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Initially, the government was unwilling to assume an interventionist role in labour matters. A National Joint Advisory Committee (NJAC) consisting of trade union and employers' representatives was set up to advise the Conservative Minister of Labour, Ernest Brown. Strained relations between unions and government characterised the interwar period and continued into the early months of the 'phoney war'. When the government requested that the Trades Union Congress (TUC) support the war effort, the General Council (TUC) requested changes to the hated Trade Disputes and Trade Union Act 1927. The Prime Minister, Neville Chamberlain, refused to concede any reforms.
Brown was unwilling to take the initiative in controlling the supply of labour, wages and the compulsory arbitration of disputes. By the end of 1940 however, there was a reserve of unskilled labour, and shortages of skilled engineering workers for munitions manufacture were being experienced.
In May 1940, after German forces had advanced into Scandinavia, Chamberlain's government collapsed. Winston Churchill formed a coalition government with Labour leaders Clement Attlee and Arthur Greenwood in the War Cabinet. Ernest Bevin, the General Secretary of the Transport and General Workers Union (TGWU), was appointed Minister of Labour and National Service. Bevin's appointment signalled the government's intention to incorporate the unions fully into the war effort.
Soon after the formation of the coalition government, parliament passed the Emergency Powers (Defence) Act of 1940, giving the government wide-ranging control over people and property. The act introduced a more active policy on the deployment of labour. On 25 May 1940, Bevin addressed the TUC affiliated union representatives to ask for their support in the war effort. The TUC General Secretary, Walter Citrine, was eager to bring the unions into full partnership with the state.
Although Bevin was unwilling to use coercive methods to establish control over the direction and deployment of labour, a number of interventionist measures followed. Bevin reduced the National Joint Advisory Committee (NJAC) to a smaller Joint Consultative Committee (JCC), enabling union leaders to play a key role in economic planning. The Committee agreed that industrial disputes be settled through existing negotiating apparatus, with the newly established National Arbitration Council taking the final decisions. The establishment of the council meant that all strikes became effectively illegal. Bevin resisted pressure from within government to suspend the voluntary collective bargaining system. The Restriction on Engagement of Labour Order of June 1940 aimed to prevent employers from competing for labour by requiring them to only recruit through labour exchanges and unions
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