 Harold Wilson resigned as Leader of the Labour Party and Prime Minister in March 1976 . Benn later attributed the collapse of the Wilson government to cuts enforced on the UK by global capital , in particular the International Monetary Fund . In the resulting leadership contest Benn came in fourth out of the six cabinet ministers who stood — he withdrew as 11 @.@ 8 % of colleagues voted for him in the first ballot . Benn withdrew from the second ballot and supported Michael Foot ; James Callaghan eventually won . Despite not receiving his support in the second and third rounds of the vote , Callaghan kept Benn on as Energy Secretary . In 1976 there was a sterling crisis , and Chancellor of the Exchequer Denis Healey sought a loan from the International Monetary Fund . Underlining a wish to counter international market forces which seemed to penalise a larger welfare state , Benn publicly circulated the divided Cabinet minutes in which a narrow majority of the Labour Cabinet under Ramsay MacDonald supported a cut in unemployment benefits in order to obtain a loan from American bankers . As he highlighted , these minutes resulted in the 1931 split of the Labour Party in which MacDonald and his allies formed a National Government with Conservatives and Liberals . Callaghan allowed Benn to put forward the Alternative Economic Strategy , which consisted of a self @-@ sufficient economy less dependent on low @-@ rate fresh borrowing , but the AES , which according to opponents would have led to a " siege economy " , was rejected by the Cabinet . In response , Benn later recalled that : " I retorted that their policy was a siege economy , only they had the bankers inside the castle with all our supporters left outside , whereas my policy would have our supporters in the castle with the bankers outside . " Benn blamed the Winter of Discontent on these cuts to socialist policies . 
