvention of itself as a mainstream
European social-democratic party. During 18 years of opposition between
1979 and 1997, Labour was transformed from being, more or less, the
political representatives of organised labour into a more broadly-based,
mass-membership party. Under Britain’s post-war corporatist industrial
relations regime, which had prevailed until the end of the 1970s, Labour’s
closeness to trade unions had been an important strategic asset, allowing
the party to present itself as the best guarantor of industrial peace (Alder-
man and Carter 1994: 321). However, the wave of industrial militancy
that followed corporatism’s collapse following the sterling crisis of 1976
politicised industrial relations for the next two decades and appeared to
turn this asset into a crippling liability for the party.
The wholesale reforms to party structures which followed Labour’s
second successive election defeat in 1983 therefore centred on disman-
tling the intricate web of formal and informal institutional ties linking
Labour with the unions which party leaders now sensed was losing its
votes. The rationale behind this was to secure the maximum room for
manoeuvre for the party leadership to challenge for office by generating
centrist policies which appealed to the median voter (Curtice 2007: 41,
Hay 1999: chap 3). A prerequisite for this was reducing or eliminating
the ability of militant unions to align themselves with the party left to
veto the overhaul of Labour’s electoral programme. Party strategists
had increasingly taken the view that Labour’s close ties with organised
labour were an electoral liability as well as incompatible with their vision
of Labour as a mainstream social-democratic party in a globalised
economy (Gould 1999: 352).
The more pragmatic unions leaders accepted that the extent to which
these constraints on a Labour party gravitating increasingly towards
the centre-ground of politics were recognised and acknowledged by the
union movement were likely to have an important effect on its willing-
ness to deal with them in the first place. This is a dilemma familiar to
most European trade unions seeking to adjust their political strategies
in response to changing electoral pressures: ‘The more closely a party
is identified only with unions, the greater will be its responsiveness to
union demands, but the smaller will be its ability to protect union inter-
ests. And the greater the political capabilities of the party the lesser the
possibility that the union will be able to subordinate it to its interests’
(Valenzuela 1994: 65).

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 Loosening Party-Union Ties 

In other words, left parties which are closely identified with unions must,
in order to succeed politically, either work to subordinate unions’ demands
to economic and political imperatives (as happened in Germany) or (where
parties are less dominant over unions – as in the UK) place a distance
between themselves and organised labour. Unions, in response, have often
been forced to exert pressures to protect their interests against their allies in
political parties when these have diversified their electoral bases.
At stake for UK unions therefore was their continued ability to influ-
ence the policy of a future Labour government directly as an ‘insider’
via political unionism (McIlroy 2000: 2) rather than indirectly through
a less attractive ‘outsiderist’ lobbying strategy which appeared to be the
main alternative to this. What made Labour’s reform process during the
late 1980s and early 1990s particularly difficult for unions was the fact
that it placed the issue of their vested interests in the party centre-stage
as one of the main reasons for Labour’s repeated rejection by the elector-
ate (Labour’s 1992 General Election defeat was its fourth in a row. It had
been preceded by violent and economically damaging strikes). However,
their dismay at this was balanced to some extent by increasing despera-
tion over the Conservatives’ anti-union industrial relations agenda which
fuelled a basic determination to do whatever was necessary to ensure the
election of a Labour government, even if this came at the cost of sacrific-
ing some influence over the party.
This chapter is concerned with how, and ultimately to what extent,
trade unions succeeded in reconciling these conflicting imperatives and
the effect that the outcome of the Labour Party reform process instigated
by Neil Kinnock had on power relations between unions and party. It
does this through a close examination of Labour Party and trade unions’
responses to party reforms undertaken while in opposition which had
the implicit aim of distancing Labour from the unions. I argue that these
reforms proceeded in three distinct phases:

1 In the first phase, under the leadership of Kinnock (leader

from 1983 to 1992), reforms to party structures were piecemeal
and did not seriously threaten the unions’ veto player status.
Unions tolerated these moves as the union-party link itself was
not seriously threatened and the party remained committed to
reversing the Conservatives’ anti-union legislation.
2 During the second phase, which largely falls under the short-lived
leadership of John Smith (1992–1994), the party abandoned its

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 New Labour Policy, Industrial Relations and the Trade Unions

pledge to reverse the Conservatives’ industrial relations program

and embarked on moves to reduce unions’ dominant bloc vote at
party Congress and replace their important role in party candidate
selection with a system based on ‘one member one vote’ (OMOV).
However, Labour remained ostensibly committed to a broad
centre-left program and so the dominant union strategy was to seek
to trade-off limited support for reform to party structures in order
to eliminate some of the political negatives associated with the
party-union link in return for commitments on specific policies, for
example, full employment.
3 The third phase began with the election of Tony Blair as Labour
leader in May 1994. Emboldened by Smith’s victories on the
block vote and OMOV, Blair signalled his intention to eliminate
unions entirely as potential veto players over Labour’s political
program, while also blocking backroom deals on policy. Labour’s
policymaking institutions were also reformed to increase the
influence of party members at the expense of activists and the
unions. The party’s move towards the political centre-ground on
economic and industrial relations policy minimised scope for
the reform/policy trade-off seen in phase two. As a result, union
leaders had to decide whether to oppose and undermine the party
leadership, for example over the repeal of Clause 4 in Labour’s
constitution, thereby risking yet another election defeat for Labour,
or to acquiesce in their own sidelining, hopefully in return for a
limited slate of pro-union policies once Labour gained power. Their
indecision saw the movement fragment into a ‘left-critical’ bloc
of militant unions eager for a Labour government but determined
to try to steer the party in a collectivist direction, and a more
moderate group, backed by the Trades Union Congress (TUC)
itself, prepared to accommodate and work with the New Labour
leadership.

What were the consequences of this realignment? First, party modernisers

largely succeeded in neutralising public perceptions of union dominance
and were able to (successfully) fight the 1997 election campaign on a
moderate centre-left platform of their own choosing (although this was
not the only reason for Labour’s success – the disarray of the Conserva-
tive government was an equally important factor). Second, it arguably
positioned the TUC as the main interface between the Labour Party and

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 Loosening Party-Union Ties 

the trade union movement on policy development. The central theme of

this book is the process by which the TUC, the peak association of UK
organised labour, was able to remake its increasingly fraught relationship
with Labour politicians to position itself to be able to lobby for pro-trade
union policies when Blair’s ‘New’ Labour entered power in 1997. This chap-
ter argues, perhaps somewhat counter-intuitively, that Labour’s reform
process streamlined, and made more effective, union-party interaction
over policy, even though it was ostensibly about placing greater distance
between the political and industrial wings of the labour movement.
The reforms took a set of complex and overbearing institutional
arrangements linking the party with affiliated trade unions and replaced
them with a nexus for political unionism that was simpler, albeit more
distant and ad hoc, centring on informal consultation between the
leaderships of the TUC and New Labour. The TUC therefore became
the dominant – and arguably more effective – interlocutor with New
Labour, and this enabled it to act strategically to press for a limited slate
of union-friendly policies from Blair’s government.
A moderate, business-friendly TUC committed to social partnership
with employers, rather than confrontation, was to stand a better chance
of influencing Blair’s New Labour in a pro-union direction than the
defensive tactics of the left critical unions. For its part, the Labour Party
was able to largely divest itself of visible reliance on the political machine
of the trade union movement which had been politically damaging. This
was arguably a necessary condition for General Election success in 1997.

Constitutional reform in the Labour Party

During the 1980s Labour was forced to face up to what Marquand has
called ‘the progressive dilemma’: that the party is a labourist organisa-
tion, founded in order to further the interests of the working class,
which nevertheless depends for electoral success in the UK’s majoritar-
ian political system on substantial support from middle-class voters. The
party’s problem had been that it identified itself as an instrument of the
labour interest rather than being the vehicle for a particular ideology.
This helped it to appeal to manual workers but at the cost of alienating
the middle classes (1991: 17).
The shrinkage of the working-class voting bloc and steady decline of
class-based voting in the 1980s spelled the end of the road for this strategy.

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 New Labour Policy, Industrial Relations and the Trade Unions

The Alford Index, which defines and measures the level of class-based
voting as the difference between the share of manual workers voting for left
parties and the share of non-manual workers voting for left parties, shows
a fairly conclusive decline in the manual worker composition of the social-
democratic vote. In the UK the average difference between 1945 and 1960
was 37.3; between 1981 and 1990 it declined to 23.4 (Nieuwbeerta 1996: 356).
While working-class voting blocs do not shrivel completely, left parties may
still be encouraged to try to build new electoral coalitions based on cross-
class interest cleavages. The solution to Marquand’s dilemma proffered by
modernisers such as Blair was therefore to forget about trying to control
the unions and manoeuvre to distance the party from them instead.
Labour’s reaction to its ejection from government in 1979 and the even
more catastrophic electoral defeats of 1983 and 1987 had been to weaken
the formal institutional linkages between itself and the unions in order
to put ‘party above class’ (Crewe 1991: 42–43). The party’s strategy which
gradually emerged after 1983 was therefore to accommodate, rather than
try to shape, the largely fixed preferences of the median voter (Hay 1999:
77). Whether accurate or not a view was taken early on that the party’s
perceived closeness to unions damaged its reputation with the electorate.
A memo prepared for the National Executive Committee (NEC) by
David Hill, the party’s Director of Campaigns and Communications,
immediately after Labour’s shock 1992 defeat, claimed: ‘Our major long-
term problem appears to be the fact that we carry too much baggage
from the late 70s and 80s to persuade people that they can fully trust us.’1
Hill also cited some private polling for the party by NOP which showed
that 30 per cent of respondents cited Labour’s ‘general image’ as a nega-
tive factor, with accompanying comments mostly referring to the Winter
of Discontent and the Miners’ Strike. Another memo contained various
recommendations for the party’s next policy review, arguing that ‘Policy
must be seen to be made for the “common good” and not in the interests
of one group.’2 Philip Gould, Blair’s chief pollster, admitted that ‘Fear of
trade union domination was probably our greatest single vulnerability: if
we lost ground there we would lose ground everywhere’ (1999: 352 ).
The reforms that ensued undermined Labour’s tradition of federal-
ism (with power distributed among various bodies) and representation
(with politicians elected to represent groups like unions) and replaced it
with the principle that all members should participate in party decisions
(Russell 2005: 258). Before examining these in detail, the next sections
analyse the institutional linkages between party and unions.

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 Loosening Party-Union Ties 

Institutional ties between Labour and the unions

Union-party collaboration had been cemented through a set of formal
institutional linkages which tied the unions explicitly to Labour and
no other party, granting significant influence in return. These linkages
pervaded the party and operated on several levels. The most prominent
were those which provided unions with a direct input into party manage-
ment and policy formation. Before the reforms of the early 1990s, these
were the Labour-TUC Liaison Committee, which was set up to foster
dialogue between a small group of union and party leaders; and Labour’s
ruling NEC, on which unions had around 12 of the 29 seats.
A further route by which unions could exert control over the party
was their influence over leader and parliamentary candidate selection
and how conference policy decisions were reached. Unions controlled 90
per cent of the votes at party conferences where party policy was decided
upon. When it came to electing the party leader and deputy leader, the
size of the union bloc vote was smaller (40 per cent) but still potentially
decisive, obliging successful leadership candidates to secure the support
of the big unions in a visible and politically damaging public demonstra-
tion of trade union power (Alderman and Carter 1993: 54). For example,
John Smith allegedly became Labour leader with Margaret Beckett as
his deputy in July 1992 through a stitch-up between the GMB (General
Trade Union ), which backed him, and the Transport and General Work-
ers’ Union (TGWU), which supported Beckett (ibid: 54).
Unions were also active at constituency party level where parliamen-
tary candidates were selected. Many members of parliament (MPs) were
‘sponsored’ by individual trade unions, so influence continued into the
parliamentary party. For instance, 173 parliamentary candidates were
sponsored by unions in the 1992 election (44 of them by the TGWU),
of whom 143 were elected, including 38 of the TGWU-sponsored candi-
dates (Butler and Kavanagh 1992: 225–227). Minkin has also claimed that
control by unions of key party institutions was underpinned, in turn, by
an equally important set of informal ties. These acted to ‘socialise’ union
and party leaders and officials through unwritten rules and protocols
which guaranteed that unions’ interests were closely identified with
those of the party and working people as a whole (1991: xiii).
Following Labour’s disastrous General Election defeat in 1983, the
party began a modernisation program under Kinnock. A sweeping Policy
Review process was launched in 1987 to weed out policies unpopular

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 New Labour Policy, Industrial Relations and the Trade Unions

with the electorate. But the priority of the modernisers was to reform
how the party’s leader and parliamentary candidates were selected and
how conference policy decisions were reached. The extent of trade union
influence over the party was therefore thrust centre-stage because their
90 per cent bloc vote guaranteed them a decisive say in these areas. For
instance, any one of the three biggest unions on their own could cancel
out the entire vote cast by constituency party delegates (Hughes and
Wintour 1990: 190–191). The undemocratic nature of the bloc vote was a
huge problem. Union members were rarely consulted before voting and
only a small number were active Labour Party members.
Kinnock’s reforms, although important in shifting entrenched atti-
tudes, were limited in scope, however, and it was left to his successor,
John Smith, (who led the party between 1992 and his early death in 1994),
to bring the issues of the union bloc vote at Congress and proposals for
OMOV over party candidate selection onto the table.
After the party’s unexpected General Election defeat in 1992, the NEC
set up a review group to look at the entire party-union relationship.
Reporting in March and July 1993, it reaffirmed support for the retention
of the trade union link3, but suggested reducing the bloc vote at confer-
ence from 90 per cent to 70 per cent, with an option to cut it further to
50 per cent once individual memberships exceeded 300,000 in number.4
The review also proposed reform to the parliamentary selection process
to water down, although not eliminate, union participation. Agreement
on the reduction of the bloc vote was reached at the 1993 party confer-
ence and this, in turn, paved the way for the push for full OMOV.
In securing these reforms the key problem for party modernisers was
that guaranteeing the necessary votes at conference to secure a mandate
to reduce unions’ power over the Labour Party required the support of a
significant faction of the trade unions themselves (See Table 3.1 above for
data on the conference voting strength of the ten biggest unions. Note
the dominance of the three big unions, the TGWU, GMB and Unison:
the TGWU and GMB combined were able to outvote all the remaining
unions bar Unison).
Smith was eventually able to push through OMOV incrementally by
allying party reformers with moderate unions to secure the necessary
votes at conference. However, the price of this support was a series of
concessions to key unions on party policy which provided the Conserva-
tive Party with political ammunition for its claim that Labour remained
dominated by ‘union barons’.

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 Loosening Party-Union Ties 

Table 3.1 Delegations and voting strengths of the ten largest unions at the Labour
Party Conference in 1994
Union Membership Vote %
TGWU (general) , .
GMB (general) , .
Unison (public sector) , .
AEEU (engineers) , .
USDAW (shop workers) , .
CWU (communications) , .
MSF (industry/services) , .
GPMU (print) , .
RMT (transport) , .
UCATT (construction) , .

Note: Union voting share does not automatically correspond with membership, as not all
unions sent a full delegation.
Source: Labour Research, October 1995: 22

OMOV was important for the party leadership because enacting it

would diminish the influence of trade unions over the party which made
it easy for Labour’s opponents to portray it as dominated by factional
interests, and replace it with a more or less democratic system which
handed power to party members instead. Removing unions as veto play-
ers over the party’s electoral program would also give its leadership a
freer hand to craft a centrist social-democratic program which was more
likely to appeal to middle-class voters than Labour’s class-oriented elec-
tion manifestos of the 1980s.
The majority of the big unions voted against OMOV at the 1993 party
conference. The breakdown of the voting is shown in Table 3.2. The two
large generalist unions, the TGWU (14.6 per cent of the conference vote)
and GMB (12.2 per cent) both opposed the reform while the MSF (3.8
per cent) abstained and the three public sector unions – COHSE, NUPE
and NALGO – which were to merge in 1993 to form UNISON (with 11.6
per cent of the vote), split their vote.
Because of the dominance of the GMB and the TGWU, it is consid-
ered unlikely that OMOV would have passed in the absence of the
prior reform to cut the union block vote at Congress from 90 per cent
to 70 per cent (Stuart 2005: 322), illustrating the incremental nature of
the modernisation process and the need for the party leadership to find
some way of bringing the big unions onside.

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 New Labour Policy, Industrial Relations and the Trade Unions

Table 3.2 Union voting on OMOV at

Labour’s September 1993 conference
For Against
AEEU GMB
COHSE TGWU
UCW GPMU
RMT UCATT
ISTC NUM
TSSA FBU
NUPE ASLEF
NCU

Various sources
(Abstained: MSF)

The battle over Clause 4 abolition

The significance of the OMOV victory and reduction of the block vote
was that it would henceforth give the party leadership much greater
scope to push the party in a modernising direction. However, it was still
necessary to begin communicating these attributes to an electorate that
continued to associate Labour with factionalism and extremist policies
but was un-interested in the details of party governance. Tony Blair, who
became leader in May 1994 following Smith’s death, chose to do this by
immediately making an issue of Clause 4 of the party’s constitution, a
redundant but symbolically important commitment to nationalisation
which Blair judged made the party seem too left wing.
For Blair, scrapping Clause 4 would show opinion formers and the
electorate that Labour was now a mainstream social democratic party
with non-partisan and moderate centre-left policies (Wickham-Jones
2005: 667). Hence, Clause 4 abolition would make Labour just like other
European left parties, many of whom had already confronted similar
dilemmas: for instance, the German SPD’s renunciation of Marxism at
the Bad Godesburg conference in 1959.
However, an equally important motivation for New Labour seems to
have been that it would provoke a row with the unreconstructed left,
which would lose, thereby demonstrating to the electorate both the
depth of Blair’s commitment to modernisation and the impotence of his
opponents. This, at least, would be the classic rational choice analysis
of political symbolism, whereby the party leadership sacrifices some
support for more freedom for manoeuvre (see Drucker 1979 for a classic

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 Loosening Party-Union Ties 

exposition of this kind of strategy). It was also the view of a number of

contemporary Labour-supporting commentators, who saw the move as
a ruse to trade captive support to the left of the leadership for centrist
swing voters who required concrete evidence of New Labour’s position-
ing of itself as a party of constructive change.5
However, it was a high-risk strategy, as defeat over the issue would
have dealt a severe blow to Blair’s leadership. As with the battle over
OMOV, scrapping Clause 4 also required forging an alliance with a
moderate group of trade unions because these still controlled 70 per cent
of the votes at conference. However, most unions, not just on the left,
regarded Clause 4 as the bedrock of the party-union alliance and were
reluctant to let this go.
Blair first broached the idea of ditching Clause 4 in his debut confer-
ence speech as party leader in September 1994. Caught by surprise,
conference delegates threw out the proposal, with 40 per cent of
constituency parties and 54 per cent of unions voting against change.
Ignoring this setback, Blair called a special conference for the following
April at which a revised clause would be presented, and spent the next
six months canvassing support. His argument that defeating the leader-
ship over Clause 4 would wreck the chances of a Labour victory at the
next election proved persuasive and the special conference approved
the change to Labour’s constitution in April 1995. Developments after
the vote appeared to vindicate Blair’s gamble, as Labour made sweeping
gains in local council elections held on 4 May.6
Table 3.3 shows unions’ voting at the special conference convened to
rule on Clause 4 abolition on 20 April 1995. The main difference with
the voting on OMOV two years earlier is that the GMB switched sides
to support Clause 4 abolition and the MSF leadership, in defiance of its
own conference policy, abandoned its previous neutrality to back aboli-
tion. On the other hand, the newly formed public sector union, Unison,
opposed Clause 4 abolition outright (in their earlier vote on OMOV, the
three public sector unions which went on to form Unison had split their
vote).
Blair easily carried a large majority of the constituency parties, giving
him 30 per cent of the non-union vote, and always had the backing of
the right-wing Amalgamated Engineering and Electrical Union (AEEU),
which added a further 8.7 per cent. The GMB switching sides with its
block vote of 12.2 per cent therefore gave the leadership a tiny but decisive
majority of 50.9 per cent, irrespective of the votes of the other unions. If

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 New Labour Policy, Industrial Relations and the Trade Unions

Table 3.3 Union voting on Clause 4 abolition at Labour’s special

conference on 29 April 1995
For Against
GMB TGWU
MSF Unison
AEEU NUM
CWU RMT
USDAW GPMU
TSSA FBU
UCATT

Various sources

the GMB had instead voted with Unison and the TGWU, their combined
total of 38.4 per cent ranged against abolition would have equalled the
combined vote of the AEEU and the constituency parties, requiring only
a slight majority of the remaining unions to defeat the leadership. The
GMB was therefore the decisive swing voter, and the implications of this
are assessed below.

Labour and the unions: stable preferences, shifting

strategies
As the above section explains, in the space of two years between 1993
and 1995, Labour succeeded in altering the entire basis of power within
the party as well as abandoning one of the central tenets of its ideology.
Both these transformations also signalled a radically changed political
and institutional relationship with the trade unions. Since this book is
concerned with analysing strategic interaction between these two sets of
actors, this process is worthy of detailed analysis. This section makes two
main propositions: first that the political strategy of the Labour party in
the 1990s, which was to move to the centre-ground of politics in order
to court the median voter, involved adopting broad policy positions that
were to prove incompatible with underlying trade union goals. Second,
that the resulting political distance between the policy goals of unions
and party eventually invalidated the ‘insider’ model of party lobbying for
trade unions (although not necessarily for the TUC).
The most obviously paradoxical element of the moderniser’s success
in forcing through change is that it required trade unions to acquiesce

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 Loosening Party-Union Ties 

in the diminution of their own power within the party. They also had
to let go of a policy commitment (Clause 4 nationalisation) which,
whatever its limitations in terms of practicality, provided a convenient
ideological rallying point with which to block further marketisation of
Labour’spolicies. However, both OMOV and Clause 4 abolition eventu-
ally secured significant trade union support.

Labour Party strategy

As already argued, the party adapted to its 1983 defeat in three ways:
by moving its electoral program towards the centre-ground of British
politics; loosening ties with trade unions; and setting out to become a
mainstream social-democratic party with a mass-membership based on
individual subscriptions rather than via membership of a trade union or
other affiliated body. The extent to which New Labour’s electoral strategy
revolved around targeting the median voter is still contentious (Hay
1999: chap 3). Broadly, however, the party’s adoption of a preference-
accommodating ‘catch-up’ strategy from the late 1980s accords with
Downs’ view of political imperatives brought on by the structure of party
competition in bipolar electoral systems: ‘Political parties tend to main-
tain ideological positions that are consistent over time unless they suffer
drastic defeats, in which case they change their ideologies to resemble
that of the party which defeated them’ (1957: 300).
Several important dimensions of New Labour’s political strategy
illustrate this. For instance, after several futile attempts to convince
voters there was little to lose by voting Labour instead of Conservative,
the party’s 1997 General Election Manifesto promised to honour the
Conservative government’s public spending plans for the first two years
of the new parliament, with the result that public spending was 3.1 per
cent of national income lower at the end of Labour’s first term in 2001
than at the beginning.7
Another was the ‘focus group socialism’ of Philip Gould, Blair’s chief
pollster. This entailed identifying areas where middle-class swing voters
were dissatisfied with the party’s existing platform and then tailoring
policies, and especially the presentation of these, to address this (Gould
1999: 326–333). Equally importantly, in this light, was also therefore the
party leadership’s effort to minimise its reliance on trade unions, as
this was the key party-institutional difference between Labour and the
Conservatives. Conservative Party attack strategies centred on Labour’s

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 New Labour Policy, Industrial Relations and the Trade Unions

links with the unions, with briefing documents prepared by the party’s
Research Department instructing spokesmen to claim that ‘union domi-
nation of Labour is the greatest for 50 years; Labour’s policy would makes
strikes easier’; and ‘Labour’s policy would give everything the unions
want’.8 Minimising the ability of their political opponents to mount these
attacks was therefore pivotal to Labour’s effort to manoeuvre to occupy
the electoral centre-ground.
The results of Labour’s political repositioning strategy are presented in
Tables 3.4, 3.5 and 3.6, which show panel data of voters’ attitudes towards
key economic issues collected between 1983 and 1997. They clearly show
the party moving from the left of British politics towards the centre-
ground to court the median voter. This was done by abandoning poli-
cies that advocated redistributing income, using fiscal policy levers to
guarantee full employment and nationalising the leading sectors of the
economy.

