PAY BOARD (ABOLITION)

§ The Secretary of State for Employment (Mr. Michael Foot)

I beg to move, That the Counter-Inflation (Abolition of Pay Board) Order 1974, a draft of which was laid before this House on 9th July, be approved. In view of the lateness of the hour I will seek to abbreviate the remarks I was proposing to address to the House. I am sure nobody will worry about that, but I am sure it is also understood that the Government and the country regard this as an important matter, and, therefore, although we may not have a longer time to discuss it, that does not mean that we do not realise the significance of what we are proposing.

I would say as a preliminary remark that undoubtedly the order for which I am seeking the approval of the House is a complicated one, but it is a complicated order to achieve a simple result. The result is to abolish the Pay Board and restore free, collective bargaining in this country. It is true that the order itself looks much more complicated than that. It is just another example of how the Department of Employment works. It is a Department of few words but very good deeds, and it shows that some things are easier done than said.

We are, therefore, proposing to ask the House to approve it first of all on those grounds. One of the main objections I have always had to the system of the Pay Board and the whole method of the compulsory control of wages is that it takes many essential effective powers away from the House of Commons and away from Departments answerable to the House of Commons, and places those responsibilities in the hands of bureaucratic boards and bureaucratic bodies of one type or another. I have always opposed this operation particularly as it affects decisions about wages partly on those grounds as well as on other, general economic grounds. The experience of the last few months has certainly confirmed my view on that as well as other aspects of the matter.

But it would be ill mannered as well as churlish on my part if I did not pay tribute, despite my objection to the system, to the candour, wisdom and skill with which Sir Derek Figgures and Mr. 694 Derek Robinson and others on the Pay Board have conducted their tasks. Most of the difficulties have derived from the legislation and decisions of the previous Government. [Interruption.] My hon. Friend as Member for Newham, North-West (Mr. Lewis) seems to disagree with me. My hon. Friend and I may have disagreements on certain matters, but I have seen the system from both ends, and it is the system that causes the difficulties.

§ Mr. Arthur Lewis (Newham, North-West)

Under both Governments the Pay Board refused to take action at any time against well-paid company directors who persistently and regularly increased their pay by thousands of pounds a year.

§ Mr. Foot

No such cases were brought to my attention. My hon. Friend did not show his usual diligence in that matter.

§ Mr. Arthur Lewis

My right hon. Friend is wrong. If he asks his right hon. Friend the Prime Minister and the Leader of the Opposition he will find that I took up this matter persistently with all Ministers and that they did nothing about it.

§ Mr. Foot

I accept my hon. Friend's criticism of everyone but myself. I hope I may proceed on that happy basis.

The Government recognise, and so do I, the seriousness of the economic situation, inflation and rising prices. Naturally enough, many newspapers have contained comments on the figures issued by the Department of Employment and published today concerning the rate of earnings increase, the rate of prices increase and the rate of incomes increase. It is natural that severe comment should be made upon those figures. The country as a whole should consider them seriously.

§ Mr. J. Bruce-Gardyne (South Angus)

The right hon. Gentleman seems to be leaving the order and going on to the general subject. Before he concludes his remarks, I hope that he will explain what is to happen in cases in which the Pay Board has already exercised its powers to issue restraint orders and companies are in a position of dispute on those orders. Companies need to know.

§ Mr. Foot

I agree that companies need to know, and my hon. Friend, if he wishes, will deal with such matters at the end of the debate. Some are dealt with in the order. I am not dealing with general subjects that are not directly related to the order. I am dealing with matters which are related to the order, and I hope that the hon. Gentleman will allow me to proceed on that basis.

The background to these events is the general inflationary situation, and everyone is entitled to regard that with the utmost seriousness. The figures on which the headlines in The Times referring to the wages explosion are based have been available for a long time. Those figures were in the Department of Employment on the first day that I arrived there. I am sure that those figures were there when right hon. and hon. Gentlemen opposite vacated the Department of Employment and other Departments of State. I think that everyone understands that when the Government came to office they faced the most inflationary situation which any Government in this country have had to face—other countries have had to face it, too—and it is on that basis that the matter should be considered.

§ Mr. James Prior (Lowestoft)

Will the right hon. Gentleman explain to the House how the figures which appeared in The Times today could possibly have been available to the outgoing Government last February or March? The figures depend to a certain degree on the operation of the threshold agreements which in turn has depended on the movement of prices since, and, not least, on the effect of the Budget.

§ Mr. Foot

I am afraid that the right hon. Gentleman has not grasped the point. The forecasts in the Department were just as much available to the right hon. Gentleman and his right hon. Friends when they left office as they were to us when we came in. Those figures took into account the threshold agreement and the estimate of the number of times the threshold agreement would be triggered. In my first speech from the Dispatch Box on 18th March I said that those forecasts in the Department were just as much available to right hon. Gentlemen opposite as they were to me. Those forecasts were in even more alarmist terms than I have 696 said. As I said in my first speech as Secretary of State, those facts were in the Department, and I repeat that now so that the Opposition shall not conduct the debate under any misapprehension.

§ Mr. Tom Boardman (Leicester, South)

rose—

§ Mr. Foot

I have already given way several times. If I give way several more times my remarks are bound to take longer.

§ Mr. Tom Boardman

The right hon. Gentleman referred to the figures given in The Times this morning which showed weekly wage rates over the last two months rising at an annual rate of 42.6 per cent. Is he suggesting that those figures were known to the outgoing Government?

§ Mr. Foot

The figure of 15 per cent. increase in earnings this year, which is the figure on which The Times bases its estimates, includes the calculations for those two months, and those calculations were included in the forecasts.

The headlines seek to portray that the threshold agreement has suddenly come into operation and upset all the previous calculations. That is not so. The calculations were there on the first day I came into the Department. That gives a somewhat different perspective to the suggestion made in the newspapers about the state of our economic situation. I say this partly to dissipate the mood of panic which is sometimes spread by headlines. If there was a case for panic it was on the first day when the Government took office, and none of the events since has intensified—

§ Sir Harmar Nicholls (Peterborough)

There is no room for complacency.

§ Mr. Foot

Of course there is no room for complacency. I said that at the beginning. The hon. Gentleman always takes about five minutes to catch up with what has been said.

