HC Deb 31 May 1962 vol 660 cc1676-732

7.39 p.m.

Mr. Norman Dodds (Erith and Crayford)

This is undoubtedly an unexpected opportunity for me to raise a matter which is worrying to millions of people. And I welcome it in order to ventilate one aspect of the subject. I refer, of course, to the cost of living and, in that context, the rising cost of living. I submit that the turn it has taken recently is a matter for grave concern and that the prospect for the ordinary people of Britain seems gloomy in this respect.

Before dealing with statistics I shall deal with the matter in terms of human welfare. I have a neighbour with two children who is proposing to go on holiday this week. The breadwinner is a civil servant. Two days ago, he told me of the increases in his budget during the last few weeks. He finds himself in difficulty, so much so that the idea of going away on holiday is marred by financial considerations.

The index of retail prices rose by two points in the five weeks between 13th March and 17th April. The index has risen as much during the past twelve months as it did in the previous three and a half years. There was a hope that prices would have reached their peak and that, at long last, the Government would he able to follow their promise that they would see that prices came down. What is particularly disconcerting is that the past twelve months have been the period of the so-called pay pause. I need not emphasise that, if the situation is such that it is necessary to have a pay pause at all, it is essential that some form of control should be exercised, or action taken by the Government, so that there will be restraint in prices.

Perhaps the Financial Secretary will say that, during the period of the Labour Government, prices rocketed. That was during the period of the Korean War, of course, and it is the fact that this country was at that time at the bottom of the league in regard to price increases because of the control which the Labour Government had exercised. No one can deny that the terms of world trade have for long periods since been very favourable to this country, yet prices have never come down. During 1960–61, the terms of trade improved by 3 per cent, but never has there been a sign of price reductions.

The Financial Secretary may imagine that these accusations are just a political move. I remind him now that there are other minds, apart from those in the Labour Party, which regard the situation as serious. On Monday of this week, the editorial in the Evening News—which certainly does not come from Transport House—said: The spiral again. Every housewife knows how in the past few weeks food prices, even excluding vegetables hit by the cold weather, have risen quite drastically in some cases. The latest index of retail prices showed a 2 point rise in the five week period ending April, 17th; and the figure has almost certainly risen since. Those were the words of people who, I should have thought, were friends of the Government.

A few days ago, we had the results of an excellent survey carried out by the Oxford University Institute of Statistics. This survey revealed in terms that for a family of five having a modest diet the cost has gone up by 6s. 7d. a week. This can he a cause for some alarm to fami- lies already running near the wind with their budget.

It is not unkind to recall that the Government said, before they were elected in 1951, that A Government will be judged according to the effect of its programme on rising prices. That was a promise. The Government must take note of the present trend and tell us what they propose to do, particularly during the period of the pay pause. If there is restraint in one direction, we need action and, if necessary, control in another.

Today, eleven years after the Government's promise was made, little can be seen of any attempt to keep faith with the public. The Government have pursued policies which have put up living costs—and they have done it deliberately—from housing to fares, from coal to lollipops and petrol. One could draw up a long list of things which people need in their everyday lives and which are costing more and more, clearly showing that the Government have no concern at all for the cost of living; or, if they have, they are quite unable, for whatever reason, to take any action about it.

The hon. Gentleman will remember the posters put up eleven years ago, showing a large diagram and carrying a slogan about mending the hole in the purse. That campaign had a tremendous influence on ordinary people, particularly the housewife, who has a difficult job to do. But has the hole in the purse been mended? Whatever pause there was for a period was due to the fall in world prices, and even then we were not at the top of the league table in Europe as regards price restraint. The Government got by just because world prices came down.

Any Government who hope to call with any moral authority for wage restraint must be seen to be doing something to control the rising cost of living. The Government should be pleased that the women have, for some reason, lost the militancy of the suffragettes. In the 1940s there was a group of women called the Housewives League, but we have not seen them since the Government last came to power. However, there is evidence now that women as well as men are, at long last, becoming very worried about rising costs.

The problem of restraint has two sides. I want the Prime Minister to take an interest in this matter. A month ago, the President of the United States made a blasting attack on those who were putting up prices in the United States. Is it too much for our Prime Minister to say a few words? In this debate, we are talking about the welfare of the consumer, yet this is being looked after, if that is the word, by six different Government Departments. If the Government were really serious in wanting to look after the consumer and control the cost of living, they would be keen to establish a Ministry of Consumer Welfare, or, at least, a department of the Board of Trade to deal with it. One of the problems here is the multiplicity of Ministries involved.

Although it is true that expenditure on food represents, on average, less than one-third of the usual family's expenditure, it represents a large part of the weekly budget of old people. The present prospect for a very large number of poor old people is bleak.