Table 3.4 Percentages of voters relative to Labour’s position on nationalisation

and privatisation, 1983–1997
Percentage who were:
Year Left of Labour Same as Labour Right of Labour Net balance
    +
    +
    +
    +
    +

source: Heath, Jowell and Curtice 2001: 107, table 6.2

Table 3.5 Percentages of voters relative to Labour’s position on unemployment

and inflation, 1983–1997
Percentage who were:
Year Left of Labour Same as Labour Right of Labour Net balance
    +
    +
    +
    +
    +

Source: Heath, Jowell and Curtice 2001: 108, table 6.3

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 Loosening Party-Union Ties 

Table 3.6 Percentages of voters relative to Labour’s position on taxes and

spending, 1983–1997
Percentage who were:
Year Left of Labour Same as Labour Right of Labour Net balance
    +
    +
    +
    +
    +

Source: Heath, Jowell and Curtice 2001: 109, table 6.4

However, they also indicate the limited effect on voter perceptions

of Labour’s extensive policy review process, which was instituted by
Kinnock and lasted from 1987 until just before the 1992 General Elec-
tion. Even though a number of ‘Old Labour’ policies on unilateral
nuclear disarmament and an interventionist economic strategy were
ditched following the review this had little effect on Labour’s popularity.
For instance, 53 per cent of voters were still to the right of Labour on the
issue of taxation and spending in 1994 – only 6 per cent down from the
party’s nadir of 1983. The repeal of Clause 4 in 1995, by contrast, had a
much more direct and significant effect on opinion, with the percent-
age of voters to the right of Labour on the taxation and spending issue
declining to 34 per cent, a net balance of just 3 per cent, by the time of
the 1997 General Election.
However, by tacking to the right to occupy the electoral centre-ground
New Labour opened up a political gulf with trade unions, most of
which (bar the AEEU) still favoured extensive nationalisation and high,
progressive taxation. The implication of this was that trading off support
for further institutional reform in return for such policy commitments
would now became impossible. What was the response of the trade
unions to this?

Sectoral Union strategies 1: OMOV

All along, the trade unions wanted the Labour party to pursue a
preference-shaping strategy regarding its political campaigning, rather
than the preference-accommodating strategy that New Labour adopted
(see above). For instance, they urged the party to pledge to overturn the
Conservatives’ anti-trade union legislation even though it was largely

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 New Labour Policy, Industrial Relations and the Trade Unions

supported by voters. A TGWU policy document argued that ‘We need

to work within the party to refocus its attention on industrial issues and
guarantee its commitment to recognising the validity of the trade union
role’.9
Union leaders were concerned that if Labour produced policies
designed to appease middle-class professional voters, then it would have
to water down its commitment to legislation enforcing collective rights
at work. In other words at this stage they had an overt interest in influ-
encing both the party’s decision-making process and the content of these
decisions. However, most of them were also aware of the party’s need to
publicly demonstrate independence from trade unions so their preferred
strategy was to trade-off concessions on party/constitutional issues, such
as over unions’ weight in conference voting, for policy commitments
such as full employment.
Different unions, of course, pursued different strategies. Left-wing
unions such as the NUM (miners), in concert with ‘Old Labour’ sections
of the party left, opposed on principle any change to party rules on deci-
sion-making. Right-wing unions, such as the AEEU (skilled engineers),
on the other hand, continued to push for reform and openly backed
both OMOV and Clause 4 abolition from the start – the only significant
union to do so. The dominant centrist group however, which included
the large generalist unions, the TGWU and GMB, as well as the public
sector unions, acted strategically and attempted to exchange concessions
over internal party reform for particular commitments on policy. They
did this in the knowledge that, with the thrust of party reforms moving
in a direction that involved drastically diminishing their input into party
decision-making, this represented their best, and possibly last, chance
to hold Labour to a left-wing and pro-union platform. Union leaders
understood their limited room for manoeuvre and acted strategically.
For instance, the TGWU and public sector unions wanted Labour to
pledge itself to a national minimum wage of £4.15 an hour, while the
GMB wanted a manifesto commitment to full employment, defined as a
maximum of 3 per cent of the labour force, or 700,000 people, without
jobs. As Labour under Kinnock/Smith in the early 1990s was still well to
the left of the median voter the party had sufficient political space to be
able to commit to these policies.
This analysis implies that the bargaining strategy adopted by both sides
at this stage was to attempt to trade-off support for party/constitutional
reform (Labour) for a left-wing, pro-union policy platform which was

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 Loosening Party-Union Ties 

the price of this (the unions). Because Labour at this stage was still well
to the left of the British electorate there was considerable policy space
available to do this.
How viable a strategy was this trade-off? The picture is muddied some-
what by the fact that both the TGWU and GMB attempted to extract
concessions from Smith while still ultimately voting against OMOV.
However, this does not necessarily mean that they had abandoned
the trade-off strategy or that it was, consequently, a failure. Anecdotal
evidence from interviews collated by media commentators and Smith’s
biographers10 indicate that furious behind the scenes negotiations took
place to achieve this. They show that Smith was ready to make the policy
commitments demanded by the unions.
Accordingly, at the TUC conference on 7 September 1993 Smith
strongly endorsed the union link: ‘We need as never before strong trade
unions to fight for jobs and social justice ... it is through the collective
strength of trade unions that workers have the best hope of defending
their interests.’ Smith also specifically committed Labour to full employ-
ment policies, putting full employment: ‘at the heart of Labour’s vision’,
and adding that ‘Labour’s economic strategy will ensure that all instru-
ments of macro-economic management, whether it concerns interest
rates, the exchange rate, or the levels of borrowing, will be geared to
sustained growth and rising employment.’11 This speech was instrumen-
tal in getting enough of the other unions to back OMOV, according
to Hilary Armstrong, Smith’s parliamentary private secretary.12 The
flipside, however, was that Labour’s electoral platform, incorporating
these pledges to the unions, remained well to the left of public opinion,
contributing to its 1992 General Election defeat.

Sectoral Union strategies 2: Clause 4 abolition

When the major unions attempted the reform/policy commitment trade-
off with Blair’s New Labour they met a completely different response.
This was because Blair deliberately eschewed the exchange model of
lobbying with trade unions.
In other words, deals exchanging pro-union policies for support over
reform were now impossible. While he was campaigning for Clause 4
reform Blair continually emphasised there would be ‘no backroom deals’
with unions.13 Union general secretaries attempting to put pressure on
New Labour were given short shrift, although this did not stop them

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 New Labour Policy, Industrial Relations and the Trade Unions

trying. One newspaper quoted a UNISON source saying that Rodney

Bickerstaffe, Unison’s general secretary, had been ‘playing poker’ with
the Labour leadership, in that if he had secured a commitment on the
level of the proposed national minimum wage he would have swung his
union behind Clause 4 abolition.14 Jon Edmonds, the general secretary
of the industrial GMB union admitted that ‘We knew exactly what we
were getting [with Blair]. The only optimistic thought was that the party
might be able to put pressure on him.’15
The revised Clause 4 mentioned public ownership and full employ-
ment but only in vague terms and in no sense committed the party to
these policies as the old clause had. They were attacked by Bill Morris, the
TGWU general secretary, on precisely these grounds.16 Well-informed
journalistic sources have emphasised the shift in the Labour leadership’s
strategy after Smith’s death: ‘Smith and [Gordon] Brown agreed that the
role of trade unions in selecting MPs, the party leaders and making policy
should be reduced, but Smith was more open to compromise ... Smith
was prepared to trade with the unions to obtain their votes in a confer-
ence plebiscite on the issue’ (Peston 2005: 158).
However, the unions remained an important component of the labour
movement, not least because of their financial contribution to party
coffers, and were guaranteed significant representation on Labour’s
governing and policymaking institutions. The New Labour leadership
therefore resolved to dilute this influence through a further set of reforms
to party structures which are considered in the following text.

Policymaking in the Labour Party: The National Policy

Forum and ‘partnership into power’
Having loosened the grip of the unions over the party conference and
parliamentary and leadership elections, New Labour continued the proc-
ess of overhauling the party’s institutions concerned with policymaking
that had been begun by Kinnock. The stated purpose of this reform proc-
ess was to replace the opaque engagements associated with Old Labour
with mechanisms that were more open and democratic.
Kinnock had responded to Labour’s third successive election defeat
in 1987 by ordering a major review of policies in seven areas, including
industrial relations. These ‘Policy Review Groups’ (PRGs) were dominated
by Members of Parliament (MPs), thanks to the integration of the shadow

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 Loosening Party-Union Ties 

cabinet and the NEC into the review process at the expense of conference
and the unions (Quinn 2004: 76–78). Moreover, the conclusions of the
review groups had been presented to the 1989 conference on an ‘accept or
reject’ basis, depriving the then union-dominated forum of any opportu-
nity to amend them. Although the policy group dealing with industrial
relations (‘People at Work’) was contested by the leadership over what
was deemed to be its overly pro-union content, the ultimate outcome of
this process was that Labour’s industrial relations policies would hence-
forth be based on providing a basic set of positive individual, rather than
collective, rights (Hughes and Wintour 1990: 152). There would also be no
wholesale repeal of the Conservative’s employment laws.
In theory, however, policymaking still ultimately remained the respon-
sibility of conference. Even after the reduction of the unions’ block vote
to 50 per cent in 1996, there was still ample scope for them to ally with
left-wing activists to block further change, and even if these attempts
failed the accompanying rows could still cause huge political damage.
There was also grassroots dissatisfaction over the dominance of the PRGs
by MPs (Russell 2005: 136). New Labour’s solution was to turn the PRGs
into a rolling set of policy groups composed of a more representative
set of the party’s diverse factions including, but not dominated by, the
unions. In 1990 conference approved an NEC statement, ‘Democracy
and Policymaking in the 1990s’, proposing to set up a National Policy
Forum (NPF) with more than 100 members drawn from the regions,
the Parliamentary Labour Party (PLP), unions, councillors and socialist
societies. The NPF was tasked with developing policies in the run-up to
each General Election, and would be overseen by a Joint Policy Commit-
tee (JPC) made up of members from the NEC and shadow cabinet.17
Crucially, however, it would be the responsibility of the JPC to prepare
the first draft of policy documents to be put to conference.
The NPF first met in 1993 and met eight times by 1997. However, it
was criticised for being ineffective due to financial and organisational
constraints (Seyd 1999: 390). Following Labour’s 1997 election triumph
the whole NPF process was overhauled in an effort to entrench it more
deeply into the policymaking process under the supervision of Blair’s
hand-picked party general secretary, Tom Sawyer. The purpose of the
exercise was to continue to transform Labour into a mass-membership
party, which required a less top-down approach to governance and poli-
cymaking in order to avoid fractures between the leadership and party.
Following the blueprint contained in a NEC document, ‘Partnership into

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 New Labour Policy, Industrial Relations and the Trade Unions

Power’, the NPF would develop policy in a rolling program completed

in three years between elections with two overlapping cycles and would
closely coordinate policy generation with the NEC and conference.18
However, it was clear that the New Labour leadership by now regarded
conference as a ‘showpiece’, rather than a genuine policymaking body,
and instructed conference delegates to avoid stoking unseemly rows that
would be lapped up by the right-wing press.19 The NEC was also increas-
ingly neutered by the leadership’s centralisation of power (Russell 2005:
185). Sawyer, the party’s general secretary, was startling candid about
this: ‘One of the things we have to do is come to terms with reality. Tony
[Blair] will want to take the lead on policy and therefore a governing
council’s responsibility is to cooperate on that basis.’20
The NPF found itself increasingly isolated in the policy process. As
an institution, it was weak and divided: the party leadership remained
in the driving seat, as the forums were structured to shadow Whitehall
departments, giving ministers and their special advisors control of the
agenda (Russell 2005: 158). Overall, the balance of party funding was
towards campaigning, not policy formation, and the JPC, which was
supposed to oversee the work of the NPF, rarely met. At this stage (i.e.,
before the end of New Labour’s first term) there was little opposition to
leadership dominance from the unions. The unions were divided and
failed to act collectively as a bloc to advance their interests, even though
they held 11 of the 32 seats on the NEC and 41 of the 184 seats on the
NPF, which included NEC members.
It is therefore little wonder that ‘Partnership into Power’ and the NPF
were regarded by many party insiders as less than democratic and ulti-
mately intended to further weaken the power of the unions (ibid: 256). A
recurring complaint of the unions was that the government continually
overrode the decisions of the NPF by failing to incorporate them into the
party manifesto, or to enact the policies mandated by the manifesto after
the election.21 This dissatisfaction would lead to clashes in New Labour’s
second and third terms that would result in increased union influence
over the election manifestos, but at the cost of worse relations with the
government, and between the government and business.

Lobbying by the Unions

To manage relations between Labour governments and the unions
under corporatism, a number of semi-official bodies had been created

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 Loosening Party-Union Ties 

to smooth cooperation between the two sides of the labour movement.

Among the most important of these was the TUC-Labour Party Liaison
Committee, which was set up in 1971 to coordinate negotiations over the
social contract. It comprised representatives from the party’s shadow
cabinet and NEC, as well as the TUC’s General Council (Taylor 2000:
209). The Liaison Committee grew into an important policy forum and
produced a number of influential proposals on economic and industrial
policy throughout the 1970s and into the1980s.
However, the Liaison Committee was discredited by the failure of
the social contract and a smaller, less official, body emerged, which
was dubbed the Contact Group (Anderson and Mann 1997: 313). The
Contact Group had been set up before the 1987 General Election, and
its role was to thrash out issues in private before they reached the
Liaison Committee, which it increasingly superseded. Contact Group
discussions revolved around the broad direction of policy and strategy.
For instance, the February 1991 meeting saw debate over the role of the
National Economic Assessment, a quasi-corporatist economic policy
institution proposed in the 1992 General Election manifesto.22 At the July
1991 meeting, attended by Kinnock, Smith and Blair as well as TUC lead-
ers, the party and the TUC agreed to try to ‘avoid major splits on policy
or organisation’, and work to ‘marginalise the ultra-left.’23
Other bodies linking Labour with the unions also existed, but their
role was largely confined to coordinating campaign financing and the
deployment of union activists. They included a ‘Leader’s Committee’,
composed of 14 senior Labour Party figures and the general secretaries
of the TGWU and GMB, to take on an ‘executive role’ during election
campaigns.24 ‘Trade Unions for Labour Victory’ and ‘Trade Unionists
for Labour’ also coordinated union support for the party. These were
merged in 1994 to form the National Trade Union and Labour party
Committee, intended to be a consultative body with ‘no formal role in
the party’s decision-making process.’25 Membership of these groupings
was restricted to those unions affiliated to the party, thereby excluding
the TUC, and they were to grow considerably in importance as New
Labour’s financial situation deteriorated after 2001.
The Contact Group remained in place under New Labour, and union
leaders continued to regard it as an important vehicle for getting their
views across to the party leadership. However, the view of party insiders
was that Blair chose to shun collective representations by the unions –
even via tight knit groupings such as the Contact Group – preferring to

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 New Labour Policy, Industrial Relations and the Trade Unions

deal with general secretaries individually where they could be played off
against each other. Increasingly, therefore, direct pressure by unions was
also closed off as an alternative avenue of potential influence under New
Labour. Direct, ‘insider lobbying’ by the TUC was therefore increasingly
what was left. But how was this conducted?

Rebuilding bridges with Labour: TUC strategy and

organisation
One, paradoxical, effect of Labour’s internal reforms to reduce union
influence was to restore the TUC to its position as the main potential
interlocutor on policy matters between trade unions and the Labour
party. The TUC henceforth enjoyed, in effect, a monopoly of insiderist
representation of the labour interest to the Labour Party from 1995 to
around 2001 when the most important industrial relations policies
were being devised. Two developments made this possible. One was the
internal party reorganisation considered in detail above, which saw the
sectoral unions increasingly frozen out by the New Labour leadership.
Another, dealt with below, was the response, in terms of organisation
and strategy, of the TUC, which positioned itself to take advantage of
this.
A central motivation behind Blair’s strategy to distance Labour from
the unions was his desire to limit the ability of big unions such as Unison
and the TGWU to exert direct insiderist pressure on his government
through internal party institutions.26 On the other hand, it was still
necessary to be able to engage with representatives of organised labour.
This would, ideally, be done through the TUC in its role as social partner,
as New Labour insiders argued: ‘We much preferred the social partner
route. In a modern situation that was the right role for the unions, and
you didn’t get all these public battles, which always looked bad for us.
I’m not saying there weren’t any blurred edges with the social partner
route, but it did give us more clarity with the issues.’27
However, while the TUC may have been the logical interface between
party and unions it was still up to the TUC leadership to prove it was
capable of this function. As one former TUC insider puts it: ‘While Blair
may have liked and trusted John Monks (the TUC’s general secretary
from 1993 to 2001), he had difficult relationships with other leading
general secretaries. Fundamentally, Blair doubted the TUC’s ability to

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 Loosening Party-Union Ties 

deliver. Equally, he was unwilling to risk losing business support for New
Labour by trying to reinstate what would have been widely seen as a
discredited model of corporatism’ (Coats 2005).
Reduction of the size of the unions’ block vote and Blair’s unwilling-
ness to cut deals with individual union leaders drastically reduced the
influence of the TGWU, GMB and Unison, replacing them with the
TUC as the mouthpiece of British unions. This, in turn, allowed the TUC
to develop a reformist strategy, known as ‘New Unionism’. This was a
progressive, employer-friendly response by the TUC to Labour’s reposi-
tioning of itself at the centre-ground of British politics. ‘New Unionism’
was associated with the TUC’s 1994 re-launch. This re-launch echoed
New Labour’s managerialist and consumerist approach, emphasising
accommodation with government and employers instead of militancy
and confrontation (McIlroy 1998: 546–551).
This is how the TUC described its new political strategy:
Although the TUC has close links with a variety of pressure groups,
academic bodies and other organisations, its influence in Whitehall and
Westminster has diminished. Government departments no longer consider
it automatic to consult the TUC on all matters of importance to the
economy and employment. A range of government public policy bodies,
such as the National Economic Development Office and the Manpower
Services Commission, with which the TUC was closely involved, have been
abolished. The TUC is therefore having to refocus its links with Whitehall
and Parliament in order to maximise its influence on public policy. It needs
to build understanding of trade union work and objectives right across the
political spectrum.28

A key component of the new strategy was the TUC’s repositioning

of itself as the representative of workers generally, rather than embody-
ing the narrower interests of trade unions. For the first time, the TUC
general secretary accepted invitations to speak at all three party confer-
ences in 1994 as well as at the Confederation of British Industry (CBI). A
Conservative employment minister also spoke to the TUC that year, in a
move that was strongly criticised by the TGWU and Unison.
The TUC’s re-launch also involved organisational changes, which
included replacing a cumbersome committee structure, which shadowed
government departments, with more streamlined ‘Task Groups’ focussed
on developing policy and campaigns on clearly defined and achievable
objectives (Heery 1998: 341). Another important change was that the
governing general council, comprising general secretaries of affiliated

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 New Labour Policy, Industrial Relations and the Trade Unions

unions, would meet much less frequently, thereby increasing the power
of the TUC permanent secretariat and general secretary. These changes
were clearly intended to increase the ability of the TUC leadership to act
strategically (ibid: 347).
The TUC took a studiously neutral stance on OMOV and Clause 4
abolition. The most obvious reason for this is that the TUC itself is not
affiliated to Labour and therefore had no stake in the matter. But strict
neutrality was also necessary to show the party leadership that it would
not seek to interfere with internal party decision-making, although
once policy had been decided upon it would feel free to lobby the party/
government for or against it in the normal way. An example of this was
the issue of job creation. Rather than demanding a formal employment
target (which was the modus operandi of the GMB and others), the TUC
published its own carefully argued plan to expand job creation and local
training schemes which was not dissimilar to Labour’s and could, it
suggested, create 300,000 new jobs over three years.29
On the other hand, the TUC was not averse to taking unpopular
stands on policy issues even where these were not obviously within its
remit, reflecting its strategic outlook. The stance of its leadership on
Clause 4 was the obverse of its position on another contentious issue:
that of UK membership of European Economic and Monetary Union
(EMU). In the 1990s it strongly backed UK membership of the Euro-
pean single currency, even though doing so engendered a split in the
union movement on an issue over which the TUC had no influence. The
split in the union movement on EMU in fact closely mirrored that over
Clause 4, with the AEEU and GMB lining up with the TUC leadership
and Unison and the TGWU opposing it.
Moreover, the TUC’s neutral stance on Clause 4 appears to have been
a deliberate decision, rather than the result of a default strategy of non-
involvement. It was reached at a two-day meeting of TUC leaders in early
November 1995 at which any confrontation between the unions and New
Labour was ruled out in advance of the General Election. This contrasted
with, for instance, the attitude of the Scottish TUC, which repeatedly
condemned Blair’s assault on Clause 4. For instance, Bill Spiers, deputy
general secretary of the Scottish TUC, told the Tribune journal: ‘As we
survey the state of the economy, it’s hard to understand the decision
to write off common ownership as a means of rectifying the shambles
created by the free market.’30 Monks, the TUC’s general secretary, had
several opportunities to oppose or endorse Clause 4 abolition in advance

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 Loosening Party-Union Ties 

of the vote, for instance at the TUC Women’s Conference in March 1995
at which numerous delegates attacked the reform, but he chose not to.
Instead, he obliquely backed the Blairite line on every occasion, for
instance emphasising his belief that ‘all those who wish to work should
have the opportunity to do so’31 which directly paraphrased the new Blair-
ite Clause 4, referring to: ‘the opportunity for all to work and prosper.’

Notes
1 ‘General Election Campaign – Some Observations.’ Labour Party memo. 24
June 1992.
2 ‘1992 General Election Defeat: Reasons for Defeat.’ Labour Party memo.
3 ‘Labour Party-Trade Union Links: Interim Report of the Review Group.’
Labour Party 1993.
4 ‘The Final Report of the Review Group on Links between the Trade Unions
and the Labour Party.’ Labour Party 1993.
5 See, for example: Wright and Marquand: ‘Commentary’, Political Quarterly,
Vol 66, 2 1995; 121–123; Thompson: ‘Causes and Clauses.’Renewal. Vol 3, 1,
January 1995: 1–4.
6 Guardian, 5 May 1995.
7 ‘Public Spending under Labour.’ Institute for Fiscal Studies 2009: 11.
8 ‘Labour and the Unions.’ Conservative Research Department 1990: 3.
9 ‘Focus for the Future: A T&G Strategy.’ TGWU 1993: 83.
10 Cf: Stuart 2005: pp 330–337; McSmith 1993: 243, 246. Donald MacIntyre,
biographer of Blair’s key ally and former TUC official, Peter Mandelson, also
argues that victory on OMOV was the quid pro quo for Smith acceding to
the union’s policy demands (McIntyre 1999: 275).
11 ‘Report of Congress.’ TUC 1993.
12 Quoted in Stuart (2005: 331).
13 Times, 17 April 1995.
14 Sunday Times, 16 April 1995.
15 Quoted in Beckett and Hencke (2004: 150).
16 Morning Star, 23 January 1995.
17 ‘Agenda for Change.’ Labour Party 1992: 28.
18 ‘Partnership into Power.’ Labour Party 1997: 5–6.
19 ‘Labour into Power: A Framework for Partnership.’ Labour Party 1997: 13–14.
20 ‘Preparing for Power: Interviews 1996-1997.’ Ed: Steve Richards. New
Statesman 1997.
21 ‘Briefing Paper. The NPF Review.’ Trade Union – Labour Party Liaison
Organisation. 2005: paras 1.5, 3.2.

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 New Labour Policy, Industrial Relations and the Trade Unions

22 ‘Meeting of the Contact Group.’ Labour Party February 1991.

23 ‘Meeting of the Contact Group.’ Labour Party July 1991.
24 Memo: ‘Establishment of a Leader’s Committee.’ Labour Party 1992.
25 ‘NEC Report.’ Labour Party 1994: 9.
26 See the highly derogatory comments on union leaders in the diaries of
Alistair Campbell, Blair’s press aide: (Campbell and Hagerty 2010: 188; 242).
27 Interview with former Labour Party general secretary.
28 ‘Campaigning for Change: A New Era for the TUC.’ TUC 1994: 3.
29 Press release: ‘TUC General Election Campaign Launched.’ TUC 1997.
30 Tribune, 11 November 1994.
31 Morning Star, 1 April 1995.

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 4
‘Insider’ Lobbying in Action:
The TUC and New Labour’s
First Term Agenda
Abstract: The focus of this chapter is on how the Trades
Union Congress’s (TUC’s) ‘insider lobbying’ strategy
worked in practice. When New Labour came to power in
May 1997, the TUC lobbied hard to ensure it enacted in
full its industrial relations program, despite the opposition
of employers. The chapter provides an overview of New
Labour’s policymaking structure and the main routes that
remained open to interest groups to lobby them following the
centralisation of policymaking structures over the previous
decade; it also explores some of the key features of the TUC’s
interaction with New Labour which were emblematic of how
interest group influence was conducted during its time in
office. It then examines two of New Labour’s main industrial
relations policies – the National Minimum Wage (NMW)
and legislation on statutory union recognition – and shows
how the TUC was instrumental in negotiating these.