§ Mr. Norman Atkinson (Tottenham)

The week before last I suffered an increase in weight of 2½ lb. If that rate of increase continues, in a few years' time I shall weigh about 6½ tons.

§ Mr. Cyril Smith (Rochdale)

The hon. Gentleman will have reached my level!

§ Mr. Atkinson

Based on The Times calculations, if I increase my rate by 2½ lb over that short period, I shall soon be in advance of the hon. Member for Rochdale (Mr. Smith). Will my right hon. Friend confirm that the figures he saw when he came into the Department referred to a phase 3 price explosion of about 17 per cent. or 18 per cent. over the 12 months ending next November?

§ Mr. Foot

I confirm what my hon. Friend said. He quoted some other figures at Question Time about the reduction in the standard of life that was involved. I would not accept all the figures with which he fortified his argument, but agree with him on his general deduction.

When we came into office we saw the seriousness of the situation, but we were properly committed to the view—everything I have since seen has strengthened it—that one of the steps we must take to deal with the situation was to do away with the statutory controls which were so directly responsible for the smash-up that occurred last winter. That was not the only reason why we were opposed to those controls, because there were also other reasons. We set about seeking to remove the statutory controls, and we said at the beginning that we wished to make as smooth a transition as possible from compulsory controls to a voluntary system. That is what we have been seeking to do.

It is sometimes said in the newspapers that we had not applied our minds to the situation, as if we had suddenly been pushed into the position of having to come forward with proposals. But we carefully considered the best way to go about the matter and I believe that we adopted a wise approach to a difficult problem. One of the objections to a statutory system is that it is difficult to get rid of it. Indeed the moment one gets rid of it there is a danger of an explosion. That is why we approached the matter as we did.

First, we used much more flexibly than did the Conservatives the consent powers in the Counter-Inflation Act. It is not much of a boast to say that we used those powers more flexibly than the Tories did, because they did not use those 698 powers at all. We used them in the case of the miners' strike, which would never have been settled without them. We also used the consent powers in a number of other specific cases, partly on a basis of representations made by Members of Parliament, partly because of what was said by trade unions and employers and partly because of our own examination of the matter. We then came before the House and announced how we were using the consent powers.

We also took steps to see how we could ease the position of several groups of workers who had been most unjustly dealt with and discriminated against in the previous two or three years or longer. We sought to make arrangements for those groups to have special reviews back-dated to the time of the announcement—it will be remembered that two of those groups were the nurses and the teachers—or we made arrangements two or so months ago for special treatment to be given to some other groups, including postmen. It was right that we should take that course because the figures showed that just as the nurses and the teachers had suffered from discrimination, so also had the postmen. We sought to liberate them from the constraints of statutory control, and I am glad to say that a negotiated settlement was reached between the Post Office and the postmen.

There are some other groups which we had to take into account to deal with different situations. One group was the rail and London Transport workers. The Government have already recognised that a solution must be found to the exceptional pay problems of London Transport and British Rail—problems inherited from a period of statutory control. It was not possible to resolve those difficult issues while arbitration proceedings were going on. We could not interfere with the arbitration procedure; its having been agreed, we could not say that we would discount it or abandon it. It was not possible to resolve difficult issues while arbitration proceedings were taking place. As soon as those proceedings have been settled, however, the case will need to be considered as part of the Government's transition from statutory controls to the voluntary arrangements which I have outlined.

The Government can see no reason to prevent British Rail and its unions from 699 reaching agreement as soon as the statutory controls are lifted in the light of the arbitration on pay restructuring. Similarly, there will be no obstacles in the way of London Transport implementing its nine-point plan. London Transport has been one of the subjects with which the Minister for Transport and myself have been especially concerned. We have listened to the case put most strongly to us by both employers and unions. On that basis we believe that an early settlement can be reached, and I believe that it will greatly assist in dealing with this special aspect of the problem. I put that in the category of the cases which it was necessary for us to deal with before we reached the operation of a social contract, to which I shall come shortly, and the general understandings which feature in that contract.

§ Sir Harmar Nicholls

Is not the real meaning of what the Secretary of State is saying that the "big boys" get the cash and the little people, such as nurses, get promises?

§ Mr. Foot

No. The hon. Gentleman must not talk in that way because he might mislead people outside the House. We in this House know what value to place on his words, but somebody outside the House might take him seriously. The misrepresentation by the hon. Gentleman must be put right at once because it might cause misunderstandings outside. So far from its being the case that the Government have merely given promises to the teachers or the nurses, it was agreed at the time when we made the announcement of the review that it should be back-dated to the date of the announcement. Therefore, anybody who believed the hon. Gentleman would be misled. I hope that nobody will be misled.

It was surely a reasonable way for us to proceed, in preparing for the change-over from one system to the other, to seek to ensure as best we could that some of the cases which had to be dealt with most urgently—some involving groups of workers who had suffered severely because of the operation of statutory controls—should be dealt with before we came to the next period, to which I shall come in a moment.

700 We also made preparations in a different sense. We believed it necessary to have two institutions alongside the social contract which would assist us in carrying through the proper conduct of these affairs once we got to the voluntary system. Therefore we took steps to establish, as we said in our manifesto, a conciliation and arbitration service on which we have had consultation with the TUC and the CBI. That service will be managed and developed by an independent council, including representatives of the TUC and the CBI. It will provide conciliation and arbitration services which are freely and readily available both nationally and locally and it will seek to develop and improve effective bargaining machinery.

Both the TUC and the CBI have welcomed the creation of the service and have agreed to give it their full support. Arrangements for its establishment are well advanced and the Government aim to have it in full operation by 1st September, under the chairmanship of Mr. J. E. Mortimer, who is currently Industrial Relations Member of the London Transport Executive and a former official of the draughtsmen's union. We are grateful to Mr. Mortimer for taking on this task and I am sure he will approach it with enthusiasm. I believe that this institution will be able to make a growing contribution to industrial peace, and I hope the House will welcome that appointment and the establishment of a service which, I emphasise, has been welcomed by the TUC and the CBI.