The price of foodstuffs generally has rise less quickly than that of other items in the index. The slowest rises have been among what I might call convenient foods, such as canned, quick frozen and cooked foods which are not bought to a very great extent by old people. The rises which have particularly affected the lower-paid workers and the elderly people have been among items such as bread, red meat and vegetables, which constitute a very big percentage of their diet. There has been a steep increase in fuel costs which, in the main, have to be met at the end of the summer period. It is a bleak time for the lower-paid workers and particularly for the poor old people.

I said earlier that the Government have not done anything to help to restrain the increase in the cost of living, but there is plenty of evidence to show that they have played havoc with it in one way or another. There is the high cost of housing and the Rent Act. Many people cannot think of buying fuel at its present cost and they have to cut down on food. There have been increases in the rates as a result of the Government's financial policy. The Treasury is the main nigger in the wood pile. Young couples wishing to buy houses are faced with high interest rates on their mortgages. Whether they are buying a house or whether they are in a council house, people are being affected by the Government's policy.

There is Purchase Tax on clothing. I should have thought that, with this businessman's Government at the helm, and since the war has been over so long, the Purchase Tax on clothing could be eliminated. It costs people a great deal of money to get to and from work. There have been increases in fares, petrol and licence fees.

Another situation which has arisen in the last week or two is the meat dispute. The Minister of Agriculture, Fisheries and Food in the House warned the butchers that the customers would 'have something to say if prices did not come down, but he does not propose to do anything about it and he has rejected any form of control. I wonder whether the Minister is right? In fact, I wonder whether he worries if he is right. On Wednesday, the President of the London Retail Meat Traders Association said: During the past month wholesale prices of meat have been rising steeply in almost all categories—for instance, 20 per cent. on New Zealand lamb, 17 per cent. on English beef, 12 per cent. on Argentine hind quarters of beef Wherever the meat comes from, the price of it goes up. If people want meat, they will 'have to pay more for it.

The Minister blamed the butchers in this matter. Do the Government propose to look into the increased price of meat, or do they intend merely to blame the butchers? Will the butchers say that it is not their fault, but that of the wholesalers? Is not this a matter for a Government concerned with the welfare of the people and who do not want those people to ask for increased wages because of the difficult economic situations? When will the Government wake up and show that they are ready to take an interest in the daily lives of the people?

If the Minister of Agriculture is not right, who is? If he is wrong, do not the retail butchers deserve an apology? Let us hear that there will be a Government inquiry into this so that the customer can know whether he is being looked after by the Government. I understand that a call was made to the Ministry of Agriculture, and a baffled official said, "We cannot understand what is happening. There seems to be no reason for the increases." What a lot of good that is to the housewife when she goes to the butcher's shop. It seems that the Government are out to disturb every facet of our national life in one way another. One day it is the nurses, the civil servants, and the loyal workers in various Government Departments. So successful have the Government been in disturbing the community at a very difficult time that people are thinking of striking who have never thought of doing so before.

Recently, my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) delivered a blast at the Treasury, and the Financial Secretary did not contradict it. My hon. Friend said that he would chase the Government until they do something about this matter, and I think that he meant it. He stated that during this period of difficulty company profits have increased by £1,000 million in less than ten years. But the annual taxation paid on those company profits has gone down by £58 million."—[OFFICIAT. REPORT, 29th May, 1962; Vol. 660, c. 1181.] There is no doubt that in the last eleven years there has not been much concentration on mending the hole in the purse, but there is plenty of evidence to show that the privileged people have been doing fairly well.

The Financial Secretary to the Treasury (Sir Edward Boyle) rose——

Mr. Dodds

It is no use the Minister coming to life now. He did not get up when the figures were given across the Table on Tuesday, and I can only assume that they were accurate. If he denies it now, he knows very well that my hon. Friend the Member for Cardiff, South-East will be back on the scene before long. It would, therefore, be as well if the hon. Gentleman accepted it.

The rise in prices poses a difficult problem for the Government. They cannot ignore it; they must do something about it. We have had what has been called "the guiding light". Let it shine on both sides of the counter. I hope that the Government can find a way of solving this problem because, although I am a member of the Opposition, it gives me no pleasure to see hardship and distress among the lower income groups and among old people. A medical officer of health reported a few days ago on the high percentage of old people who are suffering from a lack of food. Yet, in 1962, we hear of the surtax payers getting £83 million. It seems that the object of the Government is to lower taxation particularly for the people at the top and that they are ready to impose indirect taxation wherever possible. Who would have believed in 1951 that there would be a tax on children's sweets and lollies? That shows how low we have sunk in the fiscal sense.

Like my hon. Friend the Member for Cardiff, South-East, I promise the Financial Secretary that we shall return to this matter. I like the hon. Gentleman as a man. I am sorry that he is being kept here so long. He is a very agreeable chap. Whatever may be the situation, he always makes a good defence for the Government, and I congratulate him on that. But this is not an isolated attack on the rising cost of living. It will be repeated again and again. Therefore, this is merely a warning that the Government must "get cracking" to show that they mean business and will endeavour to control the rise in prices which, if it continues, may destroy everything that the Government or anyone else may seek to achieve in the next few years.