Keywords: Fairness at Work; industrial relations policy;

NMW; New Labour; TUC

Coulter, Steve. New Labour Policy, Industrial Relations and

the Trade Unions. Basingstoke: Palgrave Macmillan, 2014.
doi: 10.1057/9781137495754.0006.

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 New Labour Policy, Industrial Relations and the Trade Unions

Labour’s landslide election victory on 1 May 1997, ending 18 years of

Conservative rule, finally afforded the TUC an opportunity to try to
influence the industrial relations policy of an ostensibly sympathetic
centre-left government. Labour’s pre-election manifesto document,
‘Building Prosperity’, had contained seven basic pledges on employment
rights1:
 Providing a statutory route to trade union recognition.
 The restoration of trade union rights at the Government
Communications Headquarters (GCHQ) surveillance centre (these
had been rescinded by the Conservatives).
 Improvements to the law on unfair dismissal.
 New rights under the European Social Chapter.
 A ‘proper balance’ between support for family life and the
protection of business.
 A national minimum wage.
 The abolition of zero-hours contracts.
Within a month of the election the government restored trade union
rights at GCHQ, and during the rest of the parliament it legislated on all
the other promises apart from the pledge on zero-hours contracts, which
was omitted from the final draft of the manifesto. All these measures
had been opposed by employers. John Cridland, the Confederation of
British Industry’s (CBI’s) director of human resources policy argued that
‘The legislation proposed – introducing compulsory union recognition,
a national minimum wage, signing the European Social Chapter – goes
against the grain of flexibility. We all need to concentrate instead on
achieving the right conditions for employment growth.’2
This chapter consider to what extent the TUC was able to use its insider
status to help shape New Labour’s industrial relations agenda before
government and during its first term in office. The focus here is on New
Labour’s first term because this was the period during which its election
manifesto commitments were enacted, thereby directing attention to the
TUC’s ability to hold the party to a set of policies agreed before office.
Obviously, the aims and strategies of the TUC are not the only causal
variables determining policy outcomes. The chapter therefore begins by
considering two other factors: (1) the preferences and strategies of the
Labour government itself and; (2) the system of interest representation
by which insider interest groups (employers as well as unions) provide
input into and exert pressure over policy formation. The second part of

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 ‘Insider’ Lobbying in Action 

the chapter provides an analysis of two significant planks of Labour’s

industrial relations program on which the TUC expended most lobby-
ing effort: the NMW and legislation providing for a legal route to union
recognition.
These policies were drawn up by Labour, in consultation with the
TUC (Taylor 2007: 218), while it was in opposition and were subse-
quently enacted when the party entered government despite the clear
opposition of employers. They are considered here in depth for several
reasons. First, because they reinforce the general point being made that,
despite its misgivings over the political costs of looking like it was doing
the unions’ bidding, Labour was still prepared to enact policies (such as
on statutory union recognition) that were not merely ‘pro-worker’ (and
therefore perhaps to be expected from a centre-left government) but
‘pro-trade union’ as well. Second, going against the mainly free market
grain of its economic and industrial strategy overall, Labour instituted
other policies (such as the NMW) that were expressly anti-market as
well as being strongly backed by unions.
Third, the evolution of these from conference resolution to manifesto
commitment to practical implementation illustrates key features of the
UK’s pluralist system of interest representation which underline the
critical importance of the TUC’s ability to act strategically. Although
the TUC probably still had a closer practical working relationship with
Labour than the CBI while the party was in opposition (Tony Blair’s
efforts to seek business approval notwithstanding), in government, on
the other hand, the extensive consultation process allowed for policy/
legislation furnished the CBI with similar insider status to the TUC and
afforded it equivalent opportunities to influence its shape.
Tracing this process reveals a series of battles for influence over key
politicians in Downing Street and Whitehall which saw the TUC lead-
ership come into its own as a strategic actor. One thing to note at the
outset is that lobby groups with insider access to policymakers may
enjoy multiple opportunities to influence the progression of policy and
legislation. The critical junctures are likely to occur at points where:
(1) particular issues first come onto the table; (2) where other insider
groups are afforded an opportunity to try to shape the agenda in their
own interests; and (3) at the legislative and implementation stage. The
TUC, it is argued here, had a crucial role in ensuring (1) that most of
the ‘Old’ Labour industrial relations program inherited by Blair from
Neil Kinnock and John Smith, were included in New Labour’s election-

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 New Labour Policy, Industrial Relations and the Trade Unions

winning 1997 manifesto; and (2) that the main principles, if not all the
details, of the policies were successfully defended once the CBI and
other employers’ organisations engaged in their own lobbying offensives
to block or amend them.

The political economy of New Labour’s economic

and industrial relations agenda
New Labour’s economic and industrial relations policy
preferences
As argued in Chapters 2 and 3, New Labour relentlessly pursued a
preference-accommodating strategy with voters in order to win power.
Even before Blair the party identified its reputation for economic incom-
petence earned during the 1970s as a crippling electoral vulnerability. It
sought to counter this through a twin strategy of developing a credible
set of economic policies and seeking accommodation with employers
to neutralise the suspicion of centrist voters over its commitment to
modernisation. Labour’s employment relations policies should therefore
be considered within the broad context of its overall economic strategy,
and the main elements of this are outlined briefly below before examin-
ing their effect on industrial relations policies.
First, there is broad agreement among scholars that New Labour’s over-
riding objective was the achievement of macro-economic stability (Glyn
and Wood 2001: 50). Economic mismanagement had been responsible
for collapses in public trust both in Labour’s 1974–1979 government after
a series of sterling and balance of payments crises, and in the Conserva-
tives after the debacle of the UK’s expulsion from the Exchange Rate
Mechanism in 1992. Stability was to be achieved by making low inflation
the priority – ahead of employment or growth – under the control of an
independent central bank. Fiscal policy was also restricted via a set of
rules on borrowing and debt.
Second, there was an acknowledgment that globalisation imposes
severe constraints on an open economy such as the UK (Giddens 1998:
30). Arguably, New Labour took this further than other governments in
its strong endorsement of free trade and dogged pursuit of foreign direct
investment (FDI) (Coates and Hay 2001). Blair regularly argued ‘We live
in a global economy. We compete in this or we fail.’3

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 ‘Insider’ Lobbying in Action 

Third was a preoccupation, inherited from the Conservatives, with

supply-side reform. The main theoretical underpinning of New Labour’s
supply-side approach was provided by ‘new growth theory’, which high-
lights the importance of endogenous drivers of growth such as innova-
tion and human capital formation. The most cogent policy statement on
this is contained in a Treasury paper assessing the UK’s record on indus-
trial productivity. The document listed five key drivers of productivity:
investment, skills, innovation, competition and enterprise.4 A number
of scholars have therefore noted New Labour’s eagerness to work with,
rather than against, the grain of the liberal market economy (LME) insti-
tutions of the UK economy (Howell 2004: 17–18; Casey 2007: 3, 5–10).
Blair’s government prioritised flexible labour markets and legislated to
enhance product market competition by beefing up the powers of regu-
lators. Training remained the responsibility of the firm and individual,
rather than the state, and there were no significant moves to encourage
intra-sectoral coordination of training (Glyn and Wood 2001: 65).
How did New Labour’s economic agenda shape its approach to indus-
trial relations? Several observations can be made. In general, the priority
accorded to stability and the acceptance of globalisation places several
constraints on various policy levers which had been the traditional
purview of left governments. As well as ruling out a return to Keynesian
demand management, which would have been problematic anyway in
the absence of encompassing labour market institutions, the monetar-
ist framework enacted in its place denied unions their erstwhile role in
macro-economic steering via negotiated wage restraint. The tight fiscal
rules, which were designed explicitly to prevent policy being skewed to
provide short term gains to interest groups (Balls and O’Donnell 2002:
157), limited the government’s scope to foster ‘social justice’ through high
public spending, although these could be fudged, and were.
Yet it was the attention given to ‘flexibility’, particularly in labour
markets, which had the biggest effect on the design of industrial relations
policies. The pursuit of flexibility sprang from New Labour’s analysis of
the competitive challenges posed by globalisation as well as its decision
to accommodate the preferences of business, which were to operate with
minimal restrictions on their ability to respond to rapidly changing
markets. As already noted throughout this book, flexible labour markets
provide few institutional niches for trade unions.
New Labour’s industrial relations policies therefore represented a
compromise between a real, albeit constrained, willingness to act to

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 New Labour Policy, Industrial Relations and the Trade Unions

shore up trade unions’ declining membership and presence in the work-

place, and its counter-veiling concern not to undermine the competitive
position of UK industry or alienate employers generally. This had several
consequences for its industrial relations agenda.
First, it was not a purely industrial relations agenda at all, but was
also directed towards harnessing progressive unions in a drive to boost
firms’ productivity. The ability of UK firms to compete in world markets
became the priority, not unions’ pet issues of ‘fairness’ or ‘industrial
democracy’. Workers and unions might get improved rights to represen-
tation and a limited say in company affairs. But there was a reciprocal
obligation on them to use this access to suggest ways to improve the
performance of the enterprise, rather than simply agitating for better
pay and conditions.
The second thing to note is that New Labour preferred to rely on
the levers of the state to improve the workplace bargaining environ-
ment, rather than creating the conditions for unions to produce these
outcomes themselves. There was minimal institution building and the
government’s preferred approach to bargaining tended to be individual-
istic rather than collective.
Another, extremely important, consideration was the preferences
of employers towards industrial relations policy. New Labour sought
to exchange business-friendly policies for political approval. It also
required the cooperation of business in order to implement its supply-
side reforms. However, UK employers are uncoordinated and tended to
be suspicious of overt government interference in labour and product
markets beyond the provision of a limited range of public goods, such
as education and training. Even when not overtly hostile to trade unions
per se, they opposed moves to institutionalise collective bargaining or
shore up the presence of unions in the workplace generally. New Labour
therefore faced an acute dilemma as the pro-trade union concessions
contained in its 1997 General Election could potentially imperil its rela-
tions with employers and jeopardise its industrial policy agenda.
This, in turn, presented an opportunity for moderate trade unions, led
by the TUC, to reduce the political risks for the government of cooperat-
ing with it by adopting an employer-friendly, pro-enterprise stance. This
was fully recognised by the TUC leadership, an internal strategy docu-
ment on TUC-government relations noting: ‘We know too that Labour
would be influenced by the extent to which we can generate support
from employers.’5

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 ‘Insider’ Lobbying in Action 

Moreover, this strategy was, to some extent, successful. Adair Turner,

the CBI’s director general (1995–1999) expressed support for new
Labour’s pro-business outlook. Turner also signalled his willingness to
hold talks with the TUC in advance of any industrial relations legisla-
tion, although he remained opposed to overt government intervention
in labour markets.6

Political institutions and ‘insider’ lobbying

New Labour’s policymaking process
How was industrial relations policy made under the New Labour
government? What part did interest groups play? Under 1960s/1970s
corporatism the TUC was automatically accorded ‘insider’ status and was
able to access policymaking circles under governments of both parties
via a wide range of formal institutions such as the National Economic
Development Council (NEDC) (Middlemass 1979: 309). Unions had
also enjoyed privileged access to Labour governments in particular
because of the formal and informal institutional ties linking them with
the party. But corporatism was dismantled after Margaret Thatcher came
to power in 1979, and unions responded with an ‘outsiderist’ strategy of
strikes and campaigns (McIlroy 2000: 3). Following abortive attempts to
reach accommodation with Thatcherism via a reformist strategy known
as ‘New Realism’, the TUC itself was reorganised in 1994 by incoming
general secretary, John Monks, under the banner of ‘New Unionism’.
This mandated a return by the TUC to a primarily ‘insiderist’ strategy
based on behind the scenes lobbying supplemented by cultivating public
opinion through the media.
This time, however, the TUC was unable to access policymakers via
corporatist institutions as these no longer existed. Unions’ formal influ-
ence over Labour’s internal policy process was also heavily curtailed
following extensive reforms to party structures between 1987 and 1994
under leaders Kinnock, Smith and Blair. As it looked forward to Labour’s
virtually inevitable return to government from the mid-1990s onwards,
the TUC was therefore now faced with much narrower avenues for influ-
encing labour market policy. What were these?
Under New Unionism the TUC’s lobbying strategy was to counter its
loss of influence following the dismantling of tripartite labour market

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 New Labour Policy, Industrial Relations and the Trade Unions

institutions by refocusing links on Whitehall and Parliament.7 However,

contact with ministers and the prime minister were considered of partic-
ular importance. Historically, the TUC had been stronger in parliament
than in Whitehall, whereas the reverse was the case with the CBI, and
the aim of the TUC leadership was to change this.
The rest of this section examines New Labour’s policymaking process
in more detail, focusing on the relative importance of the two main upper
levels of the executive (the prime minister and Whitehall ministries) and
the legislature (the parliamentary labour party – PLP).
1. The prime minister and party leadership
It has become something of a cliché to describe Blair’s conduct as prime
minister as ‘presidential’. To what extent was this description accurate?
Formally, the UK’s political institutions remain those of a parliamentary
democracy, that is, a set of real constraints on prime ministerial power
exist. The issue therefore revolves around Blair’s willingness and ability
to evade these. Parliamentary systems are normally less leadership-dom-
inated than presidential systems. Both require two key power resources
to operate effectively: authority within the executive; and predominance
over the legislature. Historically, British prime ministers have tended to
have more of the second than the first. But from Thatcher onwards they
have moved to extend their personal power within the executive as well
(Heffernan and Webb 2004: 27).
Another view is that situational factors determine the degree of prime
ministerial dominance over the levers of government. The ‘core-executive’
model (Dunleavy and Rhodes 1990) suggests that the prime minister is
located at the centre of a web of interlocking institutions, networks and
policy communities. His or her power at the core of this nexus depends
on the personal and institutional power resources he or she can deploy
(Heffernan 2001). For Blair, undoubtedly, with his 179-seat first-term
majority these appear to have been considerable and were enhanced
further by a preference for working with small clusters of trusted insid-
ers rather than career civil servants (Hennessy 2000: 486–489).
It was certainly the case that various institutional reforms under
Blair cemented the position of the prime minister at the summit of the
executive. These have included a large increase in the number of prime
ministerial special advisors, from 6 under John Major to 25 by 1999
(Fawcett and Rhodes 2007: 80) and turning the Cabinet Office (which
is under the direct control of the prime minister) into a policymaking

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 ‘Insider’ Lobbying in Action 

powerhouse. The key figures inside Number 10 dealing with industrial

relations were the special advisors, Jon Cruddas and Geoffrey Norris,
who liaised with the Department of Trade and Industry (DTI) on the
overall direction of policy while maintaining close contact on behalf of
the prime minister with the unions and employers respectively.8 One of
Blair’s political advisors described this model as ‘Chaotic, but not neces-
sarily flawed, as both sides [unions and business] had their input.’9 Blair,
according to insiders, had limited interest in industrial relations issues
insofar as they remained relatively uncontroversial, but retained a veto
over anything deemed too pro-union.
How, then, did the TUC make use of its ‘insider’ access to Number 10?
As argued in Chapter 1, a key attribute of an effective insiderist group is
being seen as credible; in other words to be able to deliver what it prom-
ises. Unfortunately, the TUC’s inability to enforce the Social Contract in
the 1970s had seriously damaged its credibility. Although the abandon-
ment of corporatist labour market institutions under the Conservatives
had robbed the TUC of its traditional post-war avenues of influence
over governments, the TUC’s real problem lay with its own failure in
the 1970s to enforce national and sectoral deals on wage restraint that
it had negotiated on behalf of its union affiliates. The breakdown of
these deals negated the Wilson-Callaghan government’s other efforts to
control inflation and contributed to the economic and industrial rela-
tions calamities which scarred the latter half of that decade.
The suspicion in Downing Street therefore lingered that any deals
brokered by the TUC would collapse the moment these were deemed
to conflict with the interests of the big unions. A senior TUC official put
it like this: ‘Blair said to me “I’d take you more seriously if you could
deliver.” ’10 Blair’s advisors claim the prime minister liked and respected
Monks, but was concerned that he lacked modernising allies inside the
unions.11 The affiliated unions continually tested Blair’s (and Monks’)
patience by passing motions at TUC conferences calling for things which
New Labour had no intention of doing. Underlying this was also a politi-
cal concern by the New Labour leadership not to look as though policy
was being influenced by trade union demands.12
The TUC leadership – namely, its professional secretariat – was
therefore dealt with a weak hand, which nevertheless even its lobby-
ing opponents concede it played with some skill.13 This may have been
possible because it possessed several strategic assets useful to Blair.
One of these was its ability to massage the agenda at TUC conferences

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 New Labour Policy, Industrial Relations and the Trade Unions

to dampen policy rows likely to attract hostile media attention.14 This

happened, for example, over union demands for a specific formula
for setting the minimum wage (see below). According to the former
home secretary, David Blunkett, Monks also intervened to prevent Bill
Morris of the GMB attacking the government over an Asylum Bill in
2001 (Blunkett 2006: 201). Another TUC asset was to capitalise on its
expertise in industrial relations and labour market issues which New
Labour in opposition lacked – the ‘civil service’ function of the TUC
(Marsh 2001: 207–208; 2005: 173).
Monks and other senior TUC figures were also careful to ensure that
their undoubtedly good access to New Labour translated into maximum
influence by positioning themselves as trusted and, above all, confiden-
tial interlocutors on a wide range of issues. Given its financial depend-
ence on the unions New Labour could hardly avoid talking to them; but
on substantive issues Blair apparently preferred doing this via Monks
because he ‘didn’t play games’.15 The TUC leadership was also careful to
avoid opposing Blair on issues deemed politically sensitive: ‘Blair realised
that he could never be seen to lose a battle with the unions, therefore our
aim was not to get into a battle with the government. If we did we would
get battered.’16
2. Ministers and departments
The ministry with primary responsibility for industrial relations issues
was the DTI, although the Treasury and the Department for Education
and Employment also had input into labour market policy.
After Labour’s election victory in 1997, the job of finalising and
implementing industrial relations policies already melded in outline by
the TUC and shadow cabinet was triangulated between the Number 10
Policy Unit, key ministries such as the DTI, and the ‘social partners’: the
CBI and TUC.17 One by-product of the executive centralisation discussed
above was the relatively small number of officials and ministers dealing
with industrial relations issues, and this put a premium on developing
personal ‘chemistry’ between the negotiating parties (Grant 2000: 180).
The key DTI ministers between 1997 and 1999 when policies on union
recognition and the minimum wage were going through the legislative
process were Margaret Beckett, the president of the Board of Trade, and
Ian McCartney, the minister of state. Both were seen as pro-trade union,
with McCartney apparently keen to restyle the DTI as the ‘Ministry of
Social Partnership’, although this was not the Number 10 view.18 The

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 ‘Insider’ Lobbying in Action 

critical importance of such ‘Gate Openers’ in the New Labour govern-

ment – ministers and officials sympathetic to certain causes – has been
explored in relation to other policy areas, for instance women’s issues
(Annesley 2009: 67).
Beckett and McCartney had both been replaced at the DTI in 2000
by Peter Mandelson and Stephen Byers, who were closer to employers
(Beckett and Hencke 2004:200, Undy 1999: 322). Beckett’s replacement
by Mandelson in a cabinet reshuffle in July 1998 produced particular
concern among union general secretaries, as the Fairness at Work legis-
lation had not yet reached the statute book and was still the object of
determined lobbying by the CBI. However McCartney was able to resist
this. During his tenure at the DTI, McCartney was the main focus for
union lobbying on industrial relations issues.19
To neutralise political negatives attached to its previous anti-enterprise
image, New Labour had assiduously courted the business lobby while
in opposition. The CBI was persuaded to drop its hostility to parts of
New Labour’s agenda in return for promises that it would be granted the
opportunity to shape key policies.20 This inevitably meant that the CBI
and other employers’ organisations would go head to head with the TUC
once the policies came onto the table for discussion.
After May 1997, both the CBI and TUC followed a twin-track lobbying
process with the New Labour government: keeping pressure on Down-
ing Street while simultaneously engaging as closely as possible with the
relevant ministries – mainly the DTI – over the details of legislation.
Regular consultations between industry ministers and the TUC took
place on a number of issues besides Fairness at Work and the NMW. For
example, Beckett included union and business leaders in DTI working
groups on improving industrial competitiveness; while John Prescott,
the deputy prime minister, met public sector unions to discuss ending
compulsory competitive tendering in local government procurement.21
The prime minister and his circle, however, maintained a veto over
policy. For instance, the Number 10 Policy Unit bypassed Beckett on
several occasions to get agreement on the Fairness at Work Bill.22 Central
control over policy delivery had been extended through the creation of
various innovation and strategy units within the Cabinet Office. Moreo-
ver, Blair’s preference for dealing with individual departmental ministers
bilaterally rather than collectively via cabinet discussions also weakened
their autonomy within the executive (Kavanagh and Seldon 1999: 245).
The TUC’s allies at the DTI therefore tried where possible to keep the

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 New Labour Policy, Industrial Relations and the Trade Unions

Fairness at Work Bill out of cabinet discussions in the knowledge that it

had more chance of emerging unscathed that way.23
An important attribute contributing to its success was undoubtedly
the TUC’s skill and experience in negotiation, which was grudgingly
acknowledged by the CBI.24 The CBI had been promised the opportunity
to be able to influence the government’s industrial relations policies and,
because Blair was afraid of giving things away in public to the unions,
many of the key details of these policies were thrashed out between the
government, CBI and the TUC behind closed doors.25 The most contested
of these policies was union recognition, but there were also lengthy
discussions over the terms and scope of the NMW and the consequences
for employers and employees of signing the European Social Chapter.
Although affiliated trade unions also put additional pressure on the
government via party mechanisms, the lead negotiator on these policies,
and deserving the lion’s share of the credit, was the TUC.26
Both the CBI and the TUC naturally tended to claim ‘victory’ in
these negotiations. The reality, according to Blair’s advisors, is that what
resulted was a workable compromise that protected employee rights
and bolstered unions while affording employers plenty of opportunities
to lobby for their amendments. Although New Labour eschewed most
visible symbols of tripartism (aside from the Low Pay Commission
[LPC]), there are plenty of indications that an insiderist form of social
partnership, involving the CBI and TUC negotiating individually with
the government behind closed doors, was put into place. This structure
was largely de-institutionalised, and at no point did all three groupings
bargain together simultaneously; however the government regarded
both the CBI and TUC as extremely effective and consistent negotiators,
which had a positive effect on the resulting policies.27
Ministers working on the details of employment legislation acknowl-
edged the effect of the TUC: ‘I worked with the TUC on everything.
They were important because they had positions on things – and they
were always sensible positions ... They were there to provide intellectual
input as well as be a social partner ... The TUC has the organisation and
the staff to make an impact.’28
3. Parliament
Trade union links with Labour parliamentarians were historically strong
because most members of parliament (MPs) were union members
and a large number were sponsored directly by individual unions via

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 ‘Insider’ Lobbying in Action 

financial contributions to their constituency parties. Links between

MPs and unions were coordinated by the Trade Union Group of MPs,
membership of which was open to any MP belonging to an affiliated
union. However, under Blair the influence of parliament as a check on
the executive waned as a result of the centralisation of power which took
place. Individual Labour MPs, while still important, therefore became
less of a focus for TUC lobbying, although they were occasionally rallied
to provide additional pressure on the government at critical moments
during the passage of legislation.
The principal example of this occurred during negotiations over
Fairness at Work. Monks of the TUC addressed 100 MPs following
publication of the White Paper dealing with statutory union recognition.
The TUC claimed that internal polling showed 96 per cent of Labour
MPs favoured automatic union recognition on its terms, rather than
the CBI’s.29 Pressure from the PLP was credited in some quarters with
forcing Blair to back down over pro-business amendments to the legisla-
tion. However the efficacy of this style of politicking was strictly limited.
No significant parliamentary rebellion on industrial relations matters
ever materialised. An illustration of Labour MPs’ limited enthusiasm
for pressing their government to enact pro-union policies is the fact
that only 133 of them could be bothered to sign an Early Day Motion (a
kind of petition which MPs can use to express their opinions and garner
support on particular issues) in 2006 in support of a Trade Union Free-
dom Bill, which would have made it easier for unions to take industrial
action. Ultimately, directly lobbying MPs to exert pressure on their own
government would have verged on the ‘outsiderist’ strategy the TUC had
abandoned.
Having briefly outlined Labour’s policy preferences, and the
constraints on interest groups in shaping these, the following sections
analyse how policy was actually formed in two areas: on statutory trade
union recognition and, to start with, the NMW.