Another institution which we are setting up, as also we have stated in our manifesto, is the Royal Commission on the Distribution of Income and Wealth. The Royal Commission has a different rôle from that of the conciliation and arbitration service. The Government are determined to help to create a fairer society, and as a first step towards this we need to establish in a more thorough and comprehensive way than has been attempted hitherto the facts about the distribution of incomes and wealth of all kinds, earned and unearned. The Government envisage the Royal Commission ranging over the whole field, on the basis of references made to it by the Government, and producing reports of a factual 701 nature which will assist and inform policy-makers and those who are active in collective bargaining.

The commission is to be established as proposed in the consultative document issued on 10th June, with the following basic terms of reference: To inquire into, and to report on, such matters concerning the distribution of personal incomes, both earned and unearned, and wealth as may be referred to it by the Government. The chairman will be Lord Diamond, who will be giving up his position as Deputy Chairman of Committees in another place to take on this task. The commission will begin its work by the end of July, and it is intended that it shall have a standing reference to inquire into the distribution of personal incomes. The terms of this standing reference are published today in draft to enable those interested to comment upon them by the end of the month.

We propose to ask the commission to undertake an analysis of the current distribution of income and wealth and of available information on past trends in that distribution, and we say that we would welcome an initial report on this as early as possible during the first year of the commission's operation and subsequent reports from time to time. I am sure that the House will welcome the readiness of Lord Diamond to undertake this task. I hope people will understand that this commission will be covering a field which in many respects has not been covered at all before, or at any rate has not been covered in anything like the way it should have been.

Although I was not especially in need of support from other quarters, I was happy to see the statement made in The Times in an article by Mr. Paul Routledge, the excellent industrial correspondent of The Times, last Friday. He was not referring specifically to the Royal Commission, but these words have considerable social significance, and they are his words, not mine: By comparison with the surgical dissection that academics have brought to bear on the condition of the poor, the well-off have been ignored. There have probably been no more than half a dozen serious research efforts in this field in the past decade. Perhaps it is not altogether surprising. The chief characteristic of wealth is reticence. 702 If I have done nothing else in the Department of Employment, if I can overcome the bashfulness of the rich I shall be satisfied. I am sure that the commission will assist in that respect, although of course it will cover a wider area than that.

One matter which I hope will be investigated very soon—I do not say that action should wait upon investigation—is one which hon. Members will have read about in the past few days, the report of the Low Pay Unit. In our belief it is a most important document. It is one which will be examined very carefully in the Department since it fits in with one of the essential paragraphs in the social contract document published by the TUC. So there is no conflict between the desire of the TUC to approach this matter and those who have prepared this valuable report of the Low Pay Unit.

I think that the Royal Commission on the Distribution of Income and Wealth will provide the country with much fuller information on all the matters than we have had before. I believe that this institution can play an important part in helping us to deal with these problems.

Much the most important aspect of the preparations which the Government have made for the change-over from the previous system to the system which will prevail if the order is passed is the discussions that we have had with the TUC and the publication by the TUC of its statement on the social contract. That is a statement not devised by the Government. It is one which the TUC itself has put forward and which it believes to be in the interests of the trade unions themselves.

In that document the TUC has given guidance to negotiators about how they should approach wage settlements. That is one essential part of the document. Along with it there are many other aspects of the social contract statement to which I wish to draw the attention of the House and the country. There are its references to equal pay, to the low paid, to the restoration of collective bargaining generally and, of course, to the form in which negotiation should take place over the next 12 months. That is a matter of paramount importance in its document. But these other matters have also 703 to be taken along with it. I believe that the more people read the whole document, the more they will see that it is a constructive effort by the trade unions to approach the matter in the interests of trade unions but that it is also a document which takes full recognition of the national interest. It is in that spirit that this House should approach it.

§ Mr. Timothy Raison (Aylesbury)

Are the Government a party to the social contract?

§ Mr. Foot

If the hon. Member for Aylesbury (Mr. Raison) reads the document and the others which have been issued on the matter, I presume that he will understand it better. He will then be able to see how the document issued by the TUC on 26th June and the one it issued earlier on the 11th April are part of a continuing partnership between the Government and the trade unions carrying into practical action what we discussed before the General Election.

We had discussions before the General Election of what measures the Government would take to try to assist in the situation and what kind of measures the TUC would take in response to those measures. The document issued by the TUC on 26th June indicates how we have made progress in that direction and how we can make further progress over the coming months.

Right hon. and hon. Members may say that it will be difficult to carry out. Many excellent things in the world are difficult to carry out. But I hope that they will not deride the document. If they do, I hope that they will say how they expect to deal with our national affairs better by returning to the statutory system.

§ Mr. Churchill (Stretford)

Can the right hon. Gentleman explain why the Government have never issued a document giving their side of the understanding of the so-called social contract? In that respect, can the right hon. Gentleman also advise the House, if the TUC General Council statement on this matter represents Government policy, when the TUC took over issuing statements on behalf of the Government?

§ Mr. Foot

It is not the case that the statement by the TUC is a statement of Government policy. It is a statement of 704 attitudes to negotiations and other matters by the TUC which is greatly welcomed by this Government and which I believe would be greatly welcomed by any intelligent Government.

As for right hon. and hon. Members asking what is the Government's attitude to it, we have on a number of occasions said that we welcomed particularly parts of the statement and the whole atmosphere and spirit of it. We believe that it can play an essential part in the conduct of the economy of the country for years ahead. All that has been made quite plain. There is no mystery about it. If the hon. Member for Stretford (Mr. Churchill) read fewer of the slogans and headlines perpetuated by his leaders, he might understand the position a little better.

Before I say any more about that, however, let me come to the Liberal Party. Hon. Members on the Liberal bench look a little neglected. I never like to neglect them. I am not sure whether the Liberal Party has abandoned its views about compulsory wage control. It has previously taken strong views on the subject. One of the things which have interested me at my Department has been representations received from different members of the Liberal Party on the question of statutory controls. They were perfectly entitled to raise individual matters with me, and they did so with their customary courtesy.

I shall quote one or two examples. I will not refer to cases of individual firms. That might in certain circumstances—not always—be invidious. I wish to give an indication of the feeling of hon. Members opposite on these matters, particularly the feeling among Liberal Members, whom I previously suspected of being in favour of maintenance of compulsory controls and who even supported the controls introduced by the previous Government in certain respects.

