Shirley Williams: He was the embodiment of democratic socialism

Jim Callaghan rose above what he regarded as an incomplete education ('And I haven't even got a degree,' he famously quipped on entering No 10) to become a Chancellor who survived devaluation, a Home Secretary who was conservative but never reactionary, and a fine Prime Minister ultimately brought down by the Winter of Discontent. And, above all, a man who did not preach family values, but lived them

Jim Callaghan wasthe embodiment of British democratic socialism. He was, as Peter Hennessy memorably put it, "a man of 1945". To become an adult in 1945 meant to be brought up during the Depression, experiencing at first or second-hand soul-destroying unemployment and often miserable poverty. It meant, for many, some kind of wartime service. It meant, too, the hopeful new dawn that followed victory, the inspiration of a new beginning in an old country.

Jim Callaghan wasthe embodiment of British democratic socialism. He was, as Peter Hennessy memorably put it, "a man of 1945". To become an adult in 1945 meant to be brought up during the Depression, experiencing at first or second-hand soul-destroying unemployment and often miserable poverty. It meant, for many, some kind of wartime service. It meant, too, the hopeful new dawn that followed victory, the inspiration of a new beginning in an old country.

These were Jim Callaghan's experiences, and the experiences of his generation. For many of his contem- poraries, democratic socialism spelled the difference between the world of their childhood and the world of their adulthood.

Jim took his first step out of privation by winning a place in Portsmouth Northern Secondary School, his school fees of a guinea a term being paid by the Ministry of Pensions. Although his widowed mother could not consider sending him on to university, grammar school enabled him to take the Oxford Senior Certificate, and after that to enter public service as a clerical civil servant. In doing so, he escaped the grinding unemployment of many other young men and women, for all that he was poorly paid and had to live in gloomy lodgings far from home.

The lack of a higher education haunted him all his life. A voracious reader, he longed to learn more about literature, history, science. He felt overshadowed by all the bright academics who clustered into post-war Labour politics, even by the Oxbridge graduates whose articulacy so often outdistanced their judgment and common sense. Callaghan could see that this was so, yet still felt a lesser man for never having been there.

Years later, he was to visit regularly a seminar of economists at Nuffield College set up to advise him as Shadow Chancellor of the Exchequer. He never felt embarrassed to admit his paucity of theoretical economics, nor was he too proud to try to learn. On the day in 1976 he was elected leader of the party, and hence Prime Minister, by his parliamentary colleagues, his response to the announcement of victory was to say, half under his breath, "And I haven't even got a degree!"

The rigours and routines of the Inland Revenue office where he worked were soon eased by Jim's enthusiasm for what was to become the second love of his life, the trade union movement.

Soon after starting work, he joined the Association of the Officers of Taxes, later to become the Inland Revenue Staff Federation (IRSF). His keenness and ability commended him to Douglas Houghton, the union's demanding and sometimes waspish organising secretary, whose own career was to parallel Callaghan's as he moved on to ministerial office.

In the union, the young Callaghan proved to be something of a firebrand, protesting against poor levels of pay and the absence of prospects of promotion for young clerks. But his protests were always within the organisation and not outside it. That was characteristic. Critic he might be, but his institutional loyalties were strong. They remained so, even in the most trying circumstances. The trade unions had given him what he wanted, to belong, to be part of a family. Even as Prime Minister, he could never quite believe they might betray him.

Fortunately there were to be other sources of happiness in his life. Chief among them was his wife, Audrey, whom he met in Maidstone, where she lived, when both he and she were teenagers. The pressures and preoccupations of politics are such that many MPs marginalise their partners, or take them for granted. Not so Jim Callaghan. His wife became more and more important to him, someone he depended upon, consulted, cherished.

Though he rarely talked in public about family values, he lived them. He was sometimes uneasy with the devotion of Labour's progressives to the permissive society. He admired and supported his wife's active involvement in child health issues, in particular her association with Great Ormond Street Children's Hospital. He was proud of his remarkable daughter, Margaret, who became Leader of the House of Lords.

