Social Contract (Britain)

The Social Contract was a policy by the Labour government of Harold Wilson in 1970s Britain.

In return for the repeal of 1971 Industrial Relations Act, food subsides and a freeze on rent increase, the Trade Union Congress would be able to persuade its members to cooperate in a programme of voluntary wage restraint.

The Social Contract aimed to avoid the difficulty of former incomes policies, allowing the employers, who in nationalised industries were the state, to treat individual groups separately in wage negotiations. There would be 12-month interval between wage settlements to prevent repeated wage demands and allow the State some level of predictability in future wage expenses, and negotiated increases in wages should be confined either to compensating for inflation since the last settlement or for anticipated future price increases before the next settlement.

It was to be the foundation on which the Chancellor Denis Healey could introduce a stronger budget in order to control the high inflation and growing government spending of the era, which Edward Heath's previous government had failed to do.