The right hon. Member for Orkney and Shetland (Mr. Grimond) wrote to me to put the case of one group of firms. He concluded his letter: May I finish by saying that I realise it is quite absurd that you should be troubled by this sort of case but I am afraid it is the inevitable result of the extraordinary machinery devised by the last Government. I am glad to welcome that view from the right hon. Gentleman. As he will know, 705 even prior to his representation we had in the Department taken special steps to give consent to another group of firms operating in the Shetlands. We came to the view that if we did not give those firms special consent for them to be able to escape the compulsory controls, the whole life of the Shetlands and the Orkneys might be strangled. We took action both by giving that consent and by drawing up our proposals which we are dealing with today to abolish the Pay Board. Once restrictions have been removed, the firm to which the right hon. Gentleman referred will be able to negotiate and we hope that by what we are proposing full assistance will be brought to his constituency.

If the Liberal Party, particularly the right hon. Gentleman, thought of voting against us in the Lobby—I am sure that such an evil thought has never crossed the right hon. Gentleman's mind—it would be the basest act of ingratitude since the afflictions King Lear had to suffer.

§ Mr. J. Grimond (Orkney and Shetland)

The right hon. Gentleman has talked about important correspondence which I exchanged with him, but I hope he does not give the impression that I was ever in favour of the policy which he is now abolishing.

§ Mr. Foot

I am glad to have that assurance. If I am King Lear, the right hon. Gentleman has given a good impression of Cordelia. What about the Gonerils and Regans who are on that bench?

The hon. Member for Cornwall, North (Mr. Pardoe) is a great champion of a compulsory wage policy. He wrote to me on behalf of the china clay workers of Cornwall. It is because of our policy, not his, that they are getting a wage increase. We had to have a special consent in their case as well.

The hon. Member for Rochdale (Mr. Smith) also wrote to me and said that we ought to abandon the pay controls in order to deal with the engineering dispute. We were able to deal with that without using that method.

§ Mr. Cyril Smith

I appear to be the only Member to whom the right hon. Gentleman has not extended the courtesy of saving that he would be referring to 706 me in the debate. My colleagues were informed this morning that he would be referring to them. Nevertheless I accept his apology in advance. I ask him to re-read the correspondence I sent to him regarding the engineers' dispute. He will find that I stated specifically that I was not expressing a personal opinion but was merely conveying to him the opinion of a man who employed 40,000 people in the engineering industry. If the right hon. Gentleman is to quote hon. Members in this way, it is important that he makes clear whether he is quoting their views or other people's views which Members have merely passed on to him.

§ Mr. Foot

I am sorry if I did not inform the hon. Gentleman that I would be referring to him. As I was looking along the Liberal bench I thought that he might be aggrieved if I left him out, so I brought him into the debate.

The hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steele) also wrote to me. He has a special case, like the hon. Member for Cornwall, North. He says that low wages are especially severe in his constituency. But the hon. Member for Cornwall, North He says that they are especially severe in his. The hon. and learned Member for Montgomery (Mr. Hooson), who is not here at the moment, says that low wages are especially severe in his constituency. Therefore, I take it that the Liberals are in favour of compulsory wage control in all parts of the country, except in their constituencies.

§ Mr. David Steel (Roxburgh, Selkirk and Peebles)

The right hon. Gentleman will want to be fair. If he re-reads my letters to him he will see that both of them contained the statement that was my party's view—a view which we put during the passage of the Counter-Inflation Act—that any statutory prices and incomes policy which was an effective means of achieving social justice must take account of the different levels of wages in different parts of the country. We criticised the policy of the previous Government because it failed to try to raise the level of wages in low-paid areas. We have supported that objective and still support it under the present Government

§ Mr. Foot

I am glad that I have the whole Liberal Party united, although I am not sure about the hon. Member for Woolwich, East (Mr. Mayhew). He 707 joined the Liberal Party on the misinformation that that party was still in favour of compulsory wage controls. Perhaps he had better cross the Floor again before he discovers his mistake.

§ Mr. John Pardoe (Cornwall, North)

Since the right hon. Gentleman has mentioned King Lear, Cordelia and the rest, it would be appropriate to say that he is in danger of playing the fool. He may be aware that when the Counter-Inflation Bill was being considered I sought to move two amendments, one specifically to exempt persons with low incomes and the other specifically to exempt persons working in development areas. Therefore, he is more right than he knows when he says that I was exempting my own constituency. I still believe in statutory pay control—though not the sort which the right hon. Gentleman is now abolishing—and so will he when next June wages are rising by 40 per cent. and there is no other answer than to allow unemployment to rise to 2 million.

§ Mr. Foot

We do not accept the solutions suggested by the hon. Gentleman, but we do not have to quarrel on such a happy occasion because the Liberal Party is not apparently going to vote against the order.

I turn now to the official Opposition. A few months ago they insisted on the maintenance of legal backing for a wages policy. They put down a motion about that for the debate on the Queen's Speech. What is the attitude of the Opposition? They have made charges against the Government generally and against me in particular. They have said that our policy, the social contract and the rest is merely a policy of giving in to the unions. That is the charge they make. No one makes it more frequently than the Leader of the Opposition. He generally makes it at Conservative women's fetes, which is not exactly the place where he might expect to be challenged. Perhaps his audiences at the fetes have not studied the question in detail.

The right hon. Gentleman says that we have given in to the unions. Let us just see. He has frequently said it outside the House, and I dare say that some of his colleagues are still trying to say it. Let us see what is the basis for this case. 708 The Leader of the Opposition started by saying that we had given in to the miners. He repeated that accusation in the country the other day. He said that we gave the miners all they wanted and then some, and he said that the strike had been settled by a blank cheque. That is quite untrue. The Conservatives would know that it is untrue if they would only consult the people who engaged in the negotiations—the people at the National Coal Board. They do not have to take it from the miners, although the miners happen to know what goes on and the Leader of the Opposition and his colleagues do not. The Miners' strike was settled by a sensible and fair negotiation not by a surrender.