Sir E. Boyle

May I say to the House that I do not want to be discourteous, but that this debate came on at short notice and that, in view of what the hon. Member for Erith and Cray-ford (Mr. Dodds) has just said in his speech, it may be necessary for me to leave the House presently for further information while hon. Members are speaking.

8.0 p.m.

Mr. Cyril Bence (Dunbar ton shire, East)

We are all grateful to my hon. Friend the Member for Erith and Cray-ford (Mr. Dodds) for taking the opportunity to initiate this debate on the rising cost of living. It is good to see back benchers on this side taking these opportunities and showing their Parliamentary skill.

Mr. Sydney Silverman (Nelson and Colne)

Where are the others?

Mr. Bence

Generally speaking, hon. Members on this side are often more alive and more awake to the possibilities and to the things that can be done within the traditions, the constitution and the Standing Orders of the House. We on this side are always much more alive to our opportunities, and quicker to see them so that we may press the complaints and grievances of our people.

I support my hon. Friend the Member for Erith and Crayford. I hope that he will not mind if I speak about Scotland. In the last week, I happened to be in West Lothian, where a by-election is pending. I was shocked by what I found when going around some of the lovely villages built by the West Lothian County Council, with their lovely areas and fine council houses. I canvassed, knocked on doors and met old people. In house after house, they do not apply for National Assistance in that part of Scotland. I have neved met such independent people. Their children are away. Over a quarter of a million have left Scotland in the last ten years because there is no work for them, and they have gone south.

The population in the villages is almost stable and mainly old people. In discussion with shopkeepers, one discovers that because of reduced turnover and increased rate burdens on their commercial premises, they find it difficult to get a living without hardening prices. It is an amazing phenomenon that prices are higher in many of these areas of impoverished Scotland.

I checked prices in Bathgate and in Broxburn, as well as in Bo'ness, and I found that prices in shops were much higher than in, say, Finchley or Putney or the environs of London, for the simple reason that unemployment, low incomes, the departure of the young people, the small turnover and the increasing burden of rates and taxation means that the small shopkepers and traders of all kinds must get a bigger gross profit.

Therefore, we in Scotland suffer in both ways, both from heavy unemployment and from the high cost of administration because of the tremendous social task. We have high taxation, high costs and high prices amongst a people whose income is lower than incomes in the Midlands and the South. The cost-of living problem in Scotland is much more severe than any Member of the Government realises.

Too often have the Government visualised the economy of Scotland and conditions there as a reflection, as it were, of conditions in the Midlands and the South. The true picture is entirely different. It is like being in a different world. I wonder sometimes why we get the sort of economic policies which are expounded from the Government Front Bench and how the Government believe that the policy which they are following for the benefit of the South can avoid doing more damage to Scotland.

Earlier this evening, we discussed Regulations concerning consumer protection—very good Regulations indeed. I am in favour of protecting the consumer against manufacturers and distributors who mislead the consumer and who sell products which are not up to standard, and sometimes of standards that are indeed dangerous to the consumer. Consumer protection Regulations were brought in because the Government, quite rightly, have taken action to prevent consumers from a dangerous form of oil heater.

We take action to protect consumers against their homes being destroyed by fire and there are all sorts of legislation to protect consumers from dangerous drugs, but one action which, apparently, we are not prepared to take is to protect the consumer from being exploited. Those who control the means of production and distribution seem to be able to sweep in any benefits that we may get in the process of our labour and of producing goods and services. The position seems to be worse in Scotland than anywhere else.

I quite understand that goods which are pitched into the market will fetch the highest price according to the quantity of money that is searching for those goods. The argument of the Government is that when too much money is chasing too few goods, the price of the goods will rise.

Ever since the Government have been in power, we have had rising prices and rising costs over the last eleven years. There was a short period about two years ago when there was some stability, but twelve months ago prices started to rise again notwithstanding that there had been a fall in world prices in practically every country. Prices were falling on the Continent and in the United States, but here they were rising.

We know that in a free economy such as ours, if money is distributed through investment or higher wages and more goods are produced, the distributor or entrepreneur will mark up his goods and get a bigger price for them. If that happened uniformly throughout the country, prices would fall in Scotland, with its 80,000 unemployed, because there would be an area of low incomes and not much money. One would imagine that under our so-called free economy conditions, prices up there would be lower.

That is no longer true, however, because practically all the goods that we produce, no matter who produces them, are marketed through trading associations and by agreement with trading associations, so that a packet of cornflakes costs the same in Scotland as in London.

In some cases there are extra costs. Some years ago, I wanted a wheelbarrow and went into a shop in Glasgow, where I saw one for £ 3 15s., which I thought was dear. It was made, I believe, in Gillingham, Kent, or somewhere in that area. I asked the shopkeeper the reason for the terrible price. He replied that it was the carriage from London.