The national minimum wage

Although retrospectively presented as a relatively uncontentious piece
of Third Way policy triangulation, the Blair government’s early move to
institute the UK’s first ever NMW is noteworthy for several reasons. First,
it was an explicitly market-correcting measure by an administration

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 New Labour Policy, Industrial Relations and the Trade Unions

supposedly committed to a mainly pro-free market agenda (Hill 2001:

80). As such, it was initially strongly opposed by employers. Second, its
implementation involved setting up the first genuinely tripartite institu-
tion, the LPC, which adjudicated on the rate of the NMW, in the UK
since the 1970s. This meshed with the TUC’s ambitions for social part-
nership with employers and provided an institutional platform for union
involvement in labour market affairs. Third, the TUC was involved at
nearly every stage in the development and implementation of the NMW,
and it was strongly represented on the LPC.

The NMW: from social justice to productivity lever

Both Labour and the trade unions had for a long time been hostile to the
idea of a minimum wage on the grounds that it clashed with the volun-
tarist principles that formed part of the DNA of the British industrial
relations system and could undercut bargaining across the pay spectrum
(ibid: 75–76). Scarred by the disastrous experience of the Social Contract
in the 1970s, they feared it might be the thin end of the wedge for a return
to a statutory incomes policy. Moreover, the experience of many unions
with Wages Councils (short term institutions designed to underpin
collective bargaining in low paid sectors) had been unsatisfactory.30
During the 1980s this position shifted. The Thatcher government had
withdrawn from the International Labour Organization (ILO) conven-
tion on wages, which mandated some minimum wage protection, and its
1986 Wages Act removed Wages Council protection from those aged less
than 21. High unemployment also put downward pressure on previously
negotiated wage rates. In response to this, the National Union of Public
Employees (NUPE) teamed up with the anti-poverty pressure group, the
Low Pay Unit, to create a Low Pay Forum (LPF) to push pro-minimum
wage resolutions at union, TUC and Labour Party conferences. After
some early knockbacks, a resolution was passed at the TUC’s 1983 confer-
ence calling for further research and debate on the issue, and by 1986
both Labour and the TUC had pro-minimum wage conference policy.
Labour’s 1987 General Election manifesto promised an ‘offensive against
low pay’, and proposed discussions with the TUC about the possibility
of a minimum wage, although the words ‘statutory’ and ‘national’ were
notably absent.31
Following the party’s comprehensive policy review process which
followed its 1987 election defeat, a more specific commitment was made

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 ‘Insider’ Lobbying in Action 

that matched the unions’ objective of a national statutory minimum

wage starting at 50 per cent of male median earnings.32 In a restatement
of this policy a year later the party also pledged to raise the minimum
wage ‘over time’ to a proportion of no less than two-thirds of the median
male hourly rate.33 At this point, both the TUC and Labour envisaged
regular up-rating of the minimum wage in detailed discussions between
the social partners as part of a macro-corporatist National Economic
Assessment (NEA), which would also institutionalise a ‘more coordi-
nated approach to collective bargaining itself ’.34 At the 1991 TUC confer-
ence a General Council statement committed the TUC to campaign for
a minimum wage based on this formula, but arrived at through detailed
discussions with the social partners.35 This became the official TUC posi-
tion despite a clear split which developed between unions organising
low paid workers, such as NUPE, and the Amalgamated Engineering
and Electrical Union (AEEU) (skilled engineers); the latter suggesting a
minimum wage of £3 an hour to preserve differentials.
However, thereafter Labour began to backtrack in the face of employer
and Conservative Party hostility. A working group set up to consider the
issue in 1990 included several senior union general secretaries, including
the TUC’s Norman Willis, as well as the future party leaders, Smith and
Blair, who was then Labour’s employment spokesman. At a meeting at
MagdalenCollege, Oxford, Smith reaffirmed his commitment to a mini-
mum wage of 50 per cent of male median earnings, but now with no
timetable for up-rating this to two-thirds.36 This pledge was incorporated
into the Party’s 1992 General Election manifesto, with the promise that
the annual up-rating of the wage would be integral to the proposed
NEA.37 Despite an early lead in opinion polls, however, Labour lost the
election to the Conservatives.
Opposing arguments to Labour’s wages policy, including those
deployed by employers, sprang from the neo-classical analysis of labour
markets which viewed a minimum wage as market rigidity. The CBI’s
core objection was that ‘even a low minimum wage would reduce job
opportunities and create major problems for wages structures in a variety
of companies.’38 The CBI also pointed out that employers with experience
with Wages Councils were particularly opposed to the NMW.39 Turner,
the CBI’s politically moderate director general, affirmed the preference
of business for ‘flexible’ labour markets in which ‘wages are set by the
value of the output and the productivity of the individual enterprise’. Not,
in other words, by the government or through some other non-market

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 New Labour Policy, Industrial Relations and the Trade Unions

process. Turner called instead for the extension of in-work benefits to

fight poverty.40
After Blair became Labour leader in 1994 the party’s economic policies,
including the NMW, were overhauled to address Labour’s perceived anti-
business image. New Labour’s concerns with the NMW were twofold.
First, that during the 1992 election the rigid formula for half median
male earnings had enabled the Conservatives to quantify, and thence to
exaggerate, its economy-wide effect on inflation and employment. Even
though Labour’s endorsement of the NMW was not unpopular with
the electorate, the Conservatives had still managed to turn its opposi-
tion to the policy into electoral advantage by painting Labour as anti-
market (Coats 2007: 23). Second, its pursuit of middle-class swing voters
required the party to solicit the support of business to allay fears over
its likely handling of the economy. However, for the reasons outlined
above, firms, particularly small and medium enterprises (SMEs), were
still emphatically opposed to any diminution of their discretion to set
pay rates according to commercial conditions.
On the other hand, ditching the NMW would have played very badly
with party activists and the unions. New Labour therefore faced the
problem of deciding on the scope and implementation mechanism of a
policy that was popular in principle but risked alienating employers and
allowing political opponents to paint the party as anti-business. Blair’s
press secretary, Alistair Campbell, admitted that ‘there was a tension in
the approach to the minimum wage’ (2010: 196). The TUC leadership
shared Blair’s concerns about the political pitfalls of the NMW and set
out to help him find a compromise. At a secret meeting in July 1994 of
the ‘Contact’ Group’, the loose Labour-TUC grouping which superseded
the earlier and more formal Labour-TUC Liaison Committee, the TUC
leadership extracted a commitment from Blair that the NMW would be
preserved as a central plank of party policy for the next election. The
price for this was that the party would drop the burdensome ‘half male
median earnings’ formula.
However, this simply produced a new problem, as the rate would now
presumably be set, arbitrarily, by politicians. Labour would be accused by
employers of destroying jobs if it was ‘too high’, and attacked by unions
for selling out if it was ‘too low’. Sensing New Labour’s disquiet, some
union leaders became privately very worried that it would honour the
principle of the NMW while setting it very low, at perhaps below £3 an
hour, to placate employers.41

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 ‘Insider’ Lobbying in Action 

Following high-level party meetings involving Blair, Prescott and

Harriet Harman, the shadow secretary of State for Employment, new
working groups were set up in early 1995 to look at options on the NMW.
These groups were put under the control of McCartney, then one of the
party’s employment spokesmen. Party and union insiders agree that
McCartney was the key figure in driving forward the party’s employ-
ment policies in opposition and, once in government, as a minister at the
DTI. He was also sympathetic to unions’ concerns and was the subject of
sustained lobbying by the TUC.42
McCartney set up two groups: one to look at overall political strategy;
the other to look at implementation issues. The split into separate groups
to look at presentation and implementation reflected the party’s nerv-
ousness over the unions’ likely reaction to any attempt to deviate from
a set formula. An internal memo to Tom Sawyer, the party Chairman,
from McCartney warned: ‘To simply offer a campaign on the principle
of the NMW will immediately lead to providing an open door to those
who wish to trade off a decision on the hourly rate with support for a
national campaign. If this was to happen we will place ourselves in a
situation of spending between now and a Spring 1995 NMW campaign
launch debating the rate rather than agreeing the essential ingredient of
a successful campaign strategy.’43 McCartney suggested holding further
meetings with party leaders; the Campaigns Directorate, Economic
Commission and Social Security Team; and with the TUC, before a
spring 1995 campaign launch.
Both groups were informal, advisory bodies and included non-party
figures. David Coats, a senior policy officer at the TUC, sat on both
groups. In fact, nearly half the members of the implementation commit-
tee were trade unionists, including Joe Irvine of the Transport and
General Workers’ Union (TGWU) (subsequently a special advisor to
Prescott and later Gordon Brown), Tim Page of the AEEU (and later the
TUC) and Tess Gill (National Union of Civil and Public Servants and
GMB), as well as the TUC’s David Coats.44 Union and TUC officials were
well represented on the working groups partly because of McCartney’s
closeness to the unions. But it also reflected the importance of the TUC’s
‘civil service’ function for Labour: the research and policy resources of
the TUC compensated for the party’s lack of expertise and experience in
employment relations issues.45
While the political strategy group worked out how to ‘sell’ NMW
policy to the labour movement and electorate, the implementation group

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 New Labour Policy, Industrial Relations and the Trade Unions

focussed on nuts and bolts issues to do with: the various mechanisms for
up-rating; examining the role of the social partners in fixing the NMW;
the role of the DTI; and the issue of sectoral and regional rates. It fed into
other research being carried out by the TUC and the LPF.46 The entire
rationale of the NMW was reworked in an attempt to placate employers’
concerns. New Labour’s and the TUC’s positions on the NMW began
to strongly emphasise the potential benefits for employers, in terms of
improved productivity, alongside the social justice element for workers
on low wages.
This dual approach contrasted starkly with Labour’s earlier emphasis
on social justice alone. The party began to develop a ‘business case’ for
the NMW, making it clear to employers that they would be consulted
over its implementation.47 This was made easier by empirical evidence
emerging at that time from the United States suggesting that labour
markets operated imperfectly and that any employment effect of a NMW
tended to be small (Card and Krueger 1995).
McCartney’s solution to Labour’s dilemma over setting the rate of the
NMW was to depoliticise the issue by proposing to devolve responsibil-
ity for this to an operationally independent LPC. The advantage of this
arrangement was that it would still allow a Labour government to retain
some room for manoeuvre over the scope of the NMW, as the LPC
would merely propose a figure for the NMW to the government for its
consideration. Moreover, the LPC was a genuinely tripartite body, which
was also strongly backed by the TUC leadership as it met their objectives
to institutionalise partnership between employers, unions and the state.
The new policy was announced on 27 June 1995 with the publication of
Labour’s economic blueprint. The document reiterated Labour’s commit-
ment to full employment and a ‘medium-term growth strategy’, as well
as a minimum wage and LPC.48
But scrapping the formula-based approach provoked a backlash from
Unison, the newly-formed public sector union, as well as the TGWU,
which now supported a NMW. Responding to earlier leaks indicating
that Labour was poised to scrap the formula, both unions had publicly
reiterated calls for a NMW of half male median earnings which they esti-
mated at the time at £4.15 an hour. There was further unrest when leaks
from Harman’s office indicated that younger workers would be excluded
from the NMW. Left-wing unions, including the FBU and UCATT, also
closed ranks to press for a figure ‘significantly’ more than £4, reached
through the half male median earnings formula.

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 ‘Insider’ Lobbying in Action 

Pre-election briefings with union leaders also revealed new Labour’s

private nervousness about the effect of the NMW on the economy. For
instance, McCartney told Unison that ‘While the NMW had been intro-
duced in Europe successfully this had been done in circumstances where
there had not been the handicap of a deregulated market and a benefits
system which needed to be overhauled simultaneously.’49
However, the TUC leadership was determined not to allow the issue
to drive a wedge between the unions and New Labour. Having played
a significant role in the design of Labour’s NMW policy, it sought to
ensure that public pressure by big unions affiliated to the party did not
jeopardise Labour’s commitment either to the policy or to the party-
union alliance itself.
For instance, at the September 1995 TUC conference Monks, the TUC’s
general secretary, joined with Blair to implore delegates not to vote to
commit the TUC to a specific figure which would bring unions and party
into conflict. The outcome was that TUC policy was fudged. Although the
vote was lost, meaning that the TUC would campaign for a figure of more
than £4 an hour, calculated according to the half male median earnings
formula that Labour had just abandoned, it was emphasised subsequently
in campaigning literature that this formula could also produce a figure as
low as £3.60 if various assumptions made about pay, overtime and hours
of work were relaxed. Moreover, the £4 plus figure would provide only a
‘reference point’ for identification of the TUC’s target figure for the wage,
whose exact rate would still ultimately be determined by the government.50
Statements by TUC leaders on the benefits to employers of the NMW
also closely mirrored those of Blair. Wage levels were expressly linked
with firms’ productivity.51 Monks realised the importance to Labour of
placating employers’ concerns and argued the NMW would play a part
in the achievement of a high productivity economy under globalisation.52
In its 1997 election campaigning document, ‘Partners in Progress’, the
TUC also committed itself to the institutional setup proposed by Labour
and moved to dampen expectations among the NMW’s strongest propo-
nents so as to head off potential clashes with Labour after the election:
‘The TUC recognises that the minimum wage will need to be set follow-
ing discussions with the social partners and in line with the economic
conditions at the time. The TUC looks forward to the discussions in the
Low Pay Commission.’53
This contrasted, and in many respects clashed, with the views of unions
backing a strict formula. Unison’s election campaigning literature, for

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 New Labour Policy, Industrial Relations and the Trade Unions

instance, made absolutely no mention of the benefits to firms of a pay

floor: ‘The main purpose of a minimum wage is to put more money into
the pockets and purses of the low paid ... The introduction of a minimum
wage can also be considered an instrument of social policy, providing a
safety net through which no-one shall fall.’54
Within a month of entering government New Labour unveiled details
of the LPC it was setting up to adjudicate over the terms, scope and
rate of the NMW. This kept promise was a welcome vindication of the
TUC’s political strategy, and it scored a further lobbying victory when
it managed to block the appointment of Whitbread chief executive Peter
Jarvis as chair of the LPC in favour of a pro-union London Business
School academic, George Bain (Anderson and Mann 1997: 304). Blair
was able to dangle the prospect of seats on the LPC in front of the CBI in
return for them ceasing to attack the NMW.
Commentators have disagreed over whether the LPC was a genuine
institution of social partnership (Brown 2009: 440–443; Coats 2007: 44),
or a model of technocratic management, hamstrung by weak social part-
ners (the TUC and CBI) and an absence of corresponding partnership
institutions in the workplace itself (Metcalf 1997: 177). Clearly, the LPC
was designed by New Labour with political imperatives in mind, that
is, it was entirely depoliticised, containing representatives of both sides
(three from the unions, three from business, as well as two independent
experts), but not dominated by either of them. A number of senior union
leaders had asked to serve on the LPC but were turned down in favour
of lower ranking figures.55 Recognising the importance of the NMW as
a bridge for social partnership the TUC supported this depoliticisation,
agreeing that ‘a politically contested NMW which is met with employer
resistance is unlikely to be successful.’56 The LPC was also only empow-
ered to make recommendations, reserving for the government the final
say over the level of the NMW.
The Bill put to parliament contained strong legal sanctions against
employers defying the legislation. It also ruled out any variation in the
minimum rate according to region, sector, occupation or company size –
key demands of the TUC. On the other hand employers successfully
argued for younger workers aged 16–25 to be covered by a separate, and
lower, rate.
The TUC also called for the LPC setup to become permanent, on the
grounds that a transitional body would make future up-rating of the
NMW contingent on the political complexion of the government in

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 ‘Insider’ Lobbying in Action 

power.57 This was eventually granted, representing a victory over Brown’s

Treasury which, although far from opposed to a NMW, wanted to main-
tain control over it by setting up a ‘shadow LPC’ under the auspices of
the Treasury.58 In their evidence to the LPC, both Unison and the TGWU
argued that the NMW should underpin collective bargaining and made
no mention of a pay floor.59 However, this was sidestepped by the TUC,
which appeared, if anything, to position itself closer to the CBI’s view of
the NMW as providing a wage floor: ‘It is important to emphasise that
the NMW is not seen by the trade union movement as a substitute for
collective bargaining but as a floor on which agreements can build.’60
The adult rate that was eventually put to the government, and accepted
by it – £3.70 an hour, to be introduced in June 2000, with an interim
rate of £3.60 from April 1999 – was less than what most unions had
campaigned for. However, the LPC’s chairman, Bain pointed out that,
consistent with the TUC’s 1996 analysis outlined earlier, this was only
very slightly adrift of the figure for half male median earnings once
certain assumptions were applied (1999: 20). Bain also described the
£3.60 an hour figure as a ‘first step’, implying that it would be raised.61
Of greater importance to the TUC, however, was its ability to hold New
Labour to a market-correcting policy first agreed upon in the 1980s in
the face of considerable pressure to drop the policy entirely or to set it at
a very low rate.

Trade union recognition

Getting government action on union recognition was possibly the TUC’s
principal objective for New Labour’s first term. The legislation, when it
came, had been expected to concentrate on union recognition. In fact,
when the White Paper, ‘Fairness at Work’, was published in May 1998, it
ranged widely, offering a number of new individual, as well as collective,
rights at work, along with reforms to aspects of trade union law and
‘family-friendly’ policies. However, this section concentrates on the ‘pro-
union’ collective rights contained in the White Paper and the subsequent
Employment Relations Act 1999, rather than the accompanying set of
individual rights which were merely ‘pro-worker’. These were of most
concern to unions as well as being particularly contentious to employers.
The evolution of Fairness at Work and the 1999 Act illustrates several
of the main themes of this study. First, their successful campaign for

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 New Labour Policy, Industrial Relations and the Trade Unions

statutory rights at work ultimately indicates the weakness, not strength,

of unions in a LME. After the Conservative’s anti-union onslaught they
had to turn to the state to enact a set of positive legal rights to shore up
collective bargaining in the face of hostile employers. As with the NMW,
union recognition reflected the abandonment of the negative rights
embodied in voluntarism in favour of ‘positive’ legal rights.
Second, the features of the UK’s system of interest representation
determined the strategies available to unions to pursue this goal, as well
as their chances of success. Thanks to its position as the main credible
interlocutor between New Labour and trade unions, the TUC was able
to hold the government to its pre-election pledge to legislate on union
recognition. However, having indicated on coming to power that this
would be granted, New Labour also sought to mollify intense opposition
to it from employers by allowing a long period of consultation. Lobbying
by both the TUC and employers over the details of the Bill was tightly
focused on the prime minister and the key ministries. As with the NMW,
the legislation was vigorously contested by employers, who were never-
theless able to influence the progress of the legislation at the consultation
stage in order to water down key proposals.

‘Fairness at Work’
The template for the Fairness at Work White Paper was provided by two
earlier pieces of legislation: the 1971 Industrial Relations Act and the 1975
Employment Protection Act. These had offered trade unions a statutory
recognition procedure in return for curbs on industrial action. However,
both largely foundered on union and employer indifference and non-
compliance and were quashed by the provisions of Thatcher’s 1980
Employment Act, which restored collective bargaining to the exclusive
purview of the market.
In the meantime the balance of power in the workplace had changed.
When unions had been strong positive rights to recognition had
been felt by unions to be unnecessary as their numerical strength was
normally sufficient to induce employers to bargain with them. Union
numbers, however, plummeted from 13m in 1979 to 8m by 1995 through
a combination of the Conservative government’s legislative onslaught
and structural changes in labour and product markets. The drastically
deteriorating circumstances for the labour movement prompted a
strategic rethink about the options for pursuing a trade union agenda

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 ‘Insider’ Lobbying in Action 

in an increasingly marketised economy. Organisation and recruitment

became a priority, and motions calling for employment rights were
passed from the 1986 TUC and Labour Party conferences onwards. A
joint statement by the TUC General Council and Labour’s NEC in July
1986 went beyond the usual calls for repeal of anti-union laws to demand
their replacement by ‘positive legislation.’ By the 1990s most unions had
come around to the argument for positive legal rights, which they saw as
a device to boost recruitment.62
After Labour’s General Election defeat in 1987, in which Conservative
attacks on ‘union power’ were prominent, Labour launched a major
policy review process covering seven key policy areas. Industrial rela-
tions fell under the auspices of the ‘People at Work’ group, overseen by
the party’s left-wing employment spokesman, Michael Meacher. The
TUC’s submission to the review, written by Monks, then the TUC’s
deputy general secretary, focussed on beefing up individual rights while
glossing over the issue of immediate repeal of the Conservative’s restric-
tions on collective rights. This was part of a political strategy agreed
between Kinnock, his chief of staff, Charles Clarke, and Monks, which
was designed to try to neutralise the unions as a negative political issue
(Hughes and Wintour 1990: 144–145).
However, it sparked a row with the TGWU and was opposed by
Meacher, who defied the party leadership by proposing restoration of a
broad set of collective trade union rights, including secondary picketing.
Sensing the mood in the party, Monks and the TUC distanced them-
selves from the quarrel and thereafter campaigned for a more limited
agenda of individual rights at work and a corresponding set of positive
collective rights of representation by trade unions. These would be
delivered through a two-pronged strategy of espousing the European
Social Charter of Fundamental Rights and encouraging a future Labour
government to provide a statutory route to union recognition.
The TUC secretariat took exclusive charge of the recognition agenda.
In 1994 it set up a Task Group on Representation at Work, which called
for a universal right to representation, consultation rights and automatic
trade union recognition where a majority of those voting in a ballot, or
in some other means of surveying opinion in a bargaining unit, called
for it. The latter would ideally be mediated by a new ‘representation
agency’.63 It was also noted that such provisions were already mandated
by the European Works Council Directive.64 Exploratory talks on union
recognition were held with the CBI,65 and there were more detailed

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 New Labour Policy, Industrial Relations and the Trade Unions

discussions with Labour’s shadow trade and industry and employment

teams (Taylor 2007: 218). In consultation with Monks of the TUC, Beck-
ett and McCartney, the shadow DTI ministers, drew up a draft ‘Fairness
at Work’ White Paper in preparation for the party’s expected return to
office.66
Blair, however, was unwilling to legislate simply to provide unions
with a statutory platform on which to attempt to rebuild their numeri-
cal strength and was nervous about likely employer hostility. Unlike the
NMW, there was really no way to depoliticise the issue. Debate over
recognition quickly assumed the form of a zero-sum game with employ-
ers, who indicated that they were implacably opposed.67 The implied
prospect of a return to a fractious industrial relations climate sparked a
rethink among senior New Labour figures, who began to favour focus-
ing on providing a set of individual, rather than collective, rights in the
workplace in order to answer calls to improve the position of employees
but without boosting unions. However, the TUC claimed employees and
unions needed collective rights in order to guarantee individual rights
and successfully pressed the party leadership to commit to this.68
Another hurdle was an intervention by Brown; the shadow chancellor
announcing that High Court Judges would be involved in adjudicating
over union recognition, whereas the TUC favoured a route involving
tripartite industrial relations institutions. Monks held a number of meet-
ings with Derry Irvine, Blair’s legal advisor and future Lord Chancellor,
and managed to thwart this.69
The TUC’s careful lobbying appeared to bear fruit and Labour’s
pre-election ‘Road to the Manifesto’ document dealing with employ-
ment policy committed the party to introducing a right to trade union
representation, making no mention of any exclusions or thresholds of
support for this.70 These were endorsed at the 1996 TUC Congress.71
Belying the TUC’s nervousness about Blair’s personal commitment
to Labour’s employment rights programme the only policy that was
cancelled during this period was Labour’s pledge to protect short-service
employees against dismissal. In a clear quid pro quo the TUC pumped
£1m of its own money into its pro-Labour election campaign with the
blunt slogan: ‘Put a cross in the wrong box and you can kiss employee
rights good-bye’.72 The TUC was quite open that this was about making
an election issue of employee rights.73
Labour campaigned in the 1997 General Election with a clear pledge
to implement a statutory procedure for trade union recognition for the