Let me take another major case. These are not trivial examples; after all, the miners' strike was a big affair. Take engineers. Is that a major case or not? Did we surrender to the unions in the case of the engineers? That is the general charge, remember—that we are giving in to the unions all the time. Do the Opposition say that there was any surrender by one side or the other in the engineering dispute? Nothing of the sort occurred. There again, there was a sensible negotiation between two sides. The engineering employers do not say that the unions surrendered, nor have the unions said that the employers surrendered. They came to a sensible agreement after sensible negotiations.

Yet we hear all these wild tales of how the Government have surrendered. What the Government have done and what we are doing even more with this order is to prepare the way for sensible collective bargaining. We believe that that is much the best way to try to avoid both the dangers of mass unemployment and the dangers of confrontation and smash-up which we had under the statutory policy and the policies of the Conservative Party.

When the Leader of the Opposition parades around the country talking of industrial relations solely in terms of surrender, capitulation and battles, we know that that is what he wants—or that that is where he would land us. That is what he thinks industrial relations are about. We say that they are about something quite different. They are about conciliation, about restoring the authority of some 709 forms of arbitration and about trying to get away from talk of surrender, particularly when, as in the case of the two strongest unions in the country—the miners and the engineers—there was no question of surrender. No one who knows anything about those negotiations could make that charge and sustain it.

I do not suppose that the Leader of the Opposition has much influence in the country now, but when he goes about saying that it is all a battle and that there has been a surrender he is putting us back to those old terms. That is where the Conservative Party would take us back if we let it do so. We should soon be back in the days of February and the bleakness of last winter if we allowed that to go on. We should soon be back in the situation that we remember, the days of Lancaster House and confrontations, with people marching in and out of Downing Street saying "The clash is coming," back to the three-day week and threats of that nature. Then, as the country waited with bated breath, no doubt the Conservatives would call sudden meetings to decide what to do and the answer we would hear would be that they had called in Lord Carrington and had been fools enough to take his advice. That is what would happen again under their methods of dealing with these problems.

We are trying to find a different way of doing it. We do not say that there is any simple course. We do not say that there is any single way of dealing with inflation. But we do say that it has to be approached by a whole series of different methods. We say that this return to collective bargaining is one part of it, that the establishment of a conciliation and arbitration service is another part, that proper communication with and information from the Royal Commission on the Distribution of Income and Wealth will be another part and that the policies which the Government follow in their approaches to rents and the rest are still another part. These are the ways in which we can try to tackle the problem.

We think that that is much better than the talk of coalitions. The last time this country saw a coalition in peace time, in 1931, we had the worst Government that we have known this century. That was how we got a coalition policy and, although they did not devise statutory means of doing it then, it was a policy 710 very much based on the real plank which apparently binds the Opposition coalition parties together now—unless we have sundered them this afternoon. That is the policy of which an essential part is the compulsory and rigid control of wages.

I say that that policy has collapsed. It collapsed in February and we as a Government say that we will not return to that policy. That is why we have said not merely that we will carry through the order but that we will not return to a freeze, we will not return to the compulsory control of wages. We have given that undertaking.

When hon. Members are making up their minds about how to vote tonight—if they vote against the order they will be voting for the maintenance of compulsory controls of that nature—[HON. MEMBERS: "No."]—yes, they will—perhaps they had better consult their CBI friends to see what they think. In all our discussions with the CBI, they did not dare to suggest that we could possibly continue with the compulsory control of wages, particularly in the bureaucratic and anti-parliamentary form in which it was devised by the Conservative Party.

Therefore, what this House does today, despite all the difficulties, despite all the problems that the nation faces, is an essential part of ensuring that the social contract shall have a chance to succeed. The abolition of compulsory controls on wages is an essential part of the social contract and tonight we shall see either whether the Opposition have abandoned the policies which led to such a collapse in February or whether they are determined to persist in that course. These are some of the issues on which the election will be fought.

§ Mr. James Prior (Lowestoft)

The Secretary of State for Employment began his speech on a serious note and I thought that we might hear from him a speech in which he really dealt with the serious issues that we have to face. I find the right hon. Gentleman an engaging man. He still makes exactly the same speeches from the Dispatch Box as he used to make when he sat below the Gangway.

§ Mr. Arthur Lewis

No U-turns.

§ Mr. Prior

The difficulty about the right hon. Gentleman is that he forgets that he is now a Minister and that he 711 has a responsibility which he is not carrying out. I wish that he would spend a little less time trying to decide how he is to share out the money which the rich supposedly have left and perhaps a little more time describing how our economy and our society can create more wealth. That is the only way in which we shall overcome our problems. When he makes snide remarks and cheap asides about that section of society that is creating all the wealth, he would do well to remember that the top rate of tax introduced by his Government on investment income is now 98 per cent.

§ Mr. William Hamilton (Fife, Central)

Poor things.

§ Mr. Prior

The right hon. Gentleman began his speech on the basis of the serious situation the country faces. We have had another reminder this afternoon of the way in which unemployment is starting to rise. We know the situation of inflation, and now this is being added to by higher unemployment. It is therefore right that the House should adopt a sober mood in discussing the issues before us today.

The order before the House is designed to do two things. First, it abolishes the Pay Board. Second, it abolishes the power provided by the Counter-Inflation Act 1973 to create a Pay Board. Along with this power there falls the power also to devise a code for the guidance of the Pay Board and for the practical guidance of those concerned in decisions about pay, and the power to make general references to the Pay Board on questions of remuneration.

This order is a wholly negative piece of legislation. It is negative not merely in the sense that it abolishes existing machinery without putting anything new or better in its place, but negative also in the deeper sense that it sets this country a good deal back while on its journey towards a fair and rational way of dealing with the problem of inflation.

As the right hon. Gentleman spent so much time discussing nurses and teachers he might for a moment have borne in mind that the real problem about the pay of nurses, teachers and many other sections of society that have fallen behind in recent years—not just in the lifetime of the previous Government but Govern- 712 ments prior to them—arose because of the power of some people and some sections of society to get out of the economy, by certain means, wages which other sections were not able to get out of it because they were not prepared to take the sort of action that others took.

