Running a seven cog freewheel on a Dawes Galexy frame is the problem. Simply put, you need a longer axle that will accommodate a spacer or two (one for each side). Or, do what I do in a situation like this...
Adjust the rear derailleur to prevent the chain from shifting to the smallest cog or get a six cog freewheel, might be easier yet.
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"98% of the bikes I buy are projects".