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By April 1968, relations between the Labour Party and the unions were strained. The Secretary for Employment and Productivity, Barbara Castle, wanted unions to move away from the defence of sectional interests and towards corporate responsibility for national economic and social development. She developed her ideas in the 1969 White Paper 'In place of strife'. The document argued for the replacement of voluntary collective bargaining with vigorous state intervention and a formal system of industrial relations. It proposed the creation of the Commission on Industrial Relations (CIR), giving it legal powers to facilitate improved industrial relations and regulate bargaining.
Despite much opposition from within the Labour Party and the unions, Castle pressed ahead with an Industrial Relations Bill. It gave the Secretary powers to enforce settlements in inter-union disputes and unofficial disputes, and enforce penalties for non-compliance. The Trades Union Congress (TUC) opposed the bill. The General Secretary, Vic Feather, attempted to negotiate with Castle and Wilson, but the TUC was unwilling to discuss unofficial disputes. By mid-June it was apparent that Castle's legislation was not supported by the Cabinet or within the parliamentary party.
In an atmosphere of crisis, Wilson threatened resignation. On 19 June, the union leaders, Jack Jones and Hugh Scanlon, offered Wilson a way out through a 'binding and solemn' agreement that the TUC would attempt to resolve unofficial disputes. Subsequently, the Cabinet was unwilling to allow inclusion of sanctions against the unions. In April 1970, Castle presented a watered down Industrial Relations Bill to parliament, but Labour was defeated in a general election before the second reading.
Much of Edward Heath's industrial relations policy was unacceptable to the Trades Union Congress (TUC) leadership. A period of severe industrial unrest began in September 1970. Local authority manual workers wanted a £30 minimum weekly wage. A Committee of Inquiry recommended a 14.5 per cent increase, but the government considered it to be too high. In the winter that followed, an electricity power workers strike caused the Cabinet to declare a national emergency.
Meanwhile, the government pressed ahead with an Industrial Relations Bill under the supervision of Robert Carr. In order to regulate rules and practices in an Industrial Relations Court, it provided for voluntary membership of a Register of Trade Unions and Employers' Associations. Collective agreements would be legally enforceable and employers would be obliged to recognise unions where a majority of workers wanted representation. Various categories of strikes, including those involving inter-union disputes, would lose legal immunity. The act was weakened, however, because unions and associations were not obliged to register (although they lost their legal immunity if they did not). Also, agreements were only legally enforceable if this was included in the terms, so accordingly the act depended on the cooperation rather than the action of government.
In February 1971, 140,000 people attended a rally held by the Trades Union Congress (TUC) in Trafalgar Square to protest against the act. Later in the year, although the TUC's membership voted that all registered unions should deregister, several important unions did not. In January 1972, a miners' strike began and fatally undermined the government's industrial relations policy. It reached a climax at the Saltley coal depot in Birmingham in February. Under the leadership of Arthur Scargill, miners forced police to suspend deliveries to the depot. By the middle of 1972, relative calm had been restored and the government, the TUC and the CBI discussed industrial consensus again. Edward Heath moved towards conciliation but was not prepared to suspend the Industrial Relations Act nor the rent increases under the Housing Finance Act of 1972. The tripartite negotiations failed by November 1972.
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