Looking back on the whole period since the war we can see the problems the nation has had in devising a system which maintained full employment and yet, at the same time, did not give rise to high rates of inflation. We can go back even to the 1944 White Paper on employment policy, which stated: Action taken by Government to maintain expenditure will be fruitless unless wages and prices are kept reasonably stable. This is of vital importance to any employment policy, and must be clearly understood by all sections of the public. If we are to operate with success a policy for maintaining a high and stable level of employment, it will be essential that employers and workers should exercise moderation in wage matters so that increased expenditure … may go to increase the volume of employment. Before the war we had 2 million or 3 million unemployed and reasonably steady prices. Since the war we have had full employment but a degree of inflation. In terms of human happiness, dignity and social progress, the decision we have made as a country since the war has been right. But inflation has now become an avalanche. It is worse here than in most other countries.

§ Mr. E. Fernyhough (Jarrow)

I wonder how the argument that the right hon. Gentleman is presenting to the House applies in respect of Italy. Italy has had the unemployment and, likewise, the inflation.

§ Mr. Prior

But Italy also, until recently, had a far higher rate of growth in her economy than we did, and Italy had no more inflation than we had. I do not think that the experience of Italy in any way changes one iota what has happened and what I have been describing.

We are now in danger of the worst of both worlds. We are in danger of having very high inflation and recession leading to high unemployment at the same time. To reflate in such circumstances can itself lead to further unemployment. High inflation: high unemployment. That is a recipe which the 713 right hon. Gentleman did not deal with at all in his speech. It is a recipe for authoritarian government and controls and loss of freedom such as we should all detest. The public have not yet understood that, although they suspect that much is wrong. We in this House have a duty to point it out. It was a great pity that the right hon. Gentleman did not delve a bit deeper in his speech to point out some of the dangers which the nation faces if it continues on its present course.

The whole post-war period has seen a set of variations on the theme of the twin pressures of full employment and of demand inflation on the economy. During this period there have been many shifts of emphasis in Government policy as between the various objectives of growth, price stability, full employment, the maintenance of the exchange rate and the maintenance of a satisfactory balance of payments. A great variety of expedients has been tried.

In respect of incomes policy there is no need for me to go over again the long story of wage restraint, guiding lights, norms and gateways. These are all familiar to us, and we shall always return to them because their story reflects the inescapable fact that, as a nation we simply cannot pay ourselves more than we earn; that as a nation we are obliged to find a way of balancing our incomes with our earnings, or we face dire consequences. The country must be brought to recognise this fact.

I think that we in the House, for the most part, do recognise this fact. While we may each give a different weight to each of the various factors which give rise to inflation, we all agree that the rate of growth of incomes is a factor of primary importance. The Prime Minister once described, in a well-known epigram, one man's pay rise as another man's price rise. I think that we also know today that one man's pay rise may be another man's job.

We all have the same objectives: full employment and growth without inflation. We share the same analysis: that we cannot sustain growth and full employment or avoid inflation unless we can find a way as a nation of limiting the growth of incomes to what we can afford. 714 The only thing that is lacking is agreement on the methods and instruments by which those shared objectives are to be pursued and that common analysis implemented.

We should much prefer, for many reasons, a voluntary system. It keeps the Government out of it. It avoids distortions. It is true to the spirit and philosophy of the Conservative Party. I tell the right hon. Gentleman that we got no joy in those last two years of having people in and out of No. 10 and the Departments of Whitehall. We should much have preferred to try to do it another way. In an ideal world the voluntary system is the only possible course one would adopt. But it requires a balance of power within the bargaining process which has not been noticeably present in recent years. We talk about free collective bargaining, but how free is it, and how much of a bargain is it nowadays with the monopoly power of trade unions?

§ Hon. Members

Nonsense.

§ Mr. Arthur Lewis

And company directors.

§ Mr. Prior

It is all very well for hon. Members to say "Nonsense ", but the whole country knows the power that certain unions are able to exercise. Anyone in government knows it. One does not have to be in government more than five minutes to know it—or if one is in government and does not know it, one ought not to be in government. There is wide agreement in the country as a whole for this view. Many people would rather have some form of incomes control than a significant rise in unemployment.

As one looks back on the history of inflation and incomes policy one finds that there has also been a wide divergency and discontinuity in the policies and institutions we have adopted as controls. I have always thought that the right hon. Member for Birmingham, Stechford (Mr. Jenkins) was right in his 1969 Budget, because at that time he suggested that what we needed to do was to abolish incomes policy and accept instead some reform of industrial relations which could be substituted for it. That was the whole basis in 1969 of getting rid of incomes control and having the "In Place of Strife" legislation.

715 We pursued that view in 1970. We thought that was right and was the best way to do it. It would have left free collective bargaining, but within a framework of law which trade unions would have to follow. I still believe that that would have provided the country with by far the best answer. That was one of the reasons why we were convinced that the right thing to do was to get rid of the National Board for Prices and Incomes. But I do not believe that we can go on changing institutions and bodies every time there is a change of Government. It is that which is doing so much harm to confidence in our economy.

We have heard from the Secretary of State today that we are now to have the CAS under Mr. Mortimer, whom we wish well, and the Royal Commission on incomes distribution under Lord Diamond. We are to have another two bodies that will do very much what the Pay Board in one form or another could have done and could even do now, and what the Prices and Incomes Board before that could have done. There is no points in this constant switching and changing of our institutions. The British are creatures of habit, and it would be better for them to become used to one institution. We could change its rules a bit and even change its members.

I do not suppose that anyone on my side of the House would particularly want to see the Pay Board with Sir Frank Figgures and Mr. Derek Robinson still there. That is a matter about which there would be some divergence of view. My own view is that in many respects the Pay Board did extremely good work. It has built up a certain expertise, and it is a mistake to get rid of it. The board could live with a voluntary policy. When my right hon. Friend designed the Counter-Inflation Act he did it in such a way that the board could operate within a voluntary policy. I believe that to be by far the best way.

§ Mr. Foot

I hope the right hon. Gentleman will not compare the two institutions he mentioned with the Pay Board. Whatever may be the virtues of one or the other, the Pay Board was backed with sanctions and even the criminal law. It could operate without reference to Parliament. It was a quite different kind of institution from either 716 of the bodies we are seeking to establish, neither of which challenges the power of Parliament and neither of which is equipped with the threat of legal and criminal sanctions.

