Between July 1972 and February 1974, the British Conservative government focused on creating a power-sharing settlement with the constitutional parties. In the meantime, the security and intelligence services would try to reduce IRA activity to a level at which it could not obstruct the power-sharing government. But once the power-sharing executive collapsed in May 1974, the British government's political policy radically shifted. Between May 1974 and December 1975, the British Labour government under Harold Wilson and Merlyn Rees envisaged an agreement on Northern Irish independence between Irish republicans, Ulster loyalists and others as being possible. This idea was not irrational. Various leading IRA and UDA members had demonstrated a willingness to contemplate an independent six-county Northern Ireland. Nonetheless, the Labour government refused to give the public or private declaration of intent to withdraw that the IRA wanted. The British feared that any declaration would provoke a loyalist uprising and civil war. The ceasefire collapsed as the IRA was not willing to forgo a British declaration of intent to withdraw. Nevertheless, the British Labour government under Harold Wilson had been willing to explore withdrawal from Northern Ireland, if republicans and loyalists could agree to independence.

A majority of IRA leaders agreed to a ceasefire in late December 1974 because the British government suggested privately that they were contemplating political withdrawal. This chapter also suggests that the ceasefire collapsed because the British government would not announce their withdrawal before a political settlement had been agreed. The British government feared that a declaration of intent to withdraw would provoke a loyalist uprising. Republicans did not trust that the British government would withdraw without a public or private declaration. Many grass-roots republicans felt tricked by the British government into a ceasefire that they began to believe had been designed to degrade the IRA’s armed capacity. However, evidence suggests that, in 1975, the British government wanted gradual political withdrawal from Northern Ireland. Many leading republicans were willing to politically compromise during that year and potentially accept an independent Northern Ireland. But pressure from grass-roots republicans meant that the leadership had to demand a British declaration of intent to withdraw.