But he was no feminist. As a good politician, he knew that modern governments and Cabinets had to have women ministers. I was one of them, and we got on well, not least because I was nearly a generation his junior. But he was not exactly looking out for chances to promote women. His relations with Barbara Castle were famously bad. When, on becoming Prime Minister, he dropped her from the Cabinet, as was widely anticipated in parliamentary circles, the reason he proffered was her age. "We need to make room for new blood", he explained. Barbara was far from mollified, pointing out that, in that case, he might like to start with himself.

Jim's reservations about the permissive society extended to education. A man who regarded education as near sacrosanct, he was infuriated by the evidence of slack teaching and indiscipline in many schools, especially in London. Teachers had great discretion in how and what they taught. Undoubtedly some abused that freedom. Jim's objection was not to comprehensive schools as such. In 1976 most of them were only a few years old, and were still coping with problems of reorganisation and transition. His objection was to the predominant fashion in education departments and teacher training colleges for a permissive school regime, "learning by doing" rather than learning by being taught. Among his motives was a strong sense that boys and girls from poorer homes would simply miss the one opportunity they had to advance and to realise their potential.

Yet it would not be right to classify Jim as some sort of reactionary. As a young MP in Attlee's first government, he was highly critical of the terms of the American loan. As an opposition spokesman on the colonies in the 1950s, he espoused liberation movements especially in Africa, and became close to many of those who led them. He could count such legendary figures as Julius Nyerere and Kenneth Kaunda among his friends.

By this time, he was becoming in great demand as a speaker, especially to student societies. I recall inviting him to speak to the Oxford University Labour Club, of which I was chairman, and making toast for him before the meeting on my college gas fire. It was an experience he never forgot, and nor did I, since I had never before met a minister so approachable, so at ease, so lacking in pomposity. Nor did time and office change him; the easy manner and accessibility remained.

No leading Labour politician in the post-war decades could escape the repeated cycle of economic crises. Every policy and every decision had to be considered in that context. The country had substantial debts. The commitments Britain had inherited from its history of empire and of global responsibilities were inconsistent with its ability to bear them. Growth and productivity were poor, near the bottom end of the spectrum of industrial economies. The country's infrastructure was ageing, and had been inadequately maintained during the war and immediate post-war years. Yet at the same time, Labour had engendered expectations of good public services, the elimination of poverty, a better life for everyone.

The Attlee government of 1945 to 1950, building on the earlier achievements of the war-time coalition, pressed ahead with its democratic socialist programme: social security from cradle to grave, a national health service free at the point of use, four years' secondary education for all, prefabricated houses to meet the immediate and desperate need, and independence for the millions living in India, Pakistan and Ceylon (now Sri Lanka).

To do so, the government had to borrow substantial amounts from the United States, and to impose a policy of austerity at home. It encountered, as all subsequent Labour governments were to do, suspicion about its financial and economic policies, and suspicion that "tax and spend" was likely to be its guiding principle. Because the UK was so dependent on the goodwill of the US, not only for bilateral lending but also because of its dominant influence on the International Monetary Fund and the World Bank, the room for manoeuvre of any Labour government was heavily constrained. It was a fact the left so disliked that its adherents simply refused to recognise it.

Jim Callaghan became Chancellor of the Exchequer in 1964, having been Shadow Chancellor from November 1961. He had been appointed by Hugh Gaitskell who distrusted Harold Wilson, the obvious candidate for the job. As Shadow Chancellor, Callaghan attacked the Conservatives' stop-and-go policies, a perpetual jolting of the economy, and promised a steadier rate of growth. In this he was bolstered by Labour's commitment to creating a new ministry, the Department of Economic Affairs, which was supposed to devote itself to planning and long-term investment. In practice, it became a competitor and goad to the Treasury. Lines of responsibility were blurred, and that was not helped by the ebullient and ambitious George Brown, its new Secretary of State.