§ Mr. Prior

The right hon. Gentleman does not know. There is no reason why the Pay Board should not be continued in existence as an independent body monitoring the progress of the social compact and expanding its advisory function under Schedule 1 to the Counter-Inflation Act. For example, it would be possible, if we wanted it to do so, for the board to monitor the progress of the social compact. That might be a rather satisfactory job. I have a great deal more reliance on the board's monitoring it than the right hon. Gentleman's doing so.

§ Mr. Bruce-Gardyne

It may be of consequence to mention that the last occasion when we experienced an appreciable deceleration in the rate of increase in unit labour costs, from 11 per cent. to just over 6 per cent., between 1971 and 1972, came at the end of a period of three years when we had not had any such institutions.

§ Mr. Prior

My hon. Friend must also recognise that by the summer of 1972 the situation had drastically changed. By August-September 1972 wages were rising at a rate of 16 per cent. year on year, and unit costs were not falling to anything like the extent to which they had fallen in the earlier period. When I think back to a time when wages were rising at 16 per cent. a year, remembering how serious we thought that was and comparing it with the way in which wages are rising now, I am even more dismayed by the Government's attitude.

I believe that no one will pretend that as a system of incomes restraint the social compact is so sure of success that we need not bother to think about alternative or additional approaches to dealing with the problem of inflation. We all hope that the social compact will succeed, but we must all have very much in mind the possibility of its failing and the consequent development of the runaway inflation of which the Chancellor of the Exchequer spoke at Durham last month.

Before I come to that speech, I should like to say to the TUC that I hope it will 717 do its best to apply to the non-conformers with the social compact sanctions as tough as it did to those unions which chose to register under the Industrial Relations Act. I shall regard that as an indication of not only its desire but its determination to make the social compact work.

The Chancellor said at Durham: There are at least some signs that the price of our imported raw materials may level off in the months ahead. So what happens to wages is the key to controlling inflation in the coming year. The right hon. Gentleman said that on 1st June. Two days later Mr. David Basnett, General Secretary of the General and Municipal Workers' Union, remarked that if the Government were saying that wage costs were the major cause of inflation, they were not saying that during the election. We all remember that.

I come to the seriousness of the situation. Here I should like to quote from a leading article in The Times this morning headed "The Wages Explosion". It says: It was firmly implied that the return of a Labour government, committed to such a compact, would cause organised labour to reduce its wage demands during 1974 and beyond. Cynics and economic forecasters were, for the most part, prepared to count very little for credit from this policy. And they are rapidly being proved right. We are now already in a phase where rises in wage costs are taking over from rises in the price of oil and other imported commodities as the main engine of inflation. The Economist has said: Other wage claims and post-stage-three settlements are soaring far beyond reason. British Rail, the Post Office and London Transport have already conceded wage increases of about 30 per cent. for the autumn. In private industry, electrical contractors are to get 40 per cent., oil tanker drivers between 25 per cent. and 30 per cent., and Imperial Chemical Industries has offered its workers between 19 per cent. and 27 per cent. If pay controls are abandoned before the election there will be an avalanche of increases". That is a quotation from the Economist.

§ Mr. Foot

I know that it is a quotation from the Economist. That does not sustain its validity. First, I do not accept all those figures. Secondly, some of the settlements that have been lumped together should be separated, for the reasons I have given before. They are separated in the understanding of the TUC and the social contract, for the reasons I gave—particularly the British Rail and Post Office settlements.

§ Mr. Prior

That does not add up in economic terms. The right hon. Gentleman is saying, in other words, that the social compact begins when one wants it to begin, but not until then. Therefore, people can have a big increase before it begins, and that does not count. It may make some political sense to the right hon. Gentleman but it does not make economic sense to the rest of the country.

§ Mr. Foot

Perhaps the right 'Ion. Gentleman should think it over a bit more carefully. His leader chose to pretend that the Conservative Government had a system for selecting some of the people who should be allowed to catch up because they had fallen so far behind. What we have done is to allow the nurses, the teachers, the postmen and the railway-men to have increases on that basis. Is the right hon. Gentleman in favour of the nurses having their review or not?

§ Mr. Prior

That is not the point. The chemical workers, Shell tanker drivers and almost everyone else in the economy are getting such increases. The right hon. Gentleman knows that the matter is not confined to the nurses or the teachers. It goes much wider than that. He should face the facts of life. There are two sides to the social compact—

§ Mr. Atkinson

We must start trying to understand some of the things that are now happening to wage movements. The Times does not help when it refers to percentages. A percentage itself is irrelevant in economic terms. If we talk about 20 per cent. or 30 per cent. of nothing, that will not have much impact on the economy or the level of demand. If we talk about a board of directors which receives enormous remuneration and whose members receive a 20 per cent. increase, that obviously will raise the level of demand considerably. The use of arithmetical sums of that kind in terms of percentages is valid only when wages are compared with prices. If the right hon. Gentleman wants to talk about the level of demand, which has decreased in the third period of the previous Government's wages policy, he should talk about the total sums involved and not the percentages.

§ Mr. Prior

The trouble with the hon. Member for Tottenham (Mr. Atkinson) is that he is trying to put his head in the sand so as not to recognise what is going 719 on. Some of the people in his union whom he supports are those who will suffer enormously over the coming months as a result of the high rate of inflation, which might be said to be an induced rate, for which many Labour Members must take some responsibility.

There are two sides to the social compact—namely, that of the Government and that of the trade unions. The retention of the Pay Board and the Government's powers over incomes under the Counter-Inflation Act bears on the position of both parties. As long as there is any doubt about the social compact achieving the purpose for which it was designed, the Government cannot be justified in casting aside their existing reserve powers. Just as when all efforts to achieve a voluntary policy broke down in the autumn of 1972 it was right to introduce a statutory policy, so now, when the Government believe that a voluntary policy may have a chance of success—that is a belief which is shared by the TUC and parts of the CBI—it may well be right to put the statutory powers on the back burner. I believe that to discard them entirely must be a great mistake.

When the right hon. Gentleman and his party came to office—he mentioned this today—he told us that certain figures were available to them. He talked about figures but in fact they were estimates which have since changed considerably. They have changed partly as a result of the Chancellor of the Exchequer's Budget and partly as a result of the much laxer policy that the right hon. Gentleman has adopted towards wage settlements.