I decided instead to try a shop in London, where I saw an identical wheelbarrow marked up at £2 10s. Carriage to Glasgow was 4s. 9d. I get fed' up with traders in Scotland telling me that things are dearer up there than down here because of carriage. I asked once about plums. I remember in 1950 buying plums in the Bullring, Birmingham, for 2d. per lb., when plums grown in Lanarkshire were 8d. per lb. in Dunbarton. Again, I was told that carriage accounted for the difference. The railways assured me, however, that it did not cost 6d. per lb. to send plums from Evesham to Glasgow.

Mr. Deputy-Speaker (Sir William Anstruther-Gray)

Order. I fear that the hon. Member is allowing his speech to go outside what is a Government responsibility.

Mr. Bence

I am talking, Mr. Deputy-Speaker about the increase in the price of goods marketed in this country and about some of the reasons given by some of the traders for those increases. I believe that it is the responsibility of any Government to maintain full employment and stable prices. The Conservative Government say that is what they want to do. I accept that. But my challenge is that they do not do much about it.

Mr. William Ross (Kilmarnock)

On a point of order, Mr. Deputy-Speaker. The index of retail prices published by the Ministry of Labour gives as one of the reasons for the recent increase in the cost of living the increase in the price of fruit and vegetables. Surely, therefore, it is relevant in a debate about the cost of living to refer to such articles.

Mr. Deputy-Speaker

Yes, I accept the hon. Member's point of order, but as I was listening to the hon. Member for Dunbartonshire, East (Mr. Bence) I thought he was alluding to the action of an individual trader in increasing unreasonably the price of an individual article, and I thought that that was going beyond the responsibility of the Government.

Mr. S. Silverman

Further to that point of order, Mr. Deputy-Speaker. One appreciates to the full that the Government are not responsible for the prices that a trader in Scotland asks for his goods. They are equally not responsible for the wage negotiations in the private sector of industry. Nevertheless, the Government have a general policy about wages, and they are able to give advice, and they do so, and they correlate the advice they give to the private sector on these points with the policy they adopt in the nationalised industries. This, equally, is not their direct responsibility. It becomes their responsibility because they make it so in advancing a general policy about wages. What my hon. Friend the Member for Dunbartonshire, East appears to me to be saying is that it is equally relevant to have a general policy about prices, and he is showing how it works.

Mr. Deputy-Speaker

Yes; I do not think that there is very much between the hon. Member and myself. It was the taking of this individual case of a private trader, who I do not think was the responsibility of the Government. It was at that point, and that point only that I interrupted the hon. Member.

Mr. Bence

Your checking me, Mr. Deputy-Speaker, has certainly been very enlightening. We have had a very able and lucid explanation——

Mr. E. G. Willis (Edinburgh, East)

Further to the point of order, Mr. Deputy-Speaker. We are very grateful for your help, but surely it is in order to quote what one private trader or another is doing and to suggest that the Government ought to take some action to stop such exploitation.

Mr. Deputy-Speaker

The answer to that is dependent upon whether the action that the hon. Member is advocating would entail legislation, because it is not in order for us, as hon. Members know, to discuss legislation in detail on the Motion for the Adjournment.

Mr. Ross

Further to the point of order, Mr. Deputy-Speaker. I think it is important that we should bear in mind that the index of retail prices is compiled on the basis of taking prices in various parts of the country. Surely if there is anything at all that is relevant to a debate about the cost of living, it is the price in any part of the country of any item which appears in the Index.

Mr. Deputy-Speaker

I do not think that the price of a individual article, a single case citing a single tradesman, can rightly be described as the responsibility of the Government in the context of this Adjournment debate. I interrupted the hon. Gentleman because I thought that way, but the debate can continue as it has done hitherto without interruption from me and, I think, without hon. Members getting out of order in any respect.

Mr. Bence

I suffer, Mr. Deputy-Speaker, from the fact that I am a countryman and whenever I see a huge wood I know it is composed of a great many trees and I look at the trees. When I see statistics, I know that they are drawn from the figures of many little firms. That is why I quoted an individual case; I know that it must constitute a part of the statistics.

But the Government take action in some fields which impinges upon prices and costs to individuals, such as in housing. They exercise a control element in rent structure. We have legislation for Scotland giving the Secretary of State power to determine the rent. Electricity can also be cited. The Report of the South of Scotland Electricity Board states that the price of electricity has been raised so that the Board may comply with the Government's new policy requiring that it should create sufficient reserves itself for its capital development. Therefore, the increased price of electricity is the result of Government action. If that Report is not accurate, I hope the Financial Secretary will be able to tell us.

Government action of this sort in raising prices should figure in the cost of living index. Potatoes provide another example. The price of agricultural products is determined in large measure by Government policy. I recently saw a leaflet from the Tory Central Office asking people who were fighting in the municipal elections not to fight as Independents or Progressives but to say what they were—Conservatives. In my constituency they would not dare do that in present circumstances because of the price of potatoes. We are taxed in order to subsidise the farmer to produce as much as he possibly can, and then another Department fines him because he has produced too many potatoes. Then we find we are short of potatoes, and the result of that is that Scottish housewives now cannot buy potatoes. The potato is now a luxury. Scots going into fish and chips shops now say, "Three pieces of fish and one chip". It is "fishes and chip" now, not "fish and chips". This is despite the fact that thousands of pounds of taxpayers' money has gone to subsidise the farmers.