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 ‘Insider’ Lobbying in Action 

purposes of collective bargaining. The 1997 Manifesto stated that ‘People

should be free to join or not to join a union. Where they do decide to
join, and where a majority of the relevant workforce vote in a ballot for
the union to represent them, the union should be recognised.’74 Labour’s
employer-friendly ‘business manifesto’ made a similarly-worded
pledge.75
On coming to power, however, New Labour appeared nervous that
immediate action on union recognition would look like ‘payback’. Union
recognition had provided New Labour with one of its few difficult
moments during the campaign (Campbell and Hagerty 2010: 683), and
employers were still very hostile. Howard Davies, the director general of
the CBI from 1992 to 1995, had made employer’s views plain on the issue
in evidence to a Commons inquiry. Davies stated that ‘our system has
always been based on a set of immunities rather than rights. We would
be most unhappy with the notion of legal right to recognition. We think
that it would entail a fundamental change, if it did not entirely unbalance
the system completely in employment law.’76
Moreover, Labour’s Business Manifesto had promised the CBI an
opportunity to influence the shape of any legislation.77 Before the
details of the White Paper were finalised, therefore, the CBI and TUC
were ordered by Blair to hold joint talks to try to thrash out a common
position. The employer and union perspectives on recognition clearly
remained incompatible, however, with the CBI – unlike the TUC – still
in favour of voluntarism, reflecting the greater economic power of
employers.78 A joint CBI-TUC statement was agreed on 4 December
1997, but the wide gulf between the two sides was reflected in a raft of
disagreements centring on the voting threshold needed for recognition,
the definition of the bargaining unit and whether small firms should be
excluded.79
After the election the TUC had held talks with the DTI ministers
and Blair on the recognition issue. TUC negotiators pressed their case
on several issues: the initial trigger for an application for recognition;
the definition of the bargaining unit; the majority required in a ballot;
whether recognition should be automatic where membership was more
than 50 per cent; whether small firms should be included; whether
individuals should be able to agree on their own terms and conditions;
and sanctions for non-compliance.80 Alarmed by press reports that the
government was preparing to come down on the side of the CBI, Monks
wrote to Blair in early April 1998 warning that it would campaign against

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 New Labour Policy, Industrial Relations and the Trade Unions

widespread concessions to employers.81 This was the only time the TUC
confronted the government directly over this issue. In all other respects
its lobbying campaign focussed on direct persuasion of key ministers,
although this was backed up by a publicity and lobbying blitz on the
media and Labour MPs.
Although the exposure of ‘bad bosses’ was a key feature of this
campaign, the TUC was also careful to make it clear that these were a
minority.82 A ‘partnership’ document, ‘Take Your Partners – the Business
Case for a Union Voice’ was launched to coincide with the 1997 CBI
conference in which the TUC took an exhibition stand. The document
pointed out to employers that 44 of Britain’s top 50 companies not only
recognised trade unions, but it also reiterated the TUC’s belief in the
need for negotiated compromise.83
Yet, in another clear sign of the TUC’s strategic role, this emphasis
on points of interest with business was at odds with the views of some
of the major unions, who rejected any accommodation to the views of
employers. For instance Bill Morris, the general secretary of the TGWU,
in rebutting Blair’s speech at the 1997 TUC Congress where he had called
for discussions on recognition with employers, cautioned that ‘there was
never a hope of us reaching agreement with the CBI – that was not the
purpose of the exercise ... The CBI represents a different interest, and a
different agenda.’84 Pressure was also exerted on the TUC’s leadership
not to give ground through the TUC General Council. Unison and
the TGWU led calls for an emergency session of Congress, which was
resisted by the TUC leadership because of fears this would provide a
focus for attacks on the government.
However, having got the issue into Labour’s election-winning mani-
festo, the TUC then had to lobby further to get the new government to
begin the legislative process. Despite having been a prominent campaign-
ing issue, there was no mention of union recognition in New Labour’s
first Queens’ Speech on 14 May 1997. Working through the familiar
axis of McCartney at the DTI and Jon Cruddas in Downing Street, the
TUC maintained insider pressure for the process to be set in train. This
was combined with ‘outsider’ pressure on the government through the
media.
In late 1997 the joint TUC/CBI document was forwarded to the DTI,
which was given overall responsibility for drafting the legislation. It also
went to the Policy Unit of Downing Street, reflecting Blair’s determina-
tion to keep a close eye on the content of the White Paper, leading to some

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 ‘Insider’ Lobbying in Action 

confusion as the two centres of power fought over its content.85 Sensing
that Blair was minded to press the TUC and CBI for further concessions
before the White Paper stage, the TUC General Council agreed for the
first time to concede to the principle of a minimum threshold in a ballot,
and to the possibility of an exemption for firms with fewer than ten
employees. These proposals were discussed with Blair at a meeting on 27
April 1998.86 Acting through Prescott, the deputy prime minister, and the
Trade Union Group of MPs, the TUC then managed to secure several
key amendments to the draft legislation, including a pledge on a future
review of whatever bargaining threshold was eventually proposed and
handing unions the final say on defining the bargaining unit.87
The White Paper, ‘Fairness at Work’, was finally published on 21 May
1998. It proposed two clear legal routes to union recognition: auto-
matically, where more than 50 per cent of employees were already union
members; and, alternatively, via the approval of a Central Arbitration
Committee (CAC) which would adjudicate if a majority of those voting
and 40 per cent of all employees in a bargaining unit eligible to vote
were in favour.88 Overall, this was a defeat for employers, who remained
flatly opposed to statutory recognition. However, the TUC had also
given ground. It had wanted the voting threshold to be 30 per cent and
complained that 40 per cent would impede collective bargaining.89 The
CBI regarded the issue of the bargaining threshold as the key issue in
the negotiations and saw 40 per cent as a crucial victory.90 The TUC was
also forced to accept the exclusion of firms with fewer than 20 employees
– although this was lower than the CBI’s target of 50, as well as Blair’s
figure of 30. On the other hand, the CBI’s demand that firms themselves
should define the bargaining unit was quashed, as the CAC would now
ultimately decide this.91 The TUC also won concessions on individual
rights to do with unfair dismissal and union representation at discipli-
nary hearings.92 Meanwhile, the Institute of Directors attacked the White
Paper as representing: ‘a significant swing towards the employee’.93
Having come off worse at the White Paper stage the CBI upped its
game as the Bill was finalised with an intense lobbying offensive aimed
at key ministers in the DTI. Critics of the CBI’s initial lobbying strategy
claimed it had focussed too much on the details of the recognition proce-
dure and missed the wider concessions made to unions. The CBI tabled a
broader range of amendments to the legislation, proposing, among other
things: to restrict voting to employees who had been union members
for more than a year; ruling out the 50 per cent route to automatic

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 New Labour Policy, Industrial Relations and the Trade Unions

recognition where workers were members of more than one union; and
forcing union members to sign an undertaking that they wanted to be
represented by a union.
Meanwhile, the TUC made a priority of getting the government to
backtrack over the 40 per cent voting threshold for recognition.94 As well
as further representations to ministers it continued to lobby ministers
and Number 10 indirectly via the large group of Labour MPs who were
members of trade unions. The TUC claimed that internal polling showed
96 per cent of Labour MPs favoured the TUC’s demand for recognition
to be granted automatically on a simple majority.95 Press reports also
indicated that 13 out of 22 cabinet ministers were opposed to the 40 per
cent minimum.96 However, no rebellion took place, illustrating how
limited the avenues available were to the TUC to exert direct political
pressure, even over a Labour government.
The Employment Relations Bill was published on 28 January 1998.
It largely endorsed the union recognition procedures suggested in the
White Paper, but with a couple of refinements. The most important of
these was that the automatic right to recognition where more than 50 per
cent of workers were union members was removed in what was seen as a
significant victory for the CBI. Instead, the CAC would have discretion to
order a ballot in certain circumstances.97 A new clause was also inserted
allowing workers to apply for derecognition of a non-independent
union. On the other hand, the CBI’s demand for a minimum period of
trade union membership as a condition of union recognition rights was
rejected. The TUC put on a brave face, despite the loss of the automatic
recognition procedure, and placed the legislation in the context of its
drive to replace confrontation with union-employer partnership, calling
the Bill: ‘The most significant advance in employee rights for a genera-
tion ... giving a real boost to the partnership at work that is the real secret
of competitive success.’98
Following publication of the Bill both sides continued to lobby parlia-
mentarians for further amendments at the Report and Committee stages,
although the TUC was told that the government now regarded the Bill as
a ‘done deal’.99 Employers’ reaction to the Bill was less hostile than their
response to the initial White Paper; the CBI’s Human Resources Direc-
tor, John Cridland, complaining that the proposals were ‘workable, if not
wholly welcome’.100
Because the CBI successfully pushed for the union recognition proce-
dures to be watered down, and because the Act ultimately offered only

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 ‘Insider’ Lobbying in Action 

tepid support for collective bargaining, it is often seen as a victory for

employers over the TUC (Howell 2005: 182–184; McIlroy 2000: 6–9).
A less damning verdict, however, would note that the Act still offered
unions a firm platform from which to rebuild their strength, and that
intense lobbying by the CBI at every stage failed to deliver its overrid-
ing objective of blocking any legal route to union recognition. Far from
being neutral over whether individual or collective rights at work should
be prioritised, Fairness at Work offered several indications that the
collective representation of individual rights could be the best method
of ensuring that individuals were treated fairly, along with a recognition
that the balance of power between firms and workers was not always
even: ‘Collective representation of individuals at work can be the best
method of ensuring that individuals are treated fairly’ and ‘can help
achieve important business objectives’.101
Moreover, the Act was more ‘social democratic’ than anything
enacted under previous Labour governments, which had accom-
modated unions’voluntarist preferences for winning rights through
economic struggle rather than government intervention (Crouch
2001: 102). Practically, while Fairness at Work did not quite provide
the renaissance in unions’ fortunes some in the TUC may had hoped,
it produced a real boost to recruitment in certain sectors: for instance,
between 2001 and 2002 the number of cases referred to the CAC
doubled (White 2004: 150).

Notes
1 ‘Building Prosperity.’ Labour Party 1997.
2 ‘Benchmarks to Judge Labour.’ CBI News, May 1997: 11.
3 Speech to IPPR conference, London, 21 January 1997.
4 ‘Productivity in the UK: The Evidence and the Government’s Approach.’ HM
Treasury 2000: 32–33.
5 ‘The Role of the TUC under a Labour Government’: General Council
Statement (Background Note) TUC, 29 October 1996: 4.
6 European Industrial Relations Observatory Online, May 1997: http://www.
eurofound.europa.eu/eiro/1997/05/inbrief/uk9705133n.htm
7 ‘Campaigning for Change: A New Era for the TUC.’ TUC 1994: 3; ‘The
Role of the TUC under a Labour Government’: General Council Statement
(Background Note) TUC 29 October 1996: 4.
8 Interview with former TUC chief economist.

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 New Labour Policy, Industrial Relations and the Trade Unions

9 Interview with former No.10 official.

10 Interview with former TUC general secretary.
11 Interviews with former No.10 officials. See also the entry in the diary of Blair’s
secretary, Alistair Campbell for 22 June 1994: (Campbell and Hagerty 2010: 34).
12 See, for example, the diary remarks by Blair’s press secretary, Alistair
Campbell regarding the minimum wage: ‘(Blair) said we had been able to
show there was no question of us being in the unions’ pockets, or having
policy dictated and decided by them.’ (2010: 524).
13 Interview with former CBI director general.
14 Interview with former TUC deputy general secretary.
15 Interview with former No.10 official.
16 Interview with former TUC general secretary.
17 Interview with former FT labour correspondent.
18 See the published journal of Blairite aide, Derek Draper (1997: 163).
19 Interview with former TGWU Head of Policy and Research.
20 Interview with former CBI director of human resources policy.
21 European Industrial Relations Online, June 1997: http://www.eurofound.
europa.eu/eiro/1997/06/inbrief/uk9706140n.htm
22 Independent, 20 April 1998.
23 Interviews with TUC officials.
24 Interview with former CBI director of human resources policy.
25 Interview with former No.10 official.
26 Interviews with former Labour NEC chair; former DTI minister.
27 Interviews with former No.10 officials.
28 Interview with former DTI minister.
29 General Council Report. TUC 1998:4.
30 Interview with former Unison general secretary.
31 ‘Britain will win with Labour.’ Labour Party Manifesto 1987.
32 ‘Meeting the Challenge.’ Labour Party 1989.
33 ‘Looking to the Future.’ Labour Party 1990.
34 ‘Opportunity Britain.’ Labour Party 1991: 12.
35 ‘General Council Statement.’ TUC 1991.
36 Interview with former Unison general secretary.
37 ‘It’s Time to Get Britain Working Again.’ Labour Party Manifesto 1992.
38 ‘A National Minimum Wage: The Employers’ Perspective.’ CBI 1995.
39 Employment Affairs Report. CBI 1995: 6.
40 Speech to Industry Forum Conference: ‘Business and Labour.’ 23 April 1996.
41 Interview with former Unison general secretary.
42 Interviews with: former No.10 official; former NEC chair; former MSF and
Amicus general secretary; and TUC officials. See also Taylor (1998: 298).
43 Internal Labour Party memo: ‘Meeting of the Employment Team on National
Minimum Wage.’ 15 November 1994.

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 ‘Insider’ Lobbying in Action 

44 Internal Labour Party memo: ‘Group working on the Implementation of the

Minimum Wage: Work Plan.’ June 1995.
45 Interviews with TUC officials.
46 Internal Labour Party memo: ‘Minutes of Group to Consider
Implementation of Minimum Wage.’ 29 March 1995.
47 ‘Labour Business Manifesto: Equipping Britain for the Future.’ Labour Party
1997: 7.
48 ‘A New Economic Future for Britain: Economic and Employment
Opportunities for All.’ Labour Party 1995: 2.
49 ‘Notes of Meeting of Unison SMT’ (senior management team), 17 December
1996.
50 ‘Campaigning for a National Minimum Wage.’ TUC 1996.
51 ‘Productivity and Social Partnership.’ TUC 1998: 5.
52 ‘Competitiveness: The Challenge’ (briefing for TUC seminar, 10 January
1996); interview with former TUC chief economist.
53 ‘Partners for Progress: Next Steps for the New Unionism.’ TUC 1997: 20.
54 ‘Unison’s Case for a National Minimum Wage.’ Unison 1997: 7.
55 Interview with former GMB general secretary.
56 ‘Take your Partners: The Business Case for a Union Voice.’ TUC 1997: 2.
57 ‘TUC evidence to the Low Pay Commission.’ TUC 1997: 3
58 Interview with former DTI minister.
59 ‘TGWU evidence to the Low Pay Commission.’ TGWU 1997: 5; ‘Unison
Evidence to the Low Pay Commission.’ Unison 1997: 4.
60 ‘TUC evidence to the Low Pay Commission.’ TUC 1997: 15.
61 Guardian, 16 September 1998.
62 Interview with former TGWU general secretary.
63 ‘Your Voice at Work. TUC Proposals for a Right to Representation at Work.’
TUC 1994: 7.
64 Ibid: 21.
65 TUC General Council Report. 1997: 7.
66 Interview with former DTI minister.
67 Interview with former CBI Director of Human Resources Policy.
68 Interview with former No.10 official.
69 Interview with TUC officials.
70 ‘Road to the Manifesto: Building Prosperity – Flexibility, Efficiency and
Fairness at Work.’ Labour Party 1996: 5.
71 Report of Congress. TUC 1997: 30.
72 Press release: ‘TUC General Election Campaign Launched.’ TUC 1997.
73 General Council Report. TUC 1997: 4.
74 ‘Because Britain Deserves Better.’ Labour Party 1997: 17.
75 ‘Labour Business Manifesto: Equipping Britain for the Future.’ Labour Party
1997: 11.

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 New Labour Policy, Industrial Relations and the Trade Unions

76 Evidence to the House of Commons Employment Committee Enquiry into

the Future of Trade Unions. 26 January 1994.
77 ‘Labour Business Manifesto: Equipping Britain for the Future.’ Labour Party
1997: 11
78 CBI letter to the Financial Times, 18 March 1997.
79 Press release: ‘CBI and TUC Record Points of Agreement and Disagreement
on Trade Union recognition.’ TUC 1997.
80 Assessing the Fairness at Work White Paper: General Council Statement
for the TUC Conference, 24 June 1998: 4, 5; General Council Report. TUC
1998: 8–9.
81 Assessing the Fairness at Work White Paper: General Council Statement for
the TUC Conference, 24 June. TUC 1998: 5.
82 General Council Report. TUC 1998: 10.
83 ‘Take Your Partners – the Business Case for a Union Voice.’ TUC 1997: 11.
84 ‘TGWU briefing on the NMW.’ TGWU 1998.
85 Comments by Robert Taylor, former FT Labour Editor, to the conference,
‘New Labour and the Labour Movement’, University of Sheffield 19 June
1998.
86 TUC General Council Report 1998: 15.
87 Guardian, 13 May 1998.
88 White Paper: ‘Fairness at Work.’ DTI 1998: para 4.18.
89 Press release: ‘Fairness at Work. The TUC Reaction.’ TUC 1998.
90 Interview with former CBI Director of Human Resources Policy.
91 White Paper: ‘Fairness at Work.’ DTI 1998: para 4.18.
92 Ibid: para 4.29.
93 ‘The Spectre of Worker Power’, Tim Melville Ross, IoD DirectorGeneral,
‘The Director’, June 1998.
94 General Council Report. TUC 1998: 40.
95 ‘Assessing the Fairness at Work White Paper: General Council Statement for
the TUC Conference’, 24 June. TUC 1998: 4.
96 Guardian, 18 November 1998.
97 ‘Employment Relations Bill.’ House of Commons Research Library 1999: 8
98 Press Release: ‘Monks Welcomes Employment Relations Bill.’ TUC 28
January 1998.
99 General Council Report. TUC 1999: 12.
100 Guardian, 29 January 1999.
101 White Paper: ‘Fairness at Work.’ DTI 1998: paras 4.2, 4.3.

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 5
Political Unionism and
Political Exchange in New
Labour’s Second Term

Abstract: The limitations of the Trades Union Congress’s

(TUC’s) ‘insider’ strategy became apparent during New
Labour’s second term in office. The TUC’s strategy shifted
to attempting to influence the UK government indirectly
by pushing for European Union (EU) social legislation on
conditions and worker representation via the EU. However,
this route also gained limited traction and this was a period
when disaffection with the TUC’s opaque insider strategy grew
among its left-wing member unions. These began to push for
more direct confrontation with the government, culminating
in the 2004 Warwick Agreement in which party leaders
agreed a series of policy concessions in exchange for continued
guarantees of trade union funding. However, this was a largely
ineffective strategy, producing few genuine concessions and
further damaging the party-union relationship.

Keywords: New Labour; political exchange; TUC;

Warwick Agreement

Coulter, Steve. New Labour Policy, Industrial Relations and

the Trade Unions. Basingstoke: Palgrave Macmillan, 2014.
doi: 10.1057/9781137495754.0007.

DOI: 10.1057/9781137495754.0007 

 New Labour Policy, Industrial Relations and the Trade Unions

The previous chapter argued that the TUC lobbied New Labour as an
insider during its first term in office and secured limited but important
legislative and policy gains for unions. Insider lobbying was a successful
instrument for exerting influence over policy because the TUC secured a
place as the main trusted interlocutor between government and unions,
allowing it to focus on achieving a narrow set of realistic and deliverable
policy goals. For the government, being the recipient of lobbying contact
in this manner limited the political negatives of consulting with unions
on labour market reform because this process largely took place away
from public scrutiny, minimising the electoral costs to the government
(real or perceived) of close engagement with the unions.
This is important, because alternatives existed to the TUC’s insider
lobbying route. Chapter 1 explained that insider lobbying was merely
one of three mechanisms by which unions could potentially exert pres-
sure on policymakers in a Labour government. The other two methods –
political exchange and indirect lobbying of the government via the party’s
governance and policymaking institutions – were arguably diminished
in importance during New Labour’s period in opposition and first term
in government.
There were several reasons for this. First, institutional reforms had
severely curtailed union influence through the party route. Second,
many union leaders were initially reluctant to ‘rock the boat’ politically
for New Labour by pressing their demands too vigorously. Third, so long
as the TUC was able to effectively perform its ‘social partner’ function as
an insider with the government, there was no need for unions to resort
to threats or internal pressure within the party.
As shown previously, TUC insider pressure secured a national mini-
mum wage (NMW), to be negotiated with unions and employers on a
tripartite basis, as well as a statutory route to trade union recognition.
In fact, all of New Labour’s employment relations commitments from
its 1997 General Election manifesto were enacted, despite determined
pressure from employers to drop or weaken them and the government’s
own qualms over their negative effect on labour market flexibility. Many
union leaders were, in private, quietly satisfied with the government’s
first term progress on employee relations.
However, the background conditions determining whether union-
party cooperation was feasible altered during the government’s second
term in office and this shift continued into its third. The factors which
had made insider lobbying by the TUC an effective instrument for influ-

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 Political Unionism and Political Exchange in New Labour’s Second Term 

encing policy were less in evidence after 2001. As set out in Chapter 1,
these factors were that, in order to successfully influence the New Labour
government, the TUC needed to focus on a narrow range of objectives,
enjoy ‘credibility’, and largely monopolise contact with the government
over policy formation. A consequence of this was that the two-level
game being played by the TUC in its social partnership role between
the government and the unions was destabilised and relationships with
either became more difficult for the TUC to manage effectively.
On the government side, there were simply fewer big policy conces-
sions made to unions from 2001 onwards – certainly nothing with the
effect of the 1999 Employment Relations Act. The gains that accrued to
unions were on a smaller scale and were extracted grudgingly from a
government which made an early declaration of its intention to focus on
reforming public services in defiance of the wishes of the public sector
unions (Blair 2010: 287, Mandelson 2010: 323).
This shift in strategy magnified latent tensions between the unions
and the government over its alleged pro-free market leanings which had
previously remained subdued. Mutual hostility was ramped up further
with the election of the first of the ‘awkward squad’ of left-wing union
general secretaries from 2001 onwards who had no interest in social
partnership and were prepared to openly challenge the government’s
industrial agenda. There was no widespread return by unions to an
outsiderist strategy of strikes and confrontations with the government.
However, this was partly because a series of mergers of the big unions,
accompanied by a revamp of their organising strategies, provided them
with new opportunities to exert pressure via party channels which had
hitherto been lacking because of the institutional deficiencies of the
‘Partnership into Power’ mechanisms explored in Chapter 3. Finally,
there were leadership changes at the TUC and Confederation of British
Industry (CBI) and the replacement of key Department of Trade and
Industry (DTI) ministers by politicians seen as closer to employers than
to unions.
The effects on the party-union relationship of the altered environment
for political unionism after 2001 were threefold. First, the TUC’s strategy
of insiderist lobbying, which had been the dominant method of securing
policy gains for unions in New Labour’s first term, came to be rivalled
in its second and third terms by indirect pressure on the government
exerted by Labour-affiliated unions acting through party institutions.
Second, this development was accompanied by a resurgence of political

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 New Labour Policy, Industrial Relations and the Trade Unions

exchange as a major force driving the party-union relationship alongside

the TUC’s social partner model based on political unionism, with the
big Labour-affiliated unions explicitly attempting to trade continued
financial contributions to Labour in return for a raft of specific policies.
Third, the ultimate result of this shift in the dynamics of the union-party
relationship was to undermine relations between the government and
employers, who became dismayed at what they saw as the growing influ-
ence of militant unions over employment relations policy. This arguably
wrecked any lingering prospect of even a weak, UK-style, form of social
partnership developing between employers and unions. Ultimately, it
would also prove politically damaging to the government itself.