I would be the first to admit that the situation was serious. The first thing that happened was that the miners broke through the pay policy. The Government settled with them on any terms. The right hon. Gentleman has said "We just sent the National Coal Board and the NUM away to settle and they made an agreement amongst themselves." Does anyone believe that the miners did not get everything that they wanted as a result of that approach? The right hon. Gentleman is a simpleton—I do not really think that he is—if he believes that the National Union of Mineworkers did not get what it wanted.

§ Mr. Foot

What the right hon. Gentleman is saying on that subject is absolutely 720 false. Before he makes such a statement he should check with the National Coal Board if he will not believe the miners. The right hon. Gentleman should find out the facts and then come back and apologise.

§ Mr. Prior

I am prepared to find out the facts, but I think that they will entirely support what I have said. The right hon. Gentleman has a charming and disarming way of settling disputes. It is consistent with the following approach—"Go away and settle. Do not worry me about the cost or the effect on the economy, just settle. We will pick up the bills later, preferably after the General Election."

§ Mr. Foot

I do not think that the right hon. Gentleman does any good by trying to deal with these matters by adopting this sort of distortion. That is not what happened in the mining dispute. It is not what happened in the engineering dispute, and it is not what happened in the London weighting issue. Before he utters such ignorant lies he should find out the facts.

§ Mr. Prior

That is exactly what happened on the London weighting issue. The right hon. Gentleman produces a policy and then backs away from it. It is plain that he has done so. His Department is no longer one which is meant to exercise some control over these matters. The right hon. Gentleman is actually pushing for higher wages—

§ Mr. Foot

Absolutely false.

§ Mr. Prior

The economy will suffer. The right hon. Gentleman should take these matters much more seriously. My right hon. and hon. Friends take it seriously.

§ Mr. John Peyton (Yeovil)

I am much impressed by the gravity with which my right hon. Friend approaches the state of the economy. His approach impresses me more than that of the Secretary of State, who gives the impression that all he can give to our problems is merely a passing glance. However, I must ask my right hon. Friend what he is actually asking us to support tonight.

§ Mr. Arthur Lewis

Another U-turn.

§ Mr. Peyton

Is my right hon. Friend asking us to support his opposition to the 721 abolition of the Pay Board or his insistence on some effective action being taken to stem the tide? I for one am not anxious to support the retention of the Pay Board.

§ Mr. Prior

I know that my right hon. Friend is not anxious to support its retention. What I am saying is that in the present serious situation it is necessary to have available for use, should it be necessary, every weapon that can be obtained from the armoury.

The present situation is that there is now a complete free-for-all. We know the rate at which wages are increasing. Nothing is being set up; nothing is being left on the statute book which will give the Government any reserve powers to introduce a statutory policy. All our experience when in government was that if we did not possess such reserve powers there were two alternatives. The first was to struggle on without any form of statutory policy. If we took that course we might be having wage increases of 20 per cent., 25 per cent. and 30 per cent. by the autumn.

§ Mr. Arthur Lewis

Why wages all the time?

§ Mr. Prior

The other alternative was to have a freeze. That is the only thing that can be operated quickly. What I want the Government to do, and what I think is wise from the point of view of our party when it comes into government, is to have statutory powers in reserve. I do not want to use them. It would be much better if we could get through without using them. There is a grave danger in allowing them all to go. It would be much more sensible to keep them in reserve and bring them out only if necessary.

There are many difficulties ahead of the nation which will require a great deal of effort to solve. If we can find a solution through the social compact and not by coercion, so much the better. Perhaps we can do it partly by controlling demand. I have never thought that the money supply could be the sole method of control but I think that it has an important part to play in the present situation. At the rate at which inflation is now running it has an even bigger part to play, but I do not think that we can rely on it alone. I feel that those who 722 take the view, which I do not entirely share, that control can be applied through the money supply alone would find that, like all other panaceas, it would soon prove to be socially unjust and too crude a method. One result would be that the level of unemployment would become unacceptable. Of course, for every 1 per cent. increase in wages that we cannot afford we are bound to add to the number of unemployed which we shall have to endure. I believe that we need the whole armoury and that we cannot afford to get rid of any of our weapons. Perhaps we can put some of them in oil, but they should be available to use at any time.

By seeking to abolish the Pay Board and the power to operate an incomes policy, the Government are stripping themselves of any alternative to deflation or a freeze. They have left themselves bare of any alternative. It is an act of massive irrelevance, at this time of all, with what we know is ahead of us, for the nation not to have these extra powers.

The Secretary of State has been a great disciple of Aneurin Bevan. Let him remember that famous Labour Party conference speech when Aneurin Bevan derided and scattered the unilateral disarmers. Mr. Bevan would not go naked to his conference table. Neither should the Secretary of State go naked to his. He should resist the demands of the TUC on this issue. Let him act as one of Her Majesty's Ministers for a change. The situation demands, and the nation expects, it.

§ Mr. E. Fernyhough (Jarrow)

The right hon. Member for Lowestoft (Mr. Prior) has made very grave charges against some of the most responsible men in the country. He is really saying that the leaders of the TUC are trying to mislead the country, that they are not true and honest and sincere in what they are saying about the social contract. He is trying to convey the impression that all the difficulties, all the problems and all the anxieties about inflation that we have are solely due to the wicked, greedy, avaricious trade unionists.

The right hon. Gentleman represents the farmers. I have never known him to be backward when farming interests are 723 at stake. Among hon. Members opposite there is a powerful lobby for the NFU. Week in and week out, they ask for more for the farmers. When the farmers get more, does not that add to inflation? Are we to believe that the farmers can get more without its adding to inflation but that the miners cannot?

The right hon. Gentleman has forgotten the experience of the nation in the first three months of this year. Had the Conservative Government remained in power the situation today would have been catastropic. They would have preferred to have kept the miners out—and every day longer the miners were kept out the deeper would our economic problems have become. It is quite remarkable how ready the Conservative Government were to pay the oil sheikhs what they demanded.

§ Mr. Cyril Smith

What would the right hon. Gentleman have done?

§ Mr. Fernyhough

I should have paid them, but I was also prepared to give the miners a living wage.

§