§ Intimately bound up with this whole question of inflation is the policy of restraint in the matter of personal in- 65 comes, which was first put forward rather more than two years ago. It is very understandable that that policy should have become difficult to carry through, and the longer the time that passes the more difficult it must become to apply it fully. I must pay a very high tribute to the trade union leaders and their members who have appreciated completely the significance of this policy for continued full employment and have given it their fullest backing.
§ The expression "a wage-freeze" has come into common use, but, of course, no law, regulation, or rule has ever been made which imposed a wage-freeze on industry. Wages and conditions of work have been left to free negotiation between employers and employees, but the Government have done what is their duty; they have put before the country the very powerful considerations that should weigh with anyone who seeks to better their own position at the expense of the country as a whole.
§ The facts are, of course, that the total of wages and salaries—and that is the important figure; not nominal wage rates has gone up substantially. Earnings increased between 1947 and 1948 by £670 million and between 1948 and 1949 by another £340 million. That certainly cannot be regarded as a standstill, although there was some increase of numbers employed at the same time, and to it must be added the £300 million of increased social services and benefits that have been accruing over the last two years. As these increases in the main were balanced by increased production, their inflationary influence has been slight. But unless there is a comparable increase in production, wage increases cannot take place without serious financial consequences.
§ Some 55 per cent. of all company profits are required for taxation; probably not less than half of what is left is used for new capital expenditure in one way or another; so that some three-quarters of the gross profits is already being utilised for essential economic purposes which otherwise we should have to finance in some other way: only a quarter goes to personal consumption, and even some of that may be subject to surtax, so there is not here any great fund from which increases in wages can be paid. There is, furthermore, no fund, as 66 some people seem to think, out of which we can increase our power of consumption beyond what our total production allows.
§ The real difficulty is that there are still some cases of low earnings which are very difficult to correct without upsetting the relative wage levels that have been established within each industry for the different grades and classes of workpeople employed in it. This is an immensely difficult problem to solve. So indeed is the whole problem of distributing fairly among the different groups who contribute to the wealth and wellbeing of the community the extra resources made available by their increased efforts.
§ There is one thing obvious, however, that if we try, by catch-as-catch-can methods, to advance anywhere and everywhere along the wage front, we shall undoubtedly succeed in destroying full employment in the way I have described earlier, through inflation. Then it will be a problem of wages falling down, and not even of their staying still where they are, and of large scale unemployment.
§ We have not yet found the solution for this problem of how to get the increased earnings corresponding to the increased production into the right pockets so as to eliminate cases of personal incomes that are too low. I know that the T.U.C. are working hard at it, and we are anxious to do all we can to help employers and employees to arrive at a solution to their difficulties without endangering the gradually improving standards that we have struggled so hard to achieve. In the meanwhile it is vital to the continued success of our efforts that the policy of restraint should not be broken down either in the matter of wages, salaries or profits, until a better policy has been worked out to take its place.