Employment legislation in New Labour’s second term

Unions campaigned energetically for New Labour in the 2001 General
Election in the expectation that a second term in government would
bring them further legislative and policy gains. Of particular importance
was the effect of the ‘key seats’ strategy by the Trade Union – Labour
Party Liaison Organisation (TULO), which produced a marked increase
in turnout of the Labour vote in the 52 marginal seats targeted by its activ-
ists (Allender, Ludlam and Taylor 2001). This more than compensated
for the decision by the TUC, which had spent £1m on anti-Conservative
campaigning in 1997, to withdraw from the 2001 contest because of new
regulations restricting political campaigning by ‘third parties’ (Ibid: 3).
The TUC’s expectations for the second term were framed by the
knowledge that its success or failure would be judged by the extent to
which it was able to persuade the government to open up new areas of
labour market regulation for reform, rather than securing pre-existing
commitments dating from the mid-1990s as had been the case during
the first term. John Monks, the TUC’s general secretary admitted: ‘While
there are some aspects of the post-1997 settlement that will need to be
reviewed, the priorities for the second term address a different set of
issues’ (2000: 22). An indication of the challenge the TUC set itself can
be seen in a pre-election briefing note, listing: ‘some areas where we want
rapid progress.’ These included a significant increase in the NMW from
£3.70 an hour to between £4.50 and £5, with abolition of the lower rate for
younger workers; full adoption of the EU information and consultation
directive; amending the Transfer of Undertaking Protection of Employ-

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 Political Unionism and Political Exchange in New Labour’s Second Term 

ment (TUPE) regulations covering transfers of workplace ownership to

include full protection for pensions; measures for ‘work-life’ balance;
further moves on workplace training; a full review of the 1999 Employ-
ment Relations Act, especially the 40 per cent ballot threshold, and
harmonisation of the regulations with International Labour Organiza-
tion (ILO) standards; and reform of equal pay legislation.1
However, New Labour’s 2001 manifesto fudged these issues. The
NMW would be raised to only £4.20 by October 2002, with no abolition
of the youth rate. The manifesto stated that information and consulta-
tion rights ‘need to be appropriate to national conditions’, and pledged
merely to review the issue; while there was no mention of the working
time directive in the section on ‘Fair and Flexible Work’. The TUPE issue
was addressed only obliquely, with a pledge that privatisation in the
health service should not be delivered at the expense of pay and condi-
tions. The 1999 Employment Act would merely be ‘kept under review’,
with any amendments incorporating guidance from both the ILO and
the World Trade Organisation, the latter taking a more free-market
approach to labour relations.2 Although the 2001 manifesto was the
first to be compiled under the Partnership into Power reforms, with its
content ostensibly finalised at a meeting of the National Policy Forum
(NPF) in Exeter in 2000, it closely reflected the policy preferences of the
leadership, rather than the party’s other ‘stakeholders’ (Shaw 2002: 150).
Oblivious to these controversies, the electorate delivered another
crushing victory for New Labour, shaving the government’s already large
parliamentary majority only marginally from 179 to 167. Despite securing
another powerful mandate, however, Tony Blair was ‘reluctant to open a
second front with employers.’3 The CBI identified the ongoing legislation
under the EU social chapter and ‘quality of life’ issues, such as family
friendly regulations, as the two key threats to labour market flexibility for
the second term, and marshalled its lobbying resources to combat them.
Anticipating these constraints, the TUC identified Europe as provid-
ing a strategic opportunity to advance its social partnership agenda.4
Despite the Conservatives previous veto of the application of EU social
legislation to the UK, the TUC had already played an active role in the
consultation process on European employment and social policy direc-
tives in the European Parliament through the Trade Union Intergroup
and the European Parliamentary Labour Party Liaison Committee, as
well as engaging directly with the European Commission through the
European Trade Union Confederation (ETUC) (Lea 1998: 134). Now,

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 New Labour Policy, Industrial Relations and the Trade Unions

in anticipation of a step-change in relations with Europe, TUC officials

shifted their focus to blocking attempts by the CBI, or pro-business
elements in Downing Street or the DTI, to water down the application of
an expected flood of EU social legislation to Britain.
In reversing the UK’s opt-out from the Social Chapter of the Maas-
tricht Treaty immediately on coming to power in 1997, New Labour
had broken decisively with the Conservatives’ policy of blocking any
social role for the EU. Signing the chapter brought the UK within
the scope of directives that could be agreed by Qualified Majority
Voting (QMV) (Undy 1999: 327). Blair made it plain that objections
would be raised to any European social regulation judged to impair
the competitiveness of the UK. However, in practice, the ‘opt-in’ to an
area of policy governed by QMV limited the government’s options for
vetoing legislation it disliked unless it could secure enough support
for a blocking majority. On the other hand, Blair was often able to
bypass domestic pressure from the TUC to lobby at the intergovern-
mental level through the European Council to seek partial opt-outs
to the directives for the UK. This left the TUC, which arguably over-
estimated the strength of the social partners at the EU level, to lobby
Number 10 – or in most cases the DTI – over the details of implemen-
tation of legislation whose broad shape had therefore often already
been agreed. The results, discussed below, were a good deal less
successful than the pure domestic insider strategy the TUC pursued
in the first term.

The TUC in Europe

New Labour’s 1997 ‘business manifesto’ had proclaimed that the Euro-
pean Social Chapter had produced only two directives: the introduction
of works councils for medium and large firms and a right to unpaid
parental leave.5 Inevitably, however, more legislation was introduced
during the course of the first parliament. In July 2000 the government
enacted Part Time Workers Regulations, as required by EU law. For the
first time in the UK, this extended statutory employment protection to
employees engaged in ‘atypical work’. However, the TUC complained
that the DTI’s restrictive definition of ‘employee’ could exclude half a
million temporary and agency workers.6 The TUC stepped up the pres-
sure to broaden the definition to include all workers, and the European
Commission proposed a directive extending protection to temporary

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 Political Unionism and Political Exchange in New Labour’s Second Term 

and agency workers. However, this directive was blocked by the British
government (Shaw 2007: 125).
The government resisted enacting another EU initiative covering
cheap immigrant labour, despite pressure from the TUC to not to do
this. The UK was one of only three countries in Europe where employ-
ers could legally hire temporary workers on worse pay and conditions
than other staff. This put downward pressure on pay and conditions in
associated industries. Many of these were hired by temporary employ-
ment agencies, and so the TUC pressed the government to enact the
Temporary Agency Workers Directive, which would have mandated
equal treatment of immigrant workers employed by these and domestic
workers. Blair tried to weaken these, leading John Monks to abandon
his customary diplomacy in dealing with the government to describe the
move as: ‘bloody stupid.’7
A battle also developed over EU attempts to regulate working hours.
The TUC hoped to combat a corporate culture which saw UK employ-
ees work some of the longest hours in Europe by securing enactment
of the EU Working Time Directive, which would have capped the
working week at 48 hours. The government had first introduced the
regulation in 1998; however, it had inserted a clause allowing workers
to seek derogations from the regulations and exempted a number of
occupations (Glyn and Wood 2001: 63). Job-seekers in some occupa-
tions affected by the legislation naturally came under pressure from
employers to seek these derogations, with the result that the effect of
the directive was muted. The TUC had unsuccessfully lobbied against
this in New Labour’s first term, and it made another attempt to end
individual opt-outs in 2003 with the launch of the ‘It’s About Time’
campaign, publishing research highlighting the link between long
hours and low productivity per hour. The government again sided with
the CBI and retained the opt-out.
On the other hand, the TUC was able to exert more influence over the
Information and Consultation Directive, as the government chose for
the first time to implement a piece of EU social legislation via tripartite
negotiation between the social partners rather than finalising its terms in
Whitehall. The directive required firms to consult with employees over
restructuring. However, the DTI, which took charge of its implementa-
tion, chose to frame it as a flexible, minimalist instrument.8 Nevertheless,
a two-stage consultation process was launched in July 2002, effectively
inviting the CBI and TUC themselves to negotiate the terms of the

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 New Labour Policy, Industrial Relations and the Trade Unions

planned legislation. Despite predictable disagreements over what it

should cover, a joint Social Partner agreement was produced and agreed
by the TUC General Council in June 2003. Although employers could
not be forced to include trade union representation in workplaces where
they were not already present, the TUC nevertheless claimed victory,
noting that the CBI had opposed the directive in principle but had
nevertheless entered into an agreement with the TUC on an important
piece of EU legislation.9 The CBI said it was ‘deeply disappointed’ with
the decision to grant new unions rights.10

Domestic disputes
The TUC was also heavily involved in two other policy issues mainly
originating domestically: revisions to the 1999 Employment Act; and
harmonisation of rights for workers whose workplaces were privatised.
Blair had earlier made it clear to the TUC that the 1999 Employment
Act (see Chapter Four) was to be the only major piece of employment
legislation of its first term, besides the NMW. However, he also promised
the TUC that aspects of the legislation would be kept under review.11 The
TUC was keen for the government to reconsider both the small firms
exclusion from the statutory recognition procedures and also the 40 per
cent ‘yes’ vote requirement in recognition ballots.12 At a TUC Special
General Council meeting in October 2000 the new DTI minister,
Stephen Byers, who had replaced Ian McCartney, confirmed that the
government would review the Act after the election. A consultation
paper was published by the DTI in July 2001 which appeared to confine
the scope of the review to a vague pledge to improve workplace dispute
resolution procedures.13 The TUC was invited to submit its concerns over
the consultation to the government. The TUC reaffirmed its view that
collective dispute resolution provided a more effective way of address-
ing workplace problems than individual litigation, and it reminded the
government that it remained in breach of ILO and European conventions
covering the right to strike.14
The CBI, however, remained flatly opposed to any major changes to
the 1999 Act, and largely got its wish. The Employment Relations Bill,
published in December 2003, stuck mainly to the parameters laid out
in the consultation document, although there was provision for easier
access rights for unions in recognition cases and a new legal right for
workers to access union services. The TUC’s frustration with this

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 Political Unionism and Political Exchange in New Labour’s Second Term 

outcome was reflected in a strongly-worded internal briefing on the

Bill, which admitted: ‘It is going to be necessary to lobby forcefully for
an amendment to be introduced on an unfair labour practices clause in
the Bill’, and suggested refocusing union lobbying onto the Trade Union
Group of Labour MPs.15
On the other hand, the government was more compliant over ending
the ‘two-tier workforce’ in local authorities. This emerged when workers
previously employed by local authorities were transferred to the private
sector as a result of contracting out and Private Finance Initiative (PFI)
deals. The government’s rationale for these was that private contractors
could supply many services to local authorities more efficiently than
they could do themselves, but unions maintained that in many cases
this could only be done by bearing down relentlessly on workers’ pay
and conditions. These were ostensibly safeguarded by TUPE regulations
introduced in 1981, but new employees were not covered, creating a ‘two-
tier’ workforce.
Following submissions by the TUC, Blair told the 2001 Labour Party
Conference that he would address the two-tier workforce in local
government, and a year later extended the pledge across the whole public
sector. The CBI wrote to cabinet ministers insisting they would reject
any pay code covering the transferred staff. Negotiations over TUPE
collapsed before the 2003 spring conference and union leaders warned
of serious industrial action if Blair reneged on his pledge. In a significant
concession, the government introduced a new code obliging private
contractors to offer all staff equivalent terms and conditions (Ludlam
and Smith 2004: 81). However, the code only applied to local authorities,
and it would take further TUC pressure in New Labour’s third term in
office for it to be agreed to extend this across the whole public sector.
New Labour’s disinclination to intervene in labour markets in its
second term therefore presented the TUC with numerous problems in
pushing for further employment legislation. On the other hand, the TUC
was still able to play a part in tripartite discussions with the government
and CBI over tackling the ‘productivity gap’ between the UK and its
major competitors. At the invitation of Patricia Hewitt, who replaced
Byers as secretary of state at the DTI in 2001, both groups were invited to
form a permanent CBI-TUC Productivity Group, which the government
would consult twice yearly on policy development. The first report of the
group was published in October 2001 and suggested a range of interven-
tions on skills, investment and technology.16

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 New Labour Policy, Industrial Relations and the Trade Unions

The TUC also sought to improve the environment for trade unions by
altering the overall climate for industrial bargaining in the UK. The next
section examines the TUC’s attempt to achieve this by promoting ‘social
partnership’ between unions and employers and getting the government
to underwrite this.

Social partnership
The TUC’s leadership had concluded in the 1990s that unions’ weakness
in the highly liberalised UK economy spelled the end of the adversarial
voluntarism which had previously characterised British industrial rela-
tions and which only made sense when unions were numerically and
politically strong. During New Labour’s period in government, the TUC
therefore looked instead to the creation of a new set of industrial rela-
tions institutions with which to enmesh employers in a more construc-
tive system of mutual trust and reciprocal obligation. Borrowing the
European ‘Social Model’ (ESM) as a template for this the TUC pushed
for a less dirigiste UK version, which it dubbed ‘social partnership’.
However, New Labour was wary of alienating employers who, as noted
earlier, preferred a voluntarist industrial relations system and were nerv-
ous of any moves to increase unions’ power. A further problem for the
TUC was that a number of unions also remained wedded to voluntarism
and equated partnership with selling out to employers.17 As a result,
social partnership was always to lack any real institutional foundations
and remained a vague aspiration.
This problem illustrates several of the themes of this book, which will
be explored further in the rest of this section below where the evidence
for these is presented. First, the TUC’s social partnership agenda was a
clear example of it acting strategically. The strategy was developed and
implemented by the leadership and key departments within the TUC
secretariat, particularly the economic and social affairs unit.
Several major unions remained entirely opposed to partnership, as
were large sections of business. A moderate, laissez faire, version of part-
nership, however, was backed by the leadership of the CBI, presenting
the TUC with an opportunity to align itself with a section of progressive
capital by highlighting the potential contribution of partnership-minded
unions to firms’ performance. New Labour, although sceptical of the
extent to which the ESM could be imported into the UK, was apprecia-

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 Political Unionism and Political Exchange in New Labour’s Second Term 

tive of such gestures by unions when these served to reduce the risk of
industrial unrest.
The second theme, however, has to do with the paucity of institutional
niches available to unions in liberal market economies (LMEs), and
the limited ability of governments – even partisan, centre-left ones – to
ameliorate this. Although the government supported the TUC’s efforts
to reinvigorate trade unions and was willing to assist in this by legislat-
ing on recognition, it remained unwilling to provide further institutional
support to reshape workplace bargaining institutions in ways helpful to
unions because this went too much against the grain of the UK’s style of
deregulated capitalism.

Take your partners

If there was a guiding philosophy underlying the TUC’s ‘New Union-
ism’ project it was ‘social partnership’. From its launch in 1994, New
Unionism had been a strategic response by the peak association of
organised labour to its industrial and political marginalisation. Its aim
was to replace adversarial voluntarism with a positive-sum, consensual
approach to bargaining and political advocacy. Social partnership was
a means to this end, potentially offering a way of reconciling labour
market flexibility with job security and an enhanced role for moderate
and credible trade unions.
By putting trade union recognition on a statutory footing Labour’s
1999 Employment Act forced employers to recognise unions where a
certain proportion of the workforce wanted it. However, the mere fact
of recognition did not by itself mean employers had to negotiate with
unions. Consistent with the UK’s LME style of capitalism most firms
continued to prioritise management autonomy, which required decen-
tralised and individualised bargaining accompanied by weak unions
(Wood 2001a: 266).
Faced with likely employer non-cooperation, the TUC therefore
developed a two-pronged approach. First, it would try to persuade the
New Labour government to take the union recognition agenda further
by putting workplace partnership on a statutory basis as well through
changes to company law.18 The TUC also wanted the government to sign
up to the EU Information and Consultation Directive and suggested a
‘National Centre for Best Practice’ with a tripartite management board,
including unions and employers to foster collaboration.19 The aim of

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 New Labour Policy, Industrial Relations and the Trade Unions

these was simply to compensate for the absence of robust institutional

structures at the economy and sectoral level on which to build partner-
ship, which meant that the process would hinge on developments at the
firm level instead.
However, there was an obvious contradiction in the idea that any
meaningful ‘partnership’ could be imposed from above on unwilling
firms – not to mention the danger to New Labour that doing this would
shred its pro-business credentials. The second prong of the TUC’s social
partnership strategy was therefore a drive to persuade both employers
and the government that responsible unions could play a role in resolv-
ing firms’ collective action problems over issues such as training and
productivity by creating a ‘high trust’ environment for long-term plan-
ning and dealing with disputes.
From this perspective, therefore, social partnership appeared to offer
solutions both to unions’ chronic weakness in the workplace, while also
providing a way to surmount the TUC’s increasingly ‘outsiderist’ status
in term of its relationship with policymakers at the macro-political
level under the Conservatives (McIlroy 2000: 2). Moreover, within the
union movement itself, espousing social partnership identified the TUC
squarely with the consensual European model of industrial democracy,
in sharp contrast to the adversarial types of relationships with employers
still favoured by some of the left-critical unions. Unison, for instance,
viewed partnership as tantamount to collusion with employers, but
with unions firmly subordinated.20 This put them on a collision course
with moderates in the TUC leadership. As one former TUC insider
puts it, ‘the TUC General Council were not really enthusiastic about a
reconfiguration of the trade union role along partnership lines. While
not openly hostile to partnership, a significant minority were at best
sceptical and remained wedded to a more traditional view of industrial
relations’ (Coats 2005: 2).
The TUC identified six principles for effective partnership in the
workplace on the part of both employers and trade unions. These were
commitment to the success of the enterprise; recognising legitimate
interests; commitment to employment security (to ensure that flex-
ibility does not come at the cost of job security); focus on the quality
of working life; transparency (to do with employee consultation); and
adding value (to do with training).21 The TUC advocated: ‘working with
“good” employers and enforcing legal standards on the rest’ (Ackers and
Payne 1998: 537).

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 Political Unionism and Political Exchange in New Labour’s Second Term 

In common with its advocacy of the NMW and Fairness at Work legis-
lation, the TUC was careful to link partnership with the government’s
economic agenda on industrial productivity, rather than presenting it as
a pro-union or social justice measure. Firms were also enticed with the
promise of an improved industrial relations climate and better perform-
ance. A number of carefully-researched, empirically-based publications
aimed at employers, Downing Street and the DTI were published during
Labour’s first term. Three distinct arguments were made.
First, evidence from the workplace purportedly showed that firms
engaging in partnership were more likely to enjoy high levels of
productivity.22 A number of academic studies on the beneficial effects
of partnership were also cited (cf. Addison et al. 2000: 7–48). Social
partnership was beneficial because worker participation fostered loyalty
and a more constructive relationship with management, aligning the
interests of both towards achieving long-term success for the firm.
The apparently weaker labour market performance of more collectiv-
ist European economies where the TUC’s partnership model was on
display was explained by the restrictive macro-economic policies being
followed there in preparation for European Economic and Monetary
Union (EMU).23
Second, the TUC emphasised that partnership arrangements needed
trade unions in order to succeed. Unions in the 1990s had noted the
growing influence of Human Resources Management (HRM), a set of
management tools which were the precursor and main alternative to
social partnership.24 HRM enabled and encouraged employers to bypass
unions to deal directly with their workforce individually or via works
councils (Bacon and Storey 2000: 409, 412). The TUC argued that
unions provided an independent voice for workers which equalised the
imbalance of power between firms and their employees that otherwise
encouraged both sides to defect from agreements.25 Furthermore, highly-
unionised workplaces were apparently correlated with higher levels of
firm-based investment in training. Trade unions engaged in social part-
nership, it was argued, helped companies develop training strategies and
encouraged more intensive training.26
Third, the TUC identified coordination problems endemic to the UK’s
model of capitalism which it claimed discouraged employers from aban-
doning their unitarist approach in favour of social partnership. These
could only be resolved by reforms to the UK’s shareholder-oriented
system of corporate governance as this encouraged a short-termist

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 New Labour Policy, Industrial Relations and the Trade Unions

outlook. This short-termism fostered a low-trust bargaining environment

in which the HRM-style management practices that displaced unions
produced poor company performance even where collective bargaining
was still taking place.27 The underlying cause of the poor productivity
record of UK firms therefore lay partly with the UK’s industrial relations
institutions, as firms were incentivised to adopt management practices
that prevented partnership. Once a partnership was established manage-
ment also had a greater incentive to renege on the deal. The solution was
a ‘fundamental change to the UK’s framework of company law to require
managers to have regard to a wider range of stakeholder interests when
they make strategic decisions’.28
The TUC enjoyed a relatively receptive audience for its partnership
agenda from New Labour because important elements of it inter-
sected with the Blair/Brown preoccupation with supply-side micro-
economic reform, particularly to the UK’s training regime which was
perceived as inadequate (Finegold and Soskice 1988: 25–30, Rubery
1994: 343–345, Wood 2001b: 55–56). Equally important, partnership
in a limited form was acceptable to many employers. Labour’s pre-
election ‘Road to the Manifesto’ document stated that ‘competitive
success is achieved through partnership between employers and
employees ... The way to achieve this is through trust, consultation,
team-working and offering people real security.’ 29 Advocates of Euro-
pean style collectivism in the workplace were emboldened by Blair’s
brief enthusiasm for the ‘stakeholder’ philosophy of Will Hutton (1996:
296–297). In a widely reported speech in Singapore on 7 January 1996
Blair called for a shift in the corporate ethos: ‘towards a vision of the
company as a community of partnership in which each employee has
a stake’ (1996: 61).
However, in government New Labour’s approach to partnership
differed from the TUC’s in key respects. First, it was unclear to what
extent it viewed partnership between workers and employers in an indi-
vidualistic or collective sense, that is, whether it required unions. On one
hand, as prime minister, Blair publicly backed the thrust of the TUC’s
partnership agenda, including its emphasis on the role of unions: ‘I see
trade unions as a force for good, an essential part of our democracy, but
as more than that, potentially as a force for economic success. They are
part of the solution to achieving economic success and not an obstacle
to it.’30 Blair also endorsed the TUC’s keynote 2000 report on the
subject, with the front cover of the document highlighting his statement:

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 Political Unionism and Political Exchange in New Labour’s Second Term 

‘Modern and successful companies draw their success from the existence
and development of partnership at work.’31
The TUC’s definition of partnership was also echoed at ministerial
level; the DTI minister, McCartney, arguing: ‘There needs to be an inclu-
sive relationship between employers, employees and their representa-
tives. There should be a joint approach to solving employment relations
problems, which respects and balances all the parties.’32 Moreover, the
government’s ‘Fairness at Work’ White Paper was steeped in the inclu-
sive and consensual language of workplace ‘partnership’.33 The DTI also
earmarked a £5m ‘partnership fund’ to build partnership relationships in
industry.
On the other hand, New Labour’s industrial relations legislation and
the limited institution-building which actually took place tended more
towards an individualistic and de-unionised relationship between work-
ers and managers, largely due to the successful intervention of employers’
organisations at the lobbying and implementation stage. Arguably, this
is an inevitable result of a shift to an industrial relations environment
based on positive rights rather than collective legal immunities, which
the TUC itself favoured.
Moreover, there was little in New Labour’s rhetoric or actions to
indicate a belief that true partnership at work required an equalisation
of power relations that justified further legislation (Ackers and Payne
1998: 539). Its preference veered towards a voluntary style of partnership
with agreement between the parties coaxed rather than forced, ignor-
ing the TUC’s objection that the imbalance of power in employment
relationships skewed such bargains in favour of employers (Novitz 2002:
491–492, Novitz and Skidmore 2001: 14–18). Byers, McCartney’s replace-
ment at the DTI, warned the TUC that ‘The practical reality is that we
cannot legislate for good relations in the workplace.’34
Ultimately, therefore, UK social partnership lacked secure institu-
tional foundations and depended on accommodationist employers (and
unions) in order to function. A number of social partnership agreements
were reached between unions and some large manufacturing and utility
firms, including Blue Circle Cement, Rover and Scottish Power. These
typically involved pay restraint for employment guarantees. However,
the uneven extent of these agreements also illustrates the limitations of
the TUC’s social partnership strategy. The failure of social partnership
to become firmly institutionalised in the UK was a function of the weak
institutional setting for consensual industrial relations in a ‘low-trust’

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 New Labour Policy, Industrial Relations and the Trade Unions

LME, rather than any overt hostility to the concept from the govern-
ment. Nevertheless, its limited effect on the UK industrial relations
environment was hardly a ringing endorsement of the TUC’s workplace
agenda, and even TUC insiders describe it as ‘the one big failure of the
John Monks strategy’.35
By the beginning of New Labour’s second term in office, the tepid
enthusiasm for social partnership among many unions led to a wider
disillusionment with the TUC’s entire insider lobbying strategy. The next
section describes and explains some of the consequences of this.