There are fields in which the Government exercise very powerful control over prices, but there are others where they seem to be completely indifferent to the prices charged. I am the son of a butcher. I have been in Scotland for eleven years and every weekend we get the most beautiful beef. I have had in Glasgow the finest beef in my life. But it is 10d. lb. dearer than in London.

Mr. Ross

It is not the carriage, but the quality.

Mr. Bence

It is beautiful meat. I will not mention the name of the firm, because that would not be fair to other butchers.

Mr. Willis

My hon. Friend could mention the breed.

Mr. Bence

Aberdeen Angus. My hon. Friend knows the name as well as I do. One can get this meat in London much cheaper than in Scotland.

Mr. Willis

But the buchers here have not reached the point when they know how to cut joints. That is the trouble.

Mr. Bence

During the last five years, it has been suggested to me on several occasions that when a butcher buys cattle alive from the stock market he is left with tons of what is called coarse meat within the bull, since, because of the rising standard of living, people are increasingly wanting better cuts.

This coarse meat was sold before the war for manufacturing purposes, and the manufacturers tender for it. That trade is now in the hands of very small groups organised together almost in a ring. There used to be a wholesale butchers' ring in the stock markets before the war. They got together and bought the cattle cheap. I wonder to what extent the butcher is being forced to sell for manufacture the coarse meat at very low prices because of a kind of ring on the manufacturing side. The Government should inquire into this.

It is extraordinary that the terriffic drop in wholesale prices of lamb, beef and mutton in recent years has not been reflected by any corresponding drop in the shops. Not all butchers are rogues. Of course, there are rogues among them as there are among Members of Parliament— —

Mr. Ross

They are now on their way home.

Mr. Bence

—but I am convinced that the prices which the butcher is getting from the manufacturing side are inadequate, I am sure that the housewife would get cheaper meat from the butcher if he could get better prices from Wall's, Unilever, MacFisheries, Bird's and other firms. These are the people who buy the coarse meat for the deep freeze. They are powerful organisations and it is they, not the housewife, who are get ting the benefit both of the subsidy and of the fall in the price of cattle. The Government should examine what is happening in the wholesale and retail distribution of meat. Here may lie part of the answer as to why the butcher cannot bring dawn his prices to a more reasonable level.

It is really rather insulting to all sorts of workers, whether they be civil servants, nurses, doctors or factory workers, for the Government to go on talking about the first need being to stop wage rises. The Government say that we cannot have continual increases in wages year after year without more production. We recognise the economic arguments, but what about the housewife? She sees her husband perhaps working a few more hours a week and hears him talk of new machinery and new techniques, with more and more coming off the production line. Yet at the same time she finds her real income either not increasing or increasing very little.

If the pay pause is maintained what will be the situation as electricity and gas prices, and rents, rates and Purchase Tax—even on lollipops—go up? As an engineer, it makes me wonder what use it is to produce more and more and to concentrate intellectual effort on devising new machines when all that happens is that we get higher prices from a more efficient productive machine.

8.25 p.m.

Mr. Dan Jones (Burnley)

I am glad that my hon. Friend the Member for Erith and Crayford (Mr. Dodds) raised this subject because a very challenging situation faces the Government. The Conservatives did not say in 1951 that they would stabilise the cost of living. They said that they would stabilise it for a time and then bring it down. Those were their terms of reference from the electorate in 1951. But after eleven years of office it must be agreed that they have brought about a most remarkable situation.

The gates of the House of Commons have been clogged during the last two or three years with people coming here to fight for wage increases—not to increase their standard of living, but to maintain it as it is. It might be said of them that they are running very hard to go backwards. That is the situation which the Government should look at with a little more concern than hitherto.

In the Press tonight there is a statement by a man whom I not only respect but revere. I worked with him for a number of years. I refer to "Bill" Carron, President of the Amalgamated Engineering Union. He is a man with foresight and with far more moral courage than any right hon. Gentleman opposite. He is a man who has been pilloried for his statesmanship in British industry. That is "Bill" Carron and there is no hon. Member on either side of the House who can gainsay those attributes. He has made a remarkable contribution to British industry.

Some months ago, he presented a case for a wage increase for engineers, the basis of which was the increase in the cost of living. The application was rejected. We cannot help the feeling that that rejection was not unassociated with Government policy. However, the Confederation of Shipbuilding and Engineering Unions has very properly held a ballot to determine what action should be taken in view of the rising cost of living and the dogmatic refusal of the employers to concede any wage increases. Tonight, "Bill" Carron has given fair warning "You will reject my approaches now at your peril". This is the view of a man who has given years of statesmanlike service to industry and whose moderation has been a hallmark.