Callaghan found himself in a position all too familiar to Labour Chancellors, inheritor of a big public sector borrowing requirement, a nasty balance of payments deficit and of course pressure on sterling. The remedies proposed were to be much the same, too: cuts in public expenditure, reduction in borrowing, and if these proved insufficient, inevitably higher taxes. For the Chancellor, committed to advancing the Government's modernisation and reform programme, the prospect must have been gloomy indeed.

Yet the two dramatic responses that might have changed that prospect, devaluation and a massive reduction in the scale of Britain's overseas commitments, were both ruled out by the Prime Minister himself, who had the support of his Chancellor of the Exchequer.

Devaluation spelled, for Harold Wilson, not only a retreat from Britain's world role, but also loss of trust in a new Labour government elected after 13 years of Conservative administrations. Politically, it would be a terrible beginning to a Government with a majority of only four. Jim Callaghan agreed, and added another argument, the devastating effect of devaluation on developing countries holding sterling balances, many of whose leaders he knew personally. They would feel they had been betrayed.

So for three miserable years, Jim Callaghan tried to make an impossible policy work. He pleaded for help from the Americans, who wanted Britain to maintain her commitments east of Suez. He pleaded with the trades unions to co-operate in avoiding industrial disputes, like the seamen's strike of 1966 which severely damaged exports. But in the end, devaluation proved unavoidable. It was accompanied by the rolling back of many of Britain's overseas commitments. The country would never again be able to aspire to the status of a world power.

For Jim Callaghan, the former Naval officer, whose father before him had served in the Royal Navy, the decision was a bitter one. His political career was in the balance, too. Yet somehow he survived, too able a political figure to be dispensed with. The state of the economy was to stalk Callaghan's political career relentlessly. The announcement of the 1967 devaluation had been the worst day of his life. Nearly 10 years later, he was again faced with a desperate economic situation and an overvalued pound.

In 1973, oil prices had been massively increased by Opec. In consequence recession in the economy coincided with inflation, a state of affairs later known as "stagflation". Public expenditure, already increased in line with the Government's social contract with the trades unions, inevitably accounted for a rising proportion of national income, and this in turn led to concerns in the world markets, once again perceiving the government as profligate. The fragile pound came under pressure. For Jim, it must have been a recurring nightmare.

Jim Callaghan and his Chancellor, Denis Healey, tried desperately to satisfy the financial markets short of borrowing from the IMF. They offered cuts of £1bn in public expenditure, a surcharge on employers' national insurance, cash limits for the future. But it was not enough. The markets, which meant in the end the US Treasury, were determined to subject the Labour government to its mercies.

Jim faced the prospect of his Cabinet disintegrating over the issue. So he embarked on the most intensive and exhaustive debate of any Cabinet of modern times. No one could complain that he or she had not been heard. Jim's chairmanship was brilliant. In the end, he not only held his Cabinet together, he got them to agree on a compromise which, after some tense stand-offs, the IMF accepted.

The outcome of the IMF cuts, £1bn in two succeeding years, proved much less damaging than expected. The switch in market confidence was dramatic. The market's lack of confidence in a Labour government had dogged its leaders for years, but won neither the understanding nor the sympathy of its supporters. Jim had provided a dazzling example of cabinet government at its best; but he had done nothing to satisfy the wider Labour movement.

In the Home Office, his second great department of state, Callaghan found himself in an environment that suited him better. He had no strong desire to follow the radical approach of his predecessor, Roy Jenkins, but he did manage to get a race relations Bill on the statute book. He was convinced that the racial tension built up by substantial inward immigration from the Commonwealth, and inflamed by the speeches of Enoch Powell, could only be contained by strict controls over non-white immigration.