Union responses to New Labour’s second

term agenda
Growing disillusionment among trade unions with the government’s
second term industrial relations priorities and manifest flaws in the
TUC’s social partnership agenda were reflected in two main develop-
ments.
First was the replacement, from 2001 onwards, of a number of moder-
ate trade union general secretaries by left-wingers who were less inclined
to seek accommodation with New Labour and more hostile to employ-
ers. By the end of 2003 the four biggest Labour-affiliated unions were
led by left-wing general secretaries. The leaders of the Transport and
General Workers’ Union (TGWU) and Unison also joined with other
militant trade unions representing workers in key public services such
as firemen (FBU) and train drivers (RMT) to form what became known
as the ‘awkward squad’. This was an informal grouping of trade union
leaders whose aim was either (the TGWU) to replace New Labour with
a genuinely socialist party, or (the RMT and FBU) to reject the Labour-
union link entirely in order to form a trade union dominated socialist
party well to its left (Murray 2003: 68).
The second development was an organisational move to improve
coordination between the major Labour-affiliated unions operating
within party structures on political matters to achieve greater influence
over policymaking. Two factors facilitated this. One was the growing
size and consolidation of union members and finances into a smaller
number of ‘super-unions’ following a series of mergers enacted in
response to perceived union decline (Ebbinghaus 2003: 447). Between
1990 and 2005 membership of the three largest TUC-affiliated unions

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 Political Unionism and Political Exchange in New Labour’s Second Term 

as a proportion of the total number of TUC-affiliates increased from 35

per cent to 52.3 per cent (Waddington 2006: 644). This trend resulted in
a concentration of voting power in the largest unions, with the big four
of Amicus, TGWU, Unison and GMB – controlling 70 per cent of union
votes at party conference in 2002 (Quinn 2004: 80–81).
The consolidation process was exemplified by the formation of the
dominant public sector union, Unison, in 1993 and continued with the
merger of the two large manufacturing unions, the MSF (Manufacturing
Science Finance) and AEEU (Amalgamated Engineering and Electrical
Union) to form Amicus in 2001. Amicus later joined with the TGWU
to form Unite in 2007. An explicit part of the rationale for the Amicus/
TGWU merger was to increase the new union’s political influence and
supplant the TUC as the main trade union interlocutor with the govern-
ment: ‘The new union will ... consolidate the influence of the three part-
ner unions in the Labour party’s policy development process and will
be able to advance our agenda with ministers ... It will be committed to
continuing affiliation to a refocused TUC.’36 This was naturally opposed
by the TUC, with Brendan Barber, the TUC’s general secretary, warn-
ing that ‘super-unions’ threatened the ability of the union movement to
speak with a coherent voice.37
The second factor responsible for improved political coordination by
the unions was a re-orientation of the role of TULO, the main Labour
Party – trade union coordinating body. TULO had been set up in 1994 to
oversee the effective deployment of union resources in Labour’s General
Election campaigns. At that time it had minimal involvement in policy-
making as the intention was that any union influence would be deployed
through the NPF, National Executive Committee (NEC) and conference.
An internal review of TULO’s remit in February 2002 concluded that
this situation needed to change: ‘This [policy] dimension has been
little explored, yet remains a key reason for trade unions to participate
in TULO. It follows that any increase in policy coordination or policy
discussion will be attractive to member unions.’38
Both these developments threatened the continued ability of the TUC
to monopolise contact with New Labour which was essential for it to
lobby effectively as an insider and were in many ways a challenge to the
position of the TUC itself. They reflected disillusionment by some unions
with the TUC’s negotiating stance on various issues. For instance, there
was strong criticism of the tripartite deal between the government, CBI
and TUC to phase in information and consultation rights, with private

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 New Labour Policy, Industrial Relations and the Trade Unions

sector unions maintaining that they would have secured better protec-
tion for employers if they had negotiated directly with the ministers.39
In according paramount importance to maintaining its insider status
with the government, the TUC was increasingly regarded as too ready to
ignore the wishes of the union movement.40
In response to this the TUC executive and General Council launched
a strategic review of its lobbying priorities. A draft paper was circulated
in November 2003 which acknowledged the difficulties of turning the
TUC’s good access to policymakers into effective leverage over policy
outcomes in the second term and beyond. The paper conceded that ‘the
circle [in government] within which decisions are made is a very tight
one and lobbying takes place at a very late stage in the process – often
after real decisions have been taken.’41
The conclusions of the review were discussed at a special TUC
General Council meeting on 30 March 2004. However the TUC’s self-
criticism did not go far enough for the big unions. The TGWU’s submis-
sion commented: ‘Our movement should not, even under a Labour
government, come to see itself as part of the establishment ... There is
a danger in the TUC being seen as an intermediary between affiliates
and ministers ... in being concerned to keep in with the government at
the expense of the forthright presentation of working people’s agendas.’42
Tony Woodley, the TGWU’s general secretary, issued a blunt warning:
‘The TUC is under big pressure ... It is just about relevant. But what does
it stand for?’43
The union backlash against the government and the TUC provided
the impetus for the big unions, acting through TULO, to manoeuvre to
replace the TUC’s insider model of political unionism with an alterna-
tive method based on direct manipulation of the party’s policymaking
institutions by affiliated unions. According to a TULO official, ‘Prior to
2004 we didn’t get in each other’s way. TULO was seen as a coordinating
body and the TUC as one of the social partners. But the failure of the
TUC was seen as one of the drivers of the new strategy. We wanted a
better way to use our strategy.’44
Mobilising through TULO enabled the unions to partially overcome
a key obstacle to its use of the party institution route: that the Smith/
Blair reforms of the early 1990s had heavily curtailed their influence
over conference, the NEC and the NPF. Power had been dispersed
deliberately among voting blocs. For example, the unions occupied only
11 out of 32 seats on the NEC (one-third of the total) and 41 out of 184

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 Political Unionism and Political Exchange in New Labour’s Second Term 

on the NPF (one-fifth). Rivalry among unions had hitherto impeded

their ability to act collectively, and some unions had simply failed to
take the new policymaking structure seriously, often failing to send
representatives to NPF meetings. However, the greater coordination
and consolidation of strategies and interests of the union bloc as a result
of the new TULO strategy and mega-mergers described above made it
easier for them to form alliances with other sections, such as constitu-
ency Labour Parties, to achieve their objectives during Labour’s second
term (Russell 2005: 164).
On the other hand, as argued in Chapter 3, New Labour had built
in safeguards to maintain some freedom of manoeuvre for the leader-
ship from party policymaking institutions. The agendas of meetings
were tightly controlled by ministers and their special advisers. Deci-
sions reached that were deemed potentially damaging politically could
be ignored or watered down. Liz Davies, who served on the NEC,
has claimed in her memoirs that the Partnership into Power reforms
reduce the policymaking process to a series of deals done behind closed
doors (2001: 80). For example, Foundation Hospitals – granting semi-
autonomy to the most efficient hospitals, with implications for working
practices – were never discussed at the NPF, but was a policy developed
unilaterally in cabinet (McIlroy 2009: 180).
The TULO strategy of seizing greater control of party policymaking
institutions was therefore, on its own, of limited effectiveness. Union
leaders quickly grasped that exerting direct pressure on the New Labour
leadership was also required to prevent conference and NPF rulings that
advanced their agenda being set aside. Their main strategic asset for
achieving this was unions’ decisive contribution to party finances. The
stage was therefore set for a resurgence of political exchange as an overt
method of attempting to secure pro-union policies from the government,
and this development is considered below.

The ‘Warwick Agreements’: resurgence of political

exchange?
‘Political exchange’ can be defined as the mutually beneficial trading of
assets between actors (Coleman 1990: 28). These may be political parties,
trade unions or others with an interest in securing specific outcomes in
the political arena. The Labour Party and the unions have participated

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 New Labour Policy, Industrial Relations and the Trade Unions

in two forms of political exchange in the modern era. During the post-
war ‘golden age’ of steady economic growth under Keynesian demand
management regimes, unions looked to deliver wage restraint, with
sporadic success, in return for guarantees of full employment (made by
Conservative as well as Labour governments). However, the oil shocks of
the early 1970s made it increasingly difficult for either side to deliver on
their pledges and most advanced industrial nations turned eventually to
independent central banks to control inflation, depriving unions of their
role in macro-economic management.
On the other hand, the continued reliance of the Labour Party on
the financial contributions of its affiliated unions in the absence of state
funding of political parties provides an alternative rationale for political
exchange within the labour movement itself.
Labour’s heavy dependence on the financial contributions of trade
unions is undeniable. Blair attempted to reduce this dependence by
trying to turn New Labour into a mass-membership party and seeking
cash donations from businesses and rich individuals, but this resulted in
scandal and failure. The unions have remained its dominant paymasters,
providing around 65 per cent of party income between 2000 and 2006.45
So long as this dependence persists, it is logical to suppose that unions
will continue to have an influence over policy whenever they choose to
exercise the power conferred on them by this situation.
However, there are dangers that an analysis of the policy outcomes
of the New Labour government based purely on a model of political
exchange is in danger of oversimplifying matters by ignoring the political
costs for Labour of its visible dependence on trade union support. What
Hopkin terms an ‘externally-financed elite party’ – that is, an increas-
ingly capital-intensive alternative to a mass-membership party, as New
Labour has arguably become – may be vulnerable to accusations that it
is ‘selling’ policies to its backers (2004: 633). As argued in Chapter 3, this
dependence was acutely perceived by New Labour modernisers as a key
ingredient in its four General Election defeats before 1997.
Heery correctly notes that the inclination and ability of unions to
influence Labour through their financial contributions ebbs and flows
according to the electoral cycle, with pressure on the party at its apogee
when the entire labour movement is mobilising to fight a General Elec-
tion (2005: 6). However, if political exchange is genuinely a significant
factor in the union-party relationship, then it arguably adheres to a longer
cycle than merely the five years between General Elections. During New

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 Political Unionism and Political Exchange in New Labour’s Second Term 

Labour’s first term, the unions generally refrained from exploiting the
funding issue, as they were anxious not to make things difficult politically
while the New Labour government established itself.46 Rational choice
analyses of political exchange can, in fact, incorporate political factors
to do with voter perceptions of Labour into their models, although they
do not specify when exactly these will come into play: ‘Although unions
are policy seekers, when they financially and organizationally dominate
a party in a two-party system, electoral considerations are fundamental.
No policies can be implemented in opposition, so doctrinal purity is an
irrational posture to strike’ (Quinn 2004: 172).
Political exchange, in other words, was a potentially powerful weapon
for the unions, but one likely to deliver them a Pyrrhic victory if it came
at the cost of the election of a Conservative government. For this reason,
it would be expected to be a strategy used sparingly by unions, deployed
only when other avenues of exerting influence were perceived to have
failed.
There are good reasons to suppose that early reticence about pursuing
political exchange began to dissipate during New Labour’s second term
in office as disillusionment with the fruits of the TUC’s insider strategy
set in. Concern that New Labour was reneging on its side of the bargain
arguably began to result in an undersupply of unions’ resources as they
resorted to direct pressure to force the government to respond to their
policy demands.
The rest of the section examines these issues in more detail. It also asks
the question: to what extent was a party-institutional/political exchange
model of union-party interaction a viable substitute for the TUC’s insider
lobbying strategy?

Threats over funding

Successfully fighting the 2001 General Election campaign plunged the
Labour Party heavily into debt. By the beginning of 2002 it was running
an overdraft of £10m, and membership was estimated to have fallen from
400,000 in 1997 to 290,000 in 2002.47 This increased the party’s reliance
on cash donations from the unions, and they began to exploit this by
making threats to disaffiliate and/or withdraw funding. In July 2001 the
GMB switched £1m of funding away from the party to campaign against
the government’s programme of public-private partnerships in the public
sector. The union also threatened to end donations to individual Labour

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 New Labour Policy, Industrial Relations and the Trade Unions

MPs – around £5,000 had been given to each of 100 candidates in 2001.48
ASLEF, BECTU, CWU, FBU and the RMT also cut donations in protest
at various government policies. Other unions, including Unison and the
GMB, dropped broad hints that ballots on political funding due in 2005
might be lost over their members’ unhappiness with the government’s
legislative record.49 The RMT and FBU, whose general secretaries were
leading members of the awkward squad, were expelled and disaffiliated
respectively from the party in 2004.
On 29 July 2002 a special meeting of TULO was convened to discuss
the party’s dire financial situation, and a stop-gap funding arrangement
was put in place.50 However, efforts by the party to negotiate a five-year
funding deal worth £40m were blocked by Unison on the eve of the
2003 party conference, jeopardising preparations for the approaching
General Election.51 New Labour leaders responded by reopening the
issue of state funding for political parties. Blair signalled his backing to
this arrangement in evidence to an inquiry by the Electoral Commission
into the issue.52 A report published by a think tank close to New Labour
proposed a cap on donations and state funding of political parties, with
union members contributing to the party on an individual not collective
basis.53 TULO organisers regarded this suspiciously as a ruse to nullify
union pressure on policies being exerted via the funding issue.54
Nevertheless, proposals for state funding of political parties stalled
after the publication of the Hayden-Phillips report into party funding
in 2007. In addition, the unions stepped up cash donations to New
Labour from £6.1m in 2002 to £10.5m in time for the 2005 General Elec-
tion, enabling the party to mount its third successful campaign. What
prompted the change of heart?

Alas poor Warwick

Arguably, the apotheosis of political exchange under New Labour was
the Warwick Agreement of 2004. Warwick was the culmination of NPF
work on three policy papers – dealing with ‘Prosperity’, ‘Sustainable
Communities’ and ‘Improving Health and Education’ – which had been
discussed at local Policy Forums and conference over the previous two
years. A salient feature of the process was the successful use of party
institutions, backed by threats over money, to ensnare the New Labour
leadership into agreeing a set of pro-union policy commitments. The
unions felt they had been outmanoeuvred by the government during the

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 Political Unionism and Political Exchange in New Labour’s Second Term 

NPF process leading up to the 2001 Manifesto and resolved to not be

caught out again.55
TULO leaders and the big four unions met to coordinate strategy at
the September 2003 Labour conference. This was followed by a ‘summit’
of all the Labour-affiliated unions under the auspices of Catalyst, a think
tank close to Labour, on 18 May 2004. Priority areas of manufacturing,
public services, pensions and fairness at work were agreed upon, and a
joint statement was issued.56 Early drafts of the NPF document indicating
that this statement was being ignored by the party prompted the unions
to issue a series of amendments, focusing on the document dealing with
economic issues (‘Building Prosperity for All’). Key union demands
included scaling down PFI in public services, ending the two-tier work-
force, more employment rights, a statutory right to flexible working and
restoration of the link between earnings and pensions.57
The final text of the agreement, reached after two days of intense nego-
tiations of the NPF between 23 and 25 July, included 67 policy pledges
that were welcomed by most unions and set the scene for a period of
cooperation between unions and party. Concessions by New Labour
negotiators included pledges to finally end the two-tier workforce, an
increase in the statutory minimum amount of paid holiday, support
for manufacturing, extension of TUPE protection and more rights for
strikers.58 The Warwick Agreement was also to form the basis of part of
New Labour’s 2005 General Election manifesto.59 Despite battles with
ministers over the details, union negotiators successfully forced the party
to campaign in the election for a host of new rights for workers. Even
though many of these rights were never implemented this damaged its
reputation with business.
There are several arguments for viewing the Warwick Agreement as a
successful example of political exchange for the trade unions. The first,
and most obvious, is that, as indicated above, it coincided with a timely
injection of union cash into party coffers which enabled it to successfully
fight a third General Election campaign (Wring 2005: 715).
Second, the TUC was largely excluded from the negotiations, as the
NPF was an internal party matter and the TUC is not affiliated to Labour,
controlling no substantial assets necessary for Labour’s election. This
automatically calls into question the viability of the TUC’s strategy of
insider lobbying as the dominant model of bargaining with the govern-
ment.

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 New Labour Policy, Industrial Relations and the Trade Unions

A third reason was the inclusion of enforcement mechanisms at the

heart of the Warwick process. Enforcement mechanisms play an impor-
tant part in exchange models of political parties because they ensure that
deals are mutually beneficial (Coleman 1990: 28–29, Quinn 2002: 219).
Between the conclusion of the July negotiations and the Labour confer-
ence in September TULO officials told the party that unions expected
full consultation over the contents of the Manifesto. This was granted,
and further meetings followed in 2004 and early 2005 between Downing
Street and the TULO Executive Committee. The outcome of these was an
insertion into the final policy document confirming that Warwick would
be implemented in full. As a TULO insider puts it, ‘It was made abso-
lutely clear to them there would be consequences if this didn’t happen:
financially and organisationally.’60 A special working group was also set
up – the TUC/Trade Union Liaison Office Contact Group – which was
to meet regularly with cabinet ministers to monitor the implementation
of policies.61
Nevertheless, there are several problems with this interpretation of
Warwick which call into question the viability of political exchange
as a long term mechanism for managing the party-union relationship
and ensuring trade union input into policymaking, despite the appar-
ent triumph of this strategy. First, merely because union donations to
the party were ramped up immediately before New Labour granting
the Warwick concessions to them is not by itself evidence of a causal
relationship. The unions could have decided to plug the funding gap in
2004–2005 because they were alarmed about New Labour losing the
election to the Conservatives, not because they were offered policies in
exchange for this. As argued previously, unions are heavily constrained
in their ability to exert direct pressure on Labour because the UK’s
majoritarian electoral system renders Exit from their relationship with
Labour unattractive to both sides, limiting the ability of either to exert
genuine pressure on the other.
Second, for political exchange between unions and New Labour to
be viewed as a more viable model of engagement with policymakers
for organised labour than TUC-style insiderism, the policy concessions
granted by the government ought to be substantial. Yet, according to
key negotiators at Warwick, many of the policies offered were either
insubstantial pieces of unfinished business left over from the first term
or were things the government planned to do anyway.62 Even defenders

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 Political Unionism and Political Exchange in New Labour’s Second Term 

of the achievements of Warwick are heavily critical of the limited and

piecemeal nature of the unions’ goals and strategies.63
Third, far from being tightly bound by the enforcement mechanisms
devised by TULO, New Labour took a relaxed view of implementing the
pledges Warwick had ostensibly bound it to (McIlroy 2009: 187). Imple-
mentation remained a top priority of the unions.64 However, the Warwick
Agreement served neither as a brake on further privatisations, nor did
it defuse tensions with New Labour, which erupted almost immediately
after the election over the ‘Gate Gourmet’ strike by the TGWU. In an
internal briefing paper in 2005 TULO officials complained: ‘It is becom-
ing apparent that in a number of areas the party is not fulfilling the
commitments it made at Warwick.’ The TULO paper also warned that
party leaders were reviewing the entire Partnership into Power process
with a view to further downgrading union representation.65 There was
further dismay when the DTI granted the CBI a voice in implementing
many of the proposals.66

90
% of voters saying Labour has best policies on unions

80

70

60

50

40

30

20

10

0
5

4
–9

–9

–9

–9

–9

–0

–0

–0

–0

–0
l

l
Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Figure 5.1 Opinion polling on voters’ attitudes to trade unions and political
parties
Source: Ipsos Mori.

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 New Labour Policy, Industrial Relations and the Trade Unions

Equally importantly, the 2004 Warwick Agreement had very damaging

political repercussions for New Labour. The CBI had earlier embarked
on a campaign against the government’s employment laws, complaining
that ‘flexibility is now being eroded by the cumulative impact of employ-
ment regulation.’67 Following, Warwick the CBI director general, Digby
Jones, stepped up these attacks and accused New Labour of returning
the industrial relations agenda to the 1970s.68 The Engineering Employers
Federation, representing manufacturing firms, expressly linked Warwick
with unions’ cash donations to the Labour Party.69
Intensifying criticism of the government by business leaders may have
chimed with growing scepticism among voters about the party’s ability
to rise above the factional interests of trade unions. Figure 5.1 shows
opinion polling on voters’ views on which party was best equipped to
deal with the trade unions. Immediately after Warwick the proportion
of voters nominating Labour fell to its lowest level since before Blair
became party leader in 1994.
It is revealing that ‘Warwick Two’, a follow up agreement concluded
at the July 2008 NPF, contained many fewer concessions as ministers
dug in and refused to give ground, with many of the 130 suggestions
put forward by TULO being rejected out of hand.70 Warwick’s real value
to unions, according to insiders, may have been to boost the morale of
activists and provide political cover for general secretaries who had to
justify the financial cost of continuing affiliation to the party.71
Meanwhile, the TUC’s insider strategy continued to provide a stream
of important, if less dramatic, policy advances: the NMW, negotiated
by the TUC in New Labour’s first term, continued to be up-rated by
the Low Pay Commission on which the TUC sat; the Union Learning
Fund, stemming from the 2004 Employment Act negotiated by the TUC
provided £10m of funding for union restructuring which was entrusted
to the TUC to administer from 2007; and TUC input into the Turner
Commission on pensions helped to produce a recommendation that
employers contribute to employee pensions.

Notes
1 ‘Fairness at Work – Key Issues.’ TUC March 2001.
2 ‘Ambitions for Britain.’ Labour Party 2001.
3 Interview with former No.10 official.

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 Political Unionism and Political Exchange in New Labour’s Second Term 

4 Interview with TUC officials.

5 ‘Equipping Britain for the Future.’ Labour Party 1997.
6 ‘Response to DTI Consultation on Implementation of Part-Time Work
Directive.’ TUC 2000: 1
7 FT 28 June 2002.
8 ‘High Performance Workplace: The Role of Employee Involvement in the
Modern Economy.’ DTI 2002: 5.
9 ‘EU Directive on Information and Consultation: Consultation on Draft
Regulations. TUC Briefing.’ TUC 2003.
10 Labour Research, 1 November 2001.
11 Interview with TUC officials.
12 ‘Modern Rights for Modern Workplaces’ TUC 2002: 3–4.
13 ‘Routes to Resolution: Improving Dispute Resolution in Britain.’ DTI 2001: 3–5.
14 ‘TUC Submission to the Government Review of the Employment Relations
Act 1999. TUC 2002: 1.
15 ‘Employment Relations Bill 2003.’ TUC Briefing. 2003: 5-6.
16 ‘The UK Productivity Challenge.’ TUC 2001.
17 Interview with former TUC chief economist.
18 ‘Partnership: A Boost to Business.’ TUC 2000: 14.
19 Ibid: 15.
20 Notes of the Unison senior management team on ‘Developing Policy and
Direction’, held on 12/2/1997 (Unison 1997b).
21 ‘Partners for Progress: New Unions in the Workplace.’ TUC 1998: 13.
22 ‘Partners for Progress: New Unions in the Workplace.’ TUC 1998: 8-9;
‘Partnership: A Boost to Business.’ TUC 2000: 5-7; ‘Partners for Progress:
Winning for Work.’ TUC 2001: 3-11.
23 TUC (2000): ‘Partnership: A Boost to Business.’ TUC 2000: 9.
24 ‘HRM/TQM.’ GMB 1993: 6.
25 ‘Partnership: A Boost to Business.’ TUC 2000: 4.
26 ‘Productivity and Social Partnership.’ TUC 1998: 12.
27 ‘Competitiveness: the Challenge’ (briefing for TUC Seminar, 10 January
1996) TUC 1996: 7; ‘Partnership: A Boost to Business.’ TUC 2000: 13.
28 Ibid: 14.
29 ‘Road to the Manifesto.’ Labour Party 1996: 1.
30 Speech at the launch of the TUC’s ‘Partners for Progress’ document, 24 May
1999.
31 ‘Partnership: A Boost to Business.’ TUC 2000.
32 Speech to the AnUMan ‘Partnership in Practice’ Conference, 27 January 1999.
33 See paras 4.1 to 4.17 in particular (DTI 1998).
34 Speech to the TUC Partnership Conference, 24 May 1999.
35 Interview with TUC officials.
36 T&G Record – New Union Special. TGWU February 2006.

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 New Labour Policy, Industrial Relations and the Trade Unions

37 Personnel Today. 13 September 2005.

38 ‘TULO Review.’ Trade Union-Labour Party Liaison Organisation 2002: 6.
39 Tribune, 10 September 2004.
40 Interview with TULO national coordinator.
41 ‘TUC Strategic Review: Facing the Future.’ TUC 2003: 10–11.
42 Tribune, 5 March 2004.
43 Tribune, 10 September 2004.
44 Interview with TULO national coordinator.
45 Source: Electoral Commission.
46 Interview with former general secretary of the GMB.
47 Tribune. 1 February 2002.
48 Tribune. 20 July 2001.
49 Tribune. 15 February 2002.
50 Tribune. 16/23 August 2002.
51 Guardian. 8 September 2003.
52 Independent. 3 March 2004.
53 ‘Keeping It Clean: The Way Forward for State Funding of Political Parties.’
Institute for Public Policy Research 2002: 17, 20-21.
54 Interview with TULO official.
55 Interview with TULO official.
56 TGWU Annual Report. 2004: 10.
57 Tribune. 16 July 2004.
58 For a full list of pledges see Labour Research, January 2005: 9-12.
59 ‘Britain Forward Not Back.’ Labour Party 2005: 27.
60 Interview with TULO official.
61 Tribune. 21 January 2005.
62 Interviews with former No.10 official and former NEC chair. The conduct
of the TGWU during and after the negotiations have also been heavily
criticised by Bill Morris (former general secretary of the TGWU).
63 Interviews with former DTI minister; and former Labour Party Chairman.
64 General Council Report. TUC 2005: 2.
65 ‘Briefing Paper: The NPF Review.’ TULO 2005.
66 Personnel Today. 29 November 2005.
67 ‘UK Labour Market Flexibility under Threat: The UK as a Place to do
Business.’ CBI 2003.
68 Personnel Today. 29 November 2005.
69 Personnel Today. 5 September 2005.
70 http://www.eurofound.europa.eu/eiro/2008/08/articles/uk0808019i.htm
71 Interviews with former No.10 official; and former DTI minister.

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 6
Conclusion: Political Trade
Unionism Reconsidered
Abstract: The concluding chapter examines the evidence
concerning the unions’ effect on policy, and argues that
the Trades Union Congress (TUC) had a limited, but real,
effect on Labour’s policies. The chapter also offers some
reflections on the prospects and strategies of interest groups
in ‘hostile’ political-economic environments.