Engineers have been included in the many deputations which have come to the House about the cost of living, deputations which have come from the professional classes, the technical classes, and what we choose to call the labouring classes, not a very complimentary term and not one with which I agree, but one which is generally used. I have worked with some of these men in engineering, men who have made a major contribution to an industry which, in its turn makes the greatest contribution to our export drive. One would have expected these people to have received some consideration because of their contribution to British industry generally and to British exports and the resulting valuable contribution to our balance of payments. I was told that skilled engineers working a regular 44-hour week cannot pay their way. One of the reasons is that they are buying their own homes, a desirable thing to do, but are now faced with increased rates of interest. This is a matter which the Government dismiss as a purely academic subject of high finance, little realising its tremendous impact upon a home which is receiving less than £10 a week after other deductions have been made. These are the factors which have now culminated in the warning of a man who is the president of a powerful trade union.

The Financial Secretary should seriously advise the Government that unless this position is controlled—and it can be controlled, as I shall explain—there will be more difficulties. There must, first, be stabilisation and an end of the pernicious pay pause and the antisocial and socially unjust climate which the Government have deliberately chosen to create by allowing the sort of profits about which we have just heard. Nor can we exclude from our consideration the Surtax payers who do not make that contribution to the nation's economic well-being which is made by the engineers, but who have benefited to the tune of £83 million. How can the Government expect wage restraint when they allow others to behave without restraint? The writing is on the wall.

Like my hon. Friend, I take no pleasure from saying that the cost of living affects the lower strata of society. My boyhood days were spent in a home where my mother was a widow and I know the hallmark of poverty at first hand. I do not need anyone to tell me about it. As I have said on many occasions, there are thousands of people who, because of the high cost of living, have had to sink their dignity and go to the National Assistance Board for a couple of shillings each week, and those who brought about this state of affairs just sit back complacently and take no action to help these people. That is just what the Financial Secretary is doing. His belly is well filled, his back is well clothed, and his home is well appointed.

I do not regard it as social justice that there are thousands of people who are feeling the vicious impact of the ever-increasing cost of living. The resultant poverty is familiar to me, and as long as I am privileged to come to this revered Chamber I shall go on repeating the injustice being done to these poor people. I wholeheartedly support my hon. Friend the Member for Erith and Crayford. His action in debating this subject deserves the credit not only of this House, but of the nation, and he is to be congratulated on attacking the Government for the short-sighted social policies to which they so passionately cling.

8.37 p.m.

Mr. E. G. Willis (Edinburgh, East)

I am glad of the opportunity to support my hon. Friend the Member for Erith and Crayord (Mr. Dodds), who has raised the question of the increasing cost of living. I do not think that anyone can look at the way in which people are living today, and at what is happening in the world, without being conscious of the impact being made on people week after week by the various increases continually being announced in the Press. These increases are not hidden. They appear as headline news.

An example of this is the recent 10 per cent. increase in the cost of electricity. This is wholly and solely the result of Government policy. On Tuesday, we had a long interchange with the Secretary of State for Scotland about 'the North of Scotland Hydro-Electricity Board having increased its prices. This has been done not because the board is losing money—in fact it is showing a substantial profit—but because the financial pundits think that the profit is not big enough. At a time when people are being told that they must not ask for more wages, when many of them are having their wages pegged and are unable to take action to improve them, the Government decide to introduce a policy which leads to increased electricity charges.

The Government are unable to wait six months or a year before introducing such a policy. They do not consider waiting until conditions are more favourable for bringing in these increased prices. Surely when an undertaking is making a profit there is no need for such measures while a pay pause is in operation? What kind of psychology are the Government displaying? What understanding have they of the way in which people react to this kind of situation?

This policy of increased prices is also being followed by the South of Scotland Electricity Board, and again it is not because the board is losing money. One would have thought that the Government, having asked for a pay pause and a limitation on incomes, would have said that they would defer the increases for six months or a year. What harm would have been done? The fact is that these increases are being made to meet the long-term policy of the Government with regard to capital expenditure and the return on capital. But the Government do not even do that. They expect the workers not to do anything about it, which is amazing.

One could go through the whole gamut of rising prices in Scotland—gas, electricity, coal, and a host of other things. When I was in Edinburgh last weekend I learned that there is to be a substantial increase in transport charges. It is not good enough for the Financial Secretary, as he did last Tuesday, to present a set of figures to the House and say: They are remarkable and provide the clearest indication I have seen … of the extent to which inflation has been due to increases in personal incomes which have increased more rapidly than the volume of production"—[OFFICIAL REPORT, 29th May, 1962; Vol. 660, c. 1151.] The figures do not do anything of the kind. They were asked for by my hon. Friend the Member for West Ham, North (Mr. A. Lewis), who asked by how much salaries had had to rise to take account of the cost of living. In the first column of the table of figures which were given we see the rises in the cost of living as measured by the consumers' price index which shows an increase of 30 since 1951—from 100 to 130. The next column gives us the increase in average wages and salaries. Average wages and salaries do not cover the whole of personal incomes by a long way. But the hon. Gentleman said that it was a clear indication of the way in which the present increases were due to increases in personal incomes.

