1978: Labour faces vote of confidence

The Prime Minister, James Callaghan, has challenged MPs to decide if his government should remain in power or face the people in an early general election.

Mr Callaghan called the ballot after a humiliating double defeat in the Commons yesterday left the government's sanctions against private sector firms in tatters.

The House carried by 285 votes to 279 a Conservative amendment refusing to support the government's "arbitrary use of economic sanctions" against firms that have "negotiated increases beyond a rigid limit which Parliament has not agreed".

A second motion was carried by 285 votes to 283 opposing sanctions on companies breaking a 5% pay rise limit.

The prime minister responded by throwing down the gauntlet to the Opposition led by Margaret Thatcher.

Evening vote

The motion read: "That this House expresses its confidence in Her Majesty's Government and in its determination to strengthen the national economy, control inflation, reduce unemployment and secure social justice."

MPs will vote tonight in the latest stage in a week of dramatic events in the House of Commons.

The feeling in Whitehall is Mr Callaghan is expected to survive this vote and secure his government until a general election which is likely to be held next spring.

But an unexpected loss would mean a general election in January forcing a political campaign rally launch immediately after Christmas.

'Special powers'

Mr Callaghan is expected to use tonight's ballot as a forum from which to give his response to yesterday's defeat.

He is expected to abandon using "special powers" in the private sector as a measure to counter inflation where settlements breach his pay policy.

The defeat is likely to place the government under greater pressure from the unions to prevent discrimination between public and private employees.

Whitehall's blacklist of offending companies that have broken the 5% pay limit set by the government includes 222 companies of which Ford is the most important.

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