He was not a racialist. His record as spokesman on the colonies attested to that. But he was a politician, and he resonated to public unease. Already thousands of East African Asians were fleeing Kenya, threatened by President Kenyatta's programme of Africanisation. Their right to settle in Britain had been guaranteed under the independence agreement. There was much fear in Britain that thousands of East African Asians might suddenly arrive.

Jim Callaghan rushed a Commonwealth Immigration Bill on to the statute book within a week, removing the right of East African Asians to settle in Britain. The disgust of many members of his own party at this was to damage Jim's reputation for years to come.

Yet he was far from being a reactionary Home Secretary. In the 1960s a new generation of students in the US was inspired by the civil rights movement in the South. A few years later, they were inflamed by the war in Vietnam. Their anger spread to Europe. The anti-Vietnam demonstrations culminated in a huge protest directed at the American Embassy in October 1968. The climate was one of fear, fear not just of disorder but of anarchy. Shopkeepers boarded up their shops, and the capital was abandoned by tourists and citizens alike.

In the embattled Home Office,there was a kind of war room, with closed-circuit television cameras showing each section of the demonstration, so that the Commissioner of the Metropolitan Police, Sir Robert Marks, and the Home Secretary could make decisions on how to contain serious trouble instantaneously. I had asked to be there, as Minister of State for Higher Education. "They are my people", I told Jim. It was a sunny morning, and I remember him saying he was going to walk down to the Embankment to see how the organisation of the demonstration was going. A few minutes later, amazed organisers saw the Home Secretary attended only by one senior policeman and a few hangers-on like me, saying it was a lovely day for a demonstration and he hoped there wouldn't be any trouble.

There was some, of course. A group of marchers broke away from the main body and tried to attack the American Embassy. Jim, back in the war room, consulted the Metropolitan Police Commissioner. They decided that the ranks of arm-linked police officers, backed up by some mounted policemen, could hold the line. There were to be no water cannon, no jeeps. "You see," Jim told me, "each demonstration begins where the last one left off. If you escalate the use of force, so will they." It was advice I haven't forgotten.

Jim needed both courage and calmness in Northern Ireland, his other major Home Office responsibility. In dealing with the civil rights marches there and in understanding the resentment of the Catholic minority he won their trust. He never hesitated to go to the province, to the streets of Belfast and Londonderry. He sent troops to protect the Catholics and disbanded the detested "B Specials". Yet he held the respect of the Unionists for his straight dealing and blunt manner. He had no truck with the bigots and extremists on either side. Northern Ireland restored Jim's reputation.

The Heath government of 1970-74 was inevitably driven towards an incomes policy. New indications of union intransigence surfaced with the long-drawn-out miners' strike. Heath's government tried to bring in legislation to curb trade union power, but the instruments he might have used had been rejected by the Labour government in 1969. Could the reforms proposed have averted the winter of discontent and what followed: the savage weakening of the trades unions that occurred in the early 1980s under Mrs Thatcher's government, with unemployment and company closures as the effective instruments? Possibly.

But the winter of discontent sealed his fate, even though in the campaign itself, he managed to narrow the gap with Mrs Thatcher's Conservatives in a remarkable way. He had been a good Prime Minister, and the people knew it. He was also to become the very model of a former Prime Minister, never criticising from the sidelines, rarely even commenting publicly on his successors, busying himself with international matters.

Now, as in the 1970s, the New Labour government finds itself buffeted by events, no longer in control, vilified by sections of the media just as Jim Callaghan was.

Tony Blair is a Christian Democrat rather than a Social Democrat, much more a managerial figure than original labour, as Callaghan described himself. The world itself is different. Perhaps, however, New Labour will learn from its own troubles to look a bit more sympathetically at its predecessors, the men and women who tried to realise the promise of democratic socialism, the men and women moulded by the peaceful revolution of 1945.

Baroness Williams of Crosby was Secretary of State for Education and Science from 1976 to 1979