Edmund Dell, who served as a minister under both Wilson and Callaghan, has written that 'the Labour Government elected in 1974 faced the most difficult economic and political baptism of any postwar British administration except that of Attlee' [150, p. vii]. Partly because of the rise in oil prices, partly as a consequence of the credit boom unwisely introduced by the Conservative Chancellor, Anthony Barber, in 1972-73, the economic situation inherited by Labour was characterised by negative growth, rising unemployment, mounting inflation and an increasing balance of payments deficit. Denis Healey, Chancellor throughout 1974-79, attempted to deal with the situation by mobilising Labour's 'social contract' with the trade unions, which restricted wage inflation, and by international borrowing on a massive scale. He was reluctant to implement public expenditure cuts until the prolonged sterling crisis of March-December 1976 necessitated them, as part of the conditions for an IMF loan. Thereafter, Healey was successful in restraining public expenditure and public sector borrowing, and curbing inflation - which had peaked at 30 per cent in 1975. Nevertheless, this was at the price of still higher unemployment, the breakdown of the alliance with the trade unions, and

the alienation of the Labour left. The 1978-79 'winter of discontent' heralded the collapse of Callaghan's government [152].