I wish to make one or two points about this table. The Chancellor of the Exchequer told us that 3.6 of the 6.4 points by which the cost of living had increased during the past year were the direct or indirect consequence of the increase in personal incomes outstripping national production. The Financial Secretary could hardly contain himself. He was jumping up and down to say how good were these figures. They do not show the increase in personal incomes but in average wages and salaries. This means that they do not apply to hundreds and thousands—to millions of people.

We spent last Friday afternoon discussing the pensions of Service pensioners which have not been increased for years. But these pensions are part of their incomes and their total incomes have not gone up by the figure shown in this column because a large element has been stable for ten years. That would apply to hundreds of other people in receipt of pensions which they must supplement by going out to work. Neither do the figures apply to people living on small fixed incomes, returns from investments, and so on.

Like all averages they are very misleading. We might say that the average age of hon. Members present in the Chamber is 45. The truth might be that no one is over 45 and a considerable number might be below. But some would be above and that is how averages are worked out. I cannot accept an average as a good test. I know of hundreds of thousands of lower-paid workers who have not had this increase in their pay during the last ten years.

On the other hand, a number of people have probably had more. We cannot determine how people are living by a set of figures of this character; we must go into the homes of the people to see how they are living when they are dependent on small fixed incomes or on pensions which have not changed in ten or fifteen years.

Mr. Bence

Does my hon. Friend realise that unemployment in Scotland has increased from 51,000 to 80,000 and that a large section of the working population there have had their incomes reduced?

Mr. Willis

I agree.

Sir E. Boyle

On a point of order. I do not want to be discourteous, but it is extremely difficult to hear what is said when, instead of addressing you, Mr. Deputy-Speaker, and speaking to where the microphones are placed, an hon. Member speaks in the opposite direction.

Mr. Deputy-Speaker (Sir William Anstruther-Gray)

I am bound to say that it was not easy from this part of the Chamber to hear what was said by the hon. Member for Dunbartonshire, East (Mr. Bence). I am sure that hon. Members will bear that in mind.

Mr. Bence

I am sorry, Mr. Deputy-Speaker. My hon. Friend was talking about the increase in incomes in the United Kingdom. I pointed out that there had been an increase in the number of unemployed in Scotland from 51,000 or 52,000 to 80,000 and that there has been a terrific reduction in incomes in a large circle of working-class homes in Scotland.

Mr. Willis

I am grateful to my hon. Friend, and I will come to that later. In the meantime, is this an intimation that the Financial Secretary will tell his usual little joke?

Sir E. Boyle

No, it is not.

Mr. Willis

I am simply making the point that the average does not necessarily apply to everyone.

But the biggest omission is that the workers are entitled to share in the increased productivity of the nation—a fact which the Financial Secretary will probably accept. We therefore have to allow for the fact that productivity has increased during the past eleven years and that the worker is entitled to his share in this productivity, which substantially reduces the difference in these so-called review figures.

When we consider inflation we have also to consider a host of other factors —the extent to which credit is being created and to which capital expenditure is being undertaken on a vast scale. To select these figures and then to say that because the average salary has outstripped a certain level we are passing into a period of inflation which makes it necessary for the Government to adopt policies which have resulted in an increase in the cost of living, in my view is misleading.

Sir Cyril Osborne (Louth)

Is the hon. Member arguing that because many workers are not getting the average wage, therefore the better-paid workers ought to share with them their higher wages? For example, Ford motor workers earned last year an average of £23 8s. 4d. a week. Those are the official figures given by the company. The average industrial worker last year earned £15 6s. a week. The Ford worker is, therefore, getting about £7 a week more than the average industrial worker. The agricultural worker is getting only about £10 a week. Is it therefore the hon. Member's contention that workers who are paid better than the average ought to take lower wages so that the more poorly paid workers should be paid more?

Bearing in mind one other factor——

Mr. Deputy-Speaker

Order, order. I think that the intervention has already been on the long side.

Mr. Willis

What I was arguing arose from an exchange in the House on Tuesday concerning the manner in which the cost of living has risen. It has risen more in the past twelve months during the period of the so-called pay pause than at any other time since 1951. There was an exchange. The answer indicated that 2.2 points in the increase are due to the current shortage of potatoes and other seasonal factors.

It has been pointed out that the Government have helped to create the shortage of potatoes. It was said that 0.6 of a point was due to increased rents and rates. The remaining 3.6 points were due to factors associated with the fact that personal incomes were rising faster than national production. The Financial Secretary was delighted with this. He told us how revealing these figures were. However, the figures are not so revealing as he suggested. They certainly do not give the picture of the cost of living. They omit hundreds of thousands of families. We always have to accept average figures with the knowledge of what we are doing.