Keywords: interest groups; New Labour; TUC

Coulter, Steve. New Labour Policy, Industrial Relations and

the Trade Unions. Basingstoke: Palgrave Macmillan, 2014.
doi: 10.1057/9781137495754.0008.

DOI: 10.1057/9781137495754.0008 

 New Labour Policy, Industrial Relations and the Trade Unions

This book has been concerned with examining whether, and if so under what
circumstances, interaction on policy between trade unions and politicians
is possible in a liberal market economy (LME). The UK from the mid-1990s
onwards presented probably one of the least promising arenas for political
unionism of any advanced capitalist democracy. The UK’s uncoordinated
style of free market capitalism, with deregulated labour markets and weakly
institutionalised trade unions, presents few obvious incentives for politi-
cians, even on the centre-left, to involve unions in policymaking.
Moreover, these problems were compounded by acrimony between
unions and the Labour Party over poor industrial relations in preceding
decades which levied electoral penalties on political parties regarded by
voters as too close to organised labour. No longer guaranteed the insider
access to Labour the unions previously enjoyed under Keynesian macro-
economic policy regimes, they faced political isolation in the UK’s
pluralist system of interest representation.
However, in this book I have argued that the TUC was able to function
as a trusted insider with New Labour, particularly during its first term in
government, and was rewarded with some pro-union concessions. The
TUC’s exploitation of the insider lobbying route was more successful in
terms of policy outcomes and the maintenance of the union-party rela-
tionship than either political exchange or the exploitation of union-party
institutions. The end result of this was a rebalancing of power between
unions and business which, while fairly modest, is still somewhat at
odds with New Labour’s wholehearted embrace of market solutions to
problems in other areas of the economy. The TUC’s political strategy
illustrated how limited policy gains can be achieved in fairly unpropi-
tious circumstances through a narrowly-focused and realistic lobbying
offensive. What are the broader implications of this argument?

Politics matters

In contrast to new institutionalist political economy (which focuses

on the stable institutional constraints on economic action) and much
of the industrial relations literature (which deals with the workings of
industrial bargaining systems), this book has analysed how political and
economic institutions interact with each other to determine whether
organised labour can use politics to shape outcomes affecting it. This

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 Conclusion 

approach accepts that institutions structure action but avoids determin-

ism and provides an alternative (but complementary) perspective to the
growing focus on union revitalisation via grass roots mobilisation (Frege
and Kelly 2003; Heery, Kelly and Waddington 2003).
Resorting to politics is conventionally seen as a sign of unions’ weak-
ness and the lack of any alternative means of defending their interests.
However, this book has argued that political unionism can provide
a route for unions to try to improve their situation when positional
weakness and/or an unwillingness to ‘rock the boat’ for their centre-left
political allies deters them from resorting to direct industrial action.
Crucial for this argument is a consideration of the factors that determine
what kinds of political strategies are feasible in a pluralist, LME political
economy.
I have shown how the widely-discussed ‘presidentialisation’ of British
politics (cf. Foley 2000) reinforces the pluralist character of its political
institutions which tends to marginalise ‘weak’ interest groups such as
unions. However, paradoxically, this structure also provides a poten-
tial route to influence for credible and pragmatic ‘insider’ groups that
are prepared to act strategically in pursuit of their goals. This, and the
residual political and organisational assets which unions are still able to
offer the Labour Party, provided the TUC with an opportunity structure
to remake its relationship with politicians which its leadership had the
good sense to exploit.
The actions of the TUC itself were therefore extremely important,
as individual TUC-affiliated unions, even large and powerful organi-
sations such as the TGWU, Unison and the GMB, were unable to fulfil
this political coordinating role. This conclusion is tacitly acknowl-
edged in the few surveys of the party-union link which exist in the
political science and industrial relations literature on New Labour
in government (Heery 1998; Ludlam 2001; McIlroy 1998, 2000; Shaw
2007). My research tries to advance these discussions through care-
ful consideration of the economic and political constraints on all the
relevant actors (politicians and employers, as well as unions) and
using a methodological framework which focuses on the interaction
between them.
The question of whether the TUC was really able to meaningfully
improve the position of unions through its political activism is a difficult
and contentious one as it rests on various assumptions about the type

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 New Labour Policy, Industrial Relations and the Trade Unions

of industrial relations system possible in a LME. The tendency in many

analyses of New Labour’s industrial relations programme is to compile
a ‘scorecard’ of unions’ gains and losses, while ignoring or underplaying
the constraints faced by Tony Blair’s government in formulating this.
For instance, a recent collection of essays by Daniels and McIlroy places
New Labour’s record firmly in the context of what the authors see as its
obeisance to neo-liberalism. Their verdict is that political unionism was
irrelevant as New Labour ‘based itself on the interests of the corporate elite
as a matter of political and economic strategy’ and that ‘Eliciting conces-
sions from the state and reversing state policy so that it is more favourable
to trade unions means building opposition and engendering resistance to
New Labour, not placating it’ (Daniels and McIlroy 2009: 11).
However, this analysis appears both to accept that centre-left govern-
ments face various constraints imposed by globalisation, while damning
them for adapting their strategies to counter these constraints. Moreover,
returning to the failed outsider strategy of resistance and opposition risks
throwing away the gains made by organised labour in building construc-
tive relationships with employer’s groups and politicians.

Unions matter
This book has also made the argument that political space exists for
trade unions and centre-left governments to engage with each other on
supply-side reform. Unions may still have a role to play in the delivery,
and perhaps even design, of policies for industrial competitiveness, even
if the mechanisms by which cooperative solutions are bargained has
evolved beyond the traditional corporatist framework.
This runs counter to the view prevailing among many scholars over the
last two decades, which is that the post-war party-union alliance faced
oblivion as governments of all stripes became hemmed in programmati-
cally by globalisation and faced irresistible demands to marketise rela-
tions between economic actors (Ferner and Hyman 1994, Kitschelt 1994,
Piazza 2001, Martin and Ross 1999, Scharpf 1991). Although the exhaus-
tion of inflation-fighting policy regimes based on centrally-managed
wage restraint has shrunk the range of assets that unions can offer to
centre-left governments this does not necessarily destroy the entire basis
for union-party interaction. It simply means that unions need to be more
‘creative’ in what they can offer to politicians, and also that the onus is

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 Conclusion 

firmly on unions to convince centre-left governments of the advantages

of cooperating with them.
More recent theoretical and empirical examinations of the records of
European centre-left governments appear to confirm this (Boix 1998,
Garrett 1998, Simoni 2007, Wickham-Jones 2000). Garrett, for example,
argues that globalisation creates uncertainty, providing a rationale for
centre-left parties to trade productivity-raising interventions for redis-
tribution, although his stipulation that this requires an encompassing
labour movement places a question mark over its application to the UK
(1998: 31). Wickham-Jones, on the other hand, notes that New Labour
in the UK successfully crafted labour market policies acceptable to busi-
ness (e.g., ‘Welfare to Work’) that simultaneously tackle social exclu-
sion and shortcomings in human capital. These offer collective goods
to employers (increasing the labour supply and improving skills sets)
and can involve unions in their implementation, thereby once again
making Labour’s closeness to unions an asset rather than a liability
(Wickham-Jones 2000: 14). In addition, their very weakness means that
the absence of encompassing unions in the UK is no longer a barrier
to wage moderation and so this can be exchanged for acceptance by
employers of social-democratic policies which they would otherwise
veto (ibid: 17).
I have argued that the TUC played a critical role in providing politi-
cal coordination for unions. This was necessary in order to convince
New Labour that unions mattered and could be relied upon to play
a constructive part in its productivity agenda in return for limited
action to re-embed them in the UK’s industrial bargaining system.
The role the TUC carved out for organised labour corresponds to
Hyman’s description of UK unions as caught uncomfortably between
‘class’ and ‘market’. The dilemma arising from this is that the focus
on economic goals stemming from the new emphasis on unions’ role
in supporting firms’ competitiveness conflicts with parallel efforts to
transcend their subordination in the UK’s liberal model of capitalism
(Hyman 2001: 6). The TUC’s strategy therefore hinged on convincing
New Labour that weak and demoralised unions would be unable to
play a constructive part in overhauling the economy and so action
should be taken to shore up their position. Arguably, therefore, UK
unions have continued to move in the direction of the ‘market’, while
now being in a slightly better position to stand up for what Hyman
refers to as their ‘class’.

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 New Labour Policy, Industrial Relations and the Trade Unions

Organisation matters
As its subject matter is the political strategy of organised labour the book
also has some relevance for theories of groups and collective action. Since
Olson, at least, political scientists have been interested in the circum-
stances in which groups and individuals will refrain from free riding on
the bargaining efforts of others and instead join together in collective
advancement of their interests (Olson 1965). I have addressed two facets
of this issue: (1) whether and how groups such as unions identify their
interests and unite to pursue them; and (2) whether their lobbying efforts
are successful in influencing policymakers. Olson’s early explanation for
why trade unions exist was that they offer selective, excludable benefits
to members. Also, smaller groups whose interests are more cohesive are
likely to organise themselves more effectively than larger groups. Olson
later extended his analysis to consider the external, macro-effects of
organised interests, arguing that once these became firmly established
they inhibited economic efficiency by behaving irresponsibly (1982: 52).
The UK experience demonstrates that the incentive structures oper-
ating on groups at the micro and macro levels may produce conflict
and instability depending on how they are organised. In the 1970s the
UK’s peculiar structure of strong but fragmented unions prevented
it from developing an effective corporatist bargaining system needed
to secure wage moderation to tackle inflation and resolve distributive
conflicts (Hall 2007: 53). UK unions, according to Crouch, were simply
not ‘encompassing’ enough for corporatism to work. That is, they
were individually too small to internalise the inflationary externalities
of their wage demands while corporatism was being attempted, but
enough of them were still large and powerful enough to mount damag-
ing strikes for at least a decade after corporatism fell apart in the late
1970s (Crouch 1993: 9).
Since then, however, UK unions appear to be operating under a differ-
ent set of incentives. Although unions have recently got larger through
mergers (Ebbinghaus 2003), there is no suggestion that those in the
UK are now sufficiently encompassing to warrant a recentralisation of
bargaining, even if employers were amenable to this. Under New Labour
they were also potentially in a good position to ‘blackmail’ the govern-
ment to grant them policy and wage concessions by threatening strikes,
as the party’s historic closeness to unions makes it politically vulnerable
to industrial unrest. However, as the previous section showed, strike

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 Conclusion 

activity remains low even though union membership has risen slightly.
Moreover, this is despite the rise of the ‘awkward squad’, a new genera-
tion of militant union leaders hostile to New Labour (Murray 2003).
The obvious, but over-defined, reason for this is that unions in
general realised that their best interests lay in avoiding the election of
a Conservative-led government un-sympathetic to their concerns and
have therefore been ‘behaving’ themselves. But this simply begs the
question of why more strikers are not free riding on the good behaviour
of other unions while enjoying the selective benefits accruing to them
from the strikes. One possible answer supplied by this book is that the
TUC provided the public good of political coordination by persuading
the majority of unions of the policy benefits to be gained in not doing
this. This, in turn, may have provided the TUC with a certain amount of
‘credibility’ needed to be accepted as an insider by New Labour.
Olson, in fact, pointed out that peak associations could serve to take a
‘broader view’ of the interests of workers than the narrow interests of the
unions of which they were composed, although it is unlikely at the time
that he had the UK in mind (Olson 1982: 50). This does not explain why
many unions chose to follow the TUC’s lead, however, suggesting that
a more comprehensive theory of collective action should indicate how
individuals or groups acquire preferences which lead them to identify
with other groups. Offe, for example, argues that unions’ interests need
to be redefined away from the traditional rational choice emphasis on
narrow, zero-sum self-interest (1985: 176–179). Once unions in LMEs
realise how weak they are compared to employers, this may provide
incentives to mobilise to defend themselves through either politics or
grass roots organising, even if this means sacrificing some opportunities
to gain excludable benefits for their members.
The viability of this strategy, however, requires that political union-
ism deliver demonstrable benefits to both sides – unions as well as the
government – in order to persuade both sides to stick with political
engagement.

Concluding remarks
The argument of this book has been that trade unions and left parties in
LMEs retain the incentive and the means to cooperate on policy forma-
tion. This does not mean that cooperation will take place or that, where

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 New Labour Policy, Industrial Relations and the Trade Unions

it does, such interaction will necessarily be transformative. But it does

imply that the widely pre-ordained ‘delinkage’ of parties and unions in
advanced democracies is not yet complete or irreversible. This conclu-
sion, especially when coupled with research concerning the resilience of
political exchange in other European economies with more coordinated
labour markets (cf. Simoni 2007), ought to be a largely positive one for
trade unions and parties seeking to preserve the linkage in the face of
diverse political and competitive pressures.
Policy collaboration with unions offers centre-left parties in LMEs two
main benefits. First, they are able to offer an electoral program that is
distinctive from their opponents on the centre-right. How much of an
asset this amounts to depends on whether differences between parties
are viewed as being based on fundamental structural cleavages (Lipset
and Rokkan 1967) or are primarily ideological (Bobbio 1995). However,
union membership continues to be fairly strongly correlated with elec-
toral support for Labour and unions themselves continue to campaign
energetically and effectively for the party.
The second benefit is that unions can potentially assist centre-left
governments in tackling deep-seated rigidities in industry and labour
markets. This is especially so where such issues revolve around coordi-
nation problems affecting firm and industry restructuring, for instance
where unilateral action by management and/or governments is likely
to stoke unrest. Unions are in a good position to advice on the social
and political effect of labour market policies. There are even signs of the
resurgence of agreements on wage restraint negotiated at the firm and
national levels, both in the public and in private sectors. Although these
arrangements fall well short of the ‘social pacts’ in operation in many
coordinated market economies (CMEs), they are nevertheless vastly
better than the effective marginalisation on offer under centre-right
governments.
On the other hand, the basis for such collaboration remains precarious
because of the absence of robust institutions committing governments
and the social partners to collaborative outcomes. Political unionism in
LMEs remains a fraught process with uncertain outcomes. For political
parties, the risk remains that renewed militancy by unions defecting from
the uneasy status quo brokered by peak labour could shred its reputation
with centrist voters; for the unions, that business lobbyists increasingly
‘capture’ policymakers in the manner of the United States, rebuffing the
concessions offered by organised labour. Peak union associations such as

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 Conclusion 

the TUC and others therefore need to work hard to achieve and maintain
‘credibility’ with governments and employers’ organisations. They, in
turn, need to offer a genuine role to peak labour if these are to maintain
credibility themselves in the eyes of their affiliated unions. The alterna-
tive for labour movements is to surrender to the logic of uncoordinated
capitalism.

DOI: 10.1057/9781137495754.0008
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 Index
AEEU (Amalgamated
Engineering and Electrical
Union), 55, 56, 59, 68, 85,
119
Armstrong, Hilary, 61
AUEW (Amalgamated Union
of Engineering Workers),
40
Bad Godesburg conference, 54
Bain, George, 90
Barber, Brendan, 119
Beckett, Margaret, 51, 80–1
Bickerstaffe, Rodney, 62
Blair, Tony, 1, 14, 17, 19, 23, 31,
33, 34, 43, 48, 49, 54, 55, 61,
65–7, 73, 74, 78–83, 107, 134
Clause 4, 61–2, 68
Blunkett, David, 80
Brown, Gordon, 17, 62, 87
Byers, Stephen, 81, 110, 117
Campbell, Alistair, 5, 86
CBI (Confederation of British
Industry), 13, 17, 36, 39, 67,
72–4, 77–8, 80–3, 85, 90–1,
93, 95–9, 105, 107–12, 119,
127–8
Central Arbitration Committee
(CAC), 97
Clarke, Charles, 93
Clause 4
battle over abolition of, 54–6
Labour’s constitution, 48
DOI: 10.1057/9781137495754.0010
TUC stance on, 68
union strategy for abolition,
61–2
CMEs (coordinated market
economies), 25–30, 42,
43, 138
Coats, David, 87
Conservative Party, 9, 12,15, 28,
36, 38, 39, 52, 57–8, 79, 85,
86, 93, 107, 108, 114, 122
constitutional reform, Labour
Party, 49–56
Contact Group, 65–6
Contentious Alliance (Minkin),
31
corporatism
failure of UK, 7
retreat from, 38–40
rise and fall of UK, 35–8
Cridland, John, 72, 98
Cruddas, Jon, 79, 96
Davies, Liz, 121
Donovan Commission, 36
DTI (Department of Trade and
Industry), 79, 80, 81, 105,
108, 109
Early Day Motion, 83
economic policy, New Labour,
74–7
employment legislation, New
Labour’s second term,
106–12

 Index
Employment Protection Act of 1975, 92
Employment Relations Act of 1999, 5,
91, 105, 107, 110, 113
Employment Relations Bill of 2003,
98, 110
EMU (European Economic and
Monetary Union), 68, 115
ESM (European Social Model), 112
ETUC (European Trade Union
Confederation), 107
European Parliamentary Labour Party
Liaison Committee, 107
European Social Chapter, 5, 20n2, 72,
82, 107, 108
European Social Charter of
Fundamental Rights, 93
Exchange Rate Mechanism, 74
Fairness at Work, 81, 91, 92–99, 115, 117
finance/organization, union-party
interaction, 15–16
flexibility, 75
foreign direct investment (FDI), 74
General Election Manifesto, 4–5, 21n3,
57, 84, 104, 125
globalisation, international political
economy, 24–5
GMB, 51–4, 60, 67, 80, 133
Gould, Philip, 50, 57
Government Communications
Headquarters (GCHQ), 72
Harman, Harriet, 87, 88
Heath, Ted, 36, 38, 39
Hewitt, Patricia, 111
Hill, David, 50
homo economicus and homo
sociologicus, 32–5
HRM (Human Resources
Management), 115–16
Hutton, Will, 116
ILO (International Labour
Organization), 84, 107, 110
industrial democracy, 76
industrial relations
determinism vs. policy autonomy,
23–30
New Labour, 5, 23–30, 74–7
organisation of, 35–40
Industrial Relations Act 1971, 92
inflation, Labour Party, 58
interest group pluralism, 44
interest groups, 13, 32, 43, 72, 75, 83, 133
IPE (International Political Economy),
24–5
Irvine, Derry, 94
Jarvis, Peter, 90
Jones, Digby, 128
Jones, Jack, 31, 36
JPC (Joint Policy Committee), 63
Keynesian demand management, 39,
75, 122
Kinnock, Neil, 47, 52, 60, 62, 73, 93
Labour Party
battle over Clause 4 abolition, 54–6
constitutional reform, 49–56
institutional ties with unions, 51–4
nationalisation and privatisation, 58
policymaking in, 62–6
preferences and strategies with
unions, 56–62
reforms to party structure, 46–7
strategy, 57–9
liberal market economies (LMEs), 2,
11–18, 23, 75, 113, 132
Lijphart, Arend, 42, 43
Low Pay Commission (LPC), 82, 89–91
Low Pay Forum (LPF), 84
Maastricht Treaty, 108
McCartney, Ian, 80, 81, 87, 88, 89, 96,
110, 117
Major, John, 78
Mandelson, Peter, 81
Manpower Services Commission
(MSC), 40
Marxism, 54
DOI: 10.1057/9781137495754.0010

Meacher, Michael, 93
Members of Parliament (MPs) and
Labour policymaking, 62–63
Miners’ Strike, 50
Monks, John, 5, 13, 66, 68, 77, 79, 80,
83, 89, 93, 84, 95, 106, 109
Morris, Bill, 62, 80, 96
MSF (Manufacturing Science Finance),
119
nationalization, Labour Party, 58
National Skills Alliance, 17
NEA (National Economic
Assessment), 65, 85
NEC (National Executive Committee),
31, 50, 51, 52, 63, 64, 119, 120
NEDC (National Economic
Development Council), 40, 77
New Growth Theory, 16
New Labour, 1, 134, 135
Blair, Tony, 2–3, 49
Business Manifesto, 95
domestic disputes, 110–12
economic agenda, 74–7
employment legislation in second
term, 106–12
Fairness at Work, 91, 92–9
industrial relations, 5, 23–30, 74–7
international political economy,
24–5
ministers and departments, 80–2
options on the party-union link,
14–18
organised labour and, 136–7
parliament, 82–3
party leadership, 78–80
policy collaboration with unions,
16–18
policymaking, 30–5, 77–83
political exchange vs. political
unionism, 30–5
prime minister, 78–80
rational choice views of, 33–4
social partnership, 112–18
union responses to second term
agenda, 118–21
DOI: 10.1057/9781137495754.0010
Index 
VoC (varieties of capitalism), 25–30
Welfare to Work, 43
New Realism, 9, 77
New Unionism, 10, 17, 67, 77, 113
NMW (National Minimum Wage), 5,
72, 73, 80, 83–91, 104, 115, 128
Norris, Geoffrey, 79
NPF (National Policy Forum), 34,
62–6, 107, 120, 124
NUPE (National Union of Public
Employees), 84, 85
OECD (Organisation for Economic
Co-operation and Development),
3
OMOV (one member one vote), 48, 68
union strategy for abolition, 59–61
union voting on, 54
OPEC (Organization of the Petroleum
Exporting Countries), 36
Page, Tim, 87
parliament, New Labour, 82–3
Parliamentary Labour Party (PLP), 63,
78, 83
partnership into power, 62–6, 105
Part Time Workers Regulations, 108
party institutions, union-party
interaction, 8, 9
People at Work policy group, 63, 93
policy collaboration, union-party
interaction, 16–18
policymaking
Labour Party, 62–6
New Labour, 30–5, 77–83
Policy Review Groups (PRGs), 62–3
political ballast, union-party
interaction, 15
political exchange
union-party interaction, 7, 9
vs. political unionism, 30–5
Warwick agreements, 121–8
political parties, voters’ attitudes,
127
political power, organisation of, 40–4
political systems, 4
 Index
political unionism, 47
political exchange vs., 30–5
union-party interaction, 8, 9
Prescott, John, 81, 87, 97
Private Finance Initiative (PFI), 111
privatization, Labour Party, 58
Qualified Majority Voting (QMV), 108
rational choice, 33–4
Russell, Meg, 8
Sawyer, Tom, 63
Scottish Labour Party, 13
Scottish Parliament, 13
Shaw, Eric, 30
Smith, John, 47, 51, 52, 54, 61, 60, 73, 85
Social Chapter, 107, 108
Social Contract, 37, 38, 84
social-democratic party, Labour party,
46
social partnership, 10, 13, 112–18
Spiers, Bill, 68
Temporary Agency Workers Directive,
109
TGWU (Transport and General
Workers’ Union), 15, 31, 36, 38, 40,
51–4, 56, 60–2, 65–8, 87–8, 91, 93,
96, 118, 119–20, 127, 133
Thatcher, Margaret, 9, 16, 37–40, 43,
77, 78
Trade Union Intergroup, 107
trade unions, see unions
Trade Unions for a Labour Victory, 15
TUC (Trades Union Congress), 132, 133
aims and strategies, 72–4
domestic disputes, 110–12
in Europe, 108–10
Fairness at Work, 91, 92–9
importance of unions, 134–5
labour market policy, 13
Labour Party and, 48–9
responding to New Labour agenda,
118–21
social partnership, 112–18
strategy and organisation, 66–9
TUC–Labour Party Liaison
Committee, 15, 51, 65, 86, 126
TULO (Trade Union–Labour Party
Liaison Organisation), 15, 106,
119–21, 124–8
TUPE (Transfer of Undertaking
Protection of Employment),
106–7, 111, 125
Turner, Adair, 77, 85–6
UK (United Kingdom)
membership of trade unions, 3–4
organisation of political power, 40–4
rise and fall of corporatism, 35–8
union-party interaction, 6, 8–11
union-party interaction, 6–11, 14,
105–6
unions
Clause 4 abolition, 61–2
importance of, 134–5
Labour Party Conference in 1994, 53
liberal market economies (LMEs),
11–18
lobbying by, 64–6
OMOV strategy, 59–61
organised labour, 136–7
preferences and strategies with
Labour Party, 56–62
recognition, 91–9
UK membership, 3–4
voters’ attitudes, 127
Unison, 52, 53, 55–6, 62, 66–7, 89, 91,
96, 114, 118, 119, 124
VoC (Varieties of Capitalism), 20, 22,
25–30
Wages Councils, 84–5
Warwick agreements, 121–8
Willis, Norman, 85
Winter of Discontent, 50
Woodley, Tony, 120
WTO (World Trade Organisation), 107
DOI: 10.1057/9781137495754.0010