Members of Labour’s frontbench have recently fallen over themselves to acclaim Margaret Thatcher. Hot on the heels of Rachel Reeves feting the Iron Lady’s determination to reverse Britain’s decline, David Lammy lauded the woman who defeated his party three times as a ‘visionary leader’. But like Mark Antony’s attitude to Julius Caesar, Reeves and Lammy come to bury Thatcher rather than to praise her.

This appropriation of a Conservative icon like Thatcher is highly mischievous

Labour’s shadow ministers invoke the ‘Iron Lady’ because they know a certain kind of voter, one Labour needs to help it win power, still goes all of a quiver at the mere mention of her name. So, while they loudly applaud Thatcher’s radical ambition – to suggest Starmer’s party shares it – they quietly distance themselves from how she sought to realise it.

This appropriation of a Conservative icon is highly mischievous because a Starmer government will reverse key aspects of Thatcher’s free-market legacy to revive the soft corporatism of Jim Callaghan, the Labour leader she defeated in 1979. In fact, despite recent rhetoric, if you want an idea of what Labour in power will do, we should focus on Callaghan’s time as prime minister and not Thatcher’s.

There is a good reason why no leading Labour figure will ever celebrate Callaghan. Popular mythology has it Thatcher was The Woman Who Saved Britain and it was Callaghan’s failures from which she rescued the country. According to this tale, his time in Number 10 inevitably culminated in the dead remaining unburied during the 1978-9 Winter of Discontent when heartless union barons ruled Britain. Reflecting this narrative, in 2019 YouGov discovered that while Thatcher is seen as the greatest of all post-war prime ministers Callaghan is ranked as one of the worst. And yet, up to the summer of 1978 his government had real hopes of retaining office.

Labour was elected in 1974 facing in what was – until now – the worst economic inheritance since the Second World War. Edward Heath handed over to Harold Wilson a country beset by strikes, inflation, unemployment, and a recession. Elected on a manifesto promising an ‘irreversible shift in the balance of power and wealth in favour of working people’, the Labour cabinet soon abandoned it. Instead, ministers prioritised reducing inflation, which meant minimising wage rises and curtailing public spending, while fostering investment and growth in the private sector. Sounds familiar?

After Wilson stepped down in 1976, Callaghan inherited these priorities and stuck firmly to them, glumly telling MPs just after they elected him leader, ‘There are no soft options facing Britain’. His strategy was based on a Social Contract with the Trades Union Congress (TUC) that saw unions voluntarily limit wage claims in return for greater legal rights and other concessions. Through a National Enterprise Board, the government also invested in various companies hoping to encourage them to improve their performance or prevent them from failing.

After two years of this soft corporatism most economic indicators showed significant improvement. By mid-1978, those close to the prime minister believed that should he successfully negotiate the forthcoming election an even sunnier future lay in store, one financed by North Sea oil. But Callaghan decided the opinion polls could not guarantee him a Commons majority and calculated his prospects would improve if the TUC agreed to a further limit on wage increases of no more than 5 per cent. This was far too low for most workers and union leaders were unable to keep their members in line, which led to a series of disputes especially in the public sector, we now collectively call the Winter of Discontent. These shattered Callaghan’s authority and gave Thatcher grounds for claiming his strategy was busted and it was time for a dramatic reset. Yet had he gone to the polls in the autumn or imposed a less stringent wage limit, Callaghan might well have denied Thatcher her time in office.

Starmer, who a few months ago also somewhat disingenuously praised Thatcher, will not take Britain back to the 1970s; but the state will return to an influence unseen since 1979. Planning will again be an important feature as will direct intervention in markets, notably in the form of the government-owned Great British Energy. As the Labour leader asserted last year: government can and should ‘shape markets rather than serve them’. Labour’s New Deal for Working People will additionally give employees and unions some rights and powers lost to them thanks to Thatcher and her Conservative successors.

Starmer hopes these initiatives will promote the growth needed to finance the rebuilding of the public services, which is vital if Labour is to win a second term. Echoing Callaghan’s soft corporatism, Starmer will however want to avoid its fate. The price of slowly improving the economy was that Callaghan lost Labour to the hard left due to party activists’ frustration with his lack of radicalism. In 1978, the young Jeremy Corbyn was applauded by conference delegates after accusing the prime minister of abandoning socialism and even echoing policies associated with the fascist National Front. In heated confrontations towards the end of his reign, Callaghan was also wont to ask rebellious Tribune MPs to which party did they belong, their unspoken answer being: not his.

But the Labour leader’s basic failure was to demand too much of the unions and working people in general, and to try and squeeze their living standards just a bit more; the upshot was the Winter of Discontent. Whether Starmer possesses the political skills to avoid these pitfalls, ones his infamously wily and well-connected predecessor ultimately lacked, will decide the destiny of his own time in Number 10.