I have now reached the point where I was submitting to the Financial Secretary that this table makes no allowance at all for increased productivity, in which the worker is entitled to share. Therefore, his wages ought to rise more than the cost of living if he is to have his share.

Mr. D. Jones

The House should be aware that the White Paper issued by the Treasury makes it perfectly plain that the cost of living and increased productivity will not be the deciding factors in determining any increase in wages.

Mr. Willis

That supports my point. Increases in wages must not simply take into account increases in the cost of living. They must also take into account the increased productivity and what share of that increased productivity should be given to different groups of workers. At different times the increased share will be greater for some workers than for others, otherwise there would be no flexibility. There would be very little justification for the trade union movement if that was not possible. Part of the nurses' case at present is that they are now at the point where their share should be larger than somebody else's.

The figures and arguments presented on Tuesday about the cost of living were not relevant. What is more relevant is how different kinds of people are living. The impact of the increases in the prices of electricity, coal and vegetables will be far heavier upon the people in whose budget these items figure larger than on people in whose budget these items do not figure so greatly. Today the things which are going up so rapidly, and have gone up rapidly, are things Which people cannot avoid buying.

These are the things that people with the lowest incomes have to pay for. We have had increased National Insurance and National Health Service charges. We have had all kinds of charges imposed by the Government—for electricity, gas, etc.—all of which fall much harder on the man earning £8 or £9 a week than on the man earning £19 or £20 a week. Obviously, in these circumstances, the people at the lower level will suffer.

This is a serious situation. The Government should at least try to protect the people with smaller incomes by taking the action available to them and preventing this burden, brought about by their own policy, from falling upon these people. That is a fair request to make. It is a logical request to make when the Government are pursuing a pay pause policy. My criticism of the Government is that they have done nothing to prevent this burden falling on the people with the lowest incomes while pursuing this policy. They could do something about it. There is no need for an increased differential rent, or for an increase in the price of coal that will be coming in Scotland. When the Coal Board has been losing money for 13 or 14 years, surely it is not imperative for the Government to increase coal prices at a time when they are telling people that they must not have more wages.

The same applies to the increase in electricity charges. The electricity boards have been operating very successfully and making very large profits in many cases for the past twelve or thirteen years. Why, then, should the Government, at the time when they are telling people that they must not ask for more wages, put up the prices for the purpose of long-term policy?

In this there is no logic, rhyme or reason. These burdens fall more heavily on Scots people than on those living further South. The general level of incomes in Scotland is lower. We have a very large burden of unemployment and, as the climate is much more severe, more coal, gas and electricity are needed. We have a right to be concerned, and to point out to the Government that the general rise in prices has taken place since 1951, while the Tory Party has been in power, and while, in general, the terms of trade have been in our favour.

Those favourable terms of trade presented an opportunity to strengthen our economic basis and stabilise the cost of living, but that opportunity has been frittered away by the Government, first, by five years of a glorious beanfeast, with little idea on the Government's part of what they were doing, followed by a stop-and-start policy, not in accordance with the national needs but to win elections. We have the right to be critical and, of course, the Government have the right to answer those criticisms—if they can.

9.0 p.m.

Sir Cyril Osborne (Louth)

It is undeniable that an increase in the cost of living falls more heavily, proportionately, on the lower-paid worker than on the better-paid man. The increase in the price of coal, gas and electricity affects the old and those living in the North more than it does the young and those living in the South. That is undeniable, but the hon. Member for Edinburgh, East (Mr Willis) then reasoned that the averages that have been quoted do not represent the true facts because, he said, there is no such thing as an average person. He said that if the average age of hon. Members were 54, there was probably nobody of that age in the House.

It must be remembered that if the average industrial wage last year was £15 6s. and there were a certain number of people below that average, there must have been a corresponding number above it. That is what an average is— —

Mr. Willis

The hon. Gentleman has got this wrong. It depends how far below they were or how far above. A small number might be a long way above the average, and a much larger number fairly well below it.

Sir C. Osborne

An average is a matter of numbers and weighting.

What hon. Members opposite must face is that the last Inland Revenue returns, and I speak from memory only, showed that personal incomes amounted to £13,500 million, of which £830 million went to the Surtax payers— those earning more than £2000 a year. A few weeks ago I asked the Chancellor what would be the result if all income in excess of £2,000 a year net were taken from the Surtax payers and given to all the rest who were getting less. The answer was that the rest would get an extra 2s. 10d. a week.

Therefore, if the money is to come from the Surtax payer, the amount that can be given to the lower-paid worker to help him meet the increased cost of living is very limited——

Mr. Bence

The hon. Gentleman said that would be the result if that money was redistributed to everyone getting under £2,000 a year, but that would include people getting £1,850 a year. If the distribution of that money were limited to old-age pensioners, how much would each old-age pensioner get?

Sir C. Osborne

If the hon. Member puts the question to the Chancellor of the Exchequer I am sure that he will be given the correct answer.

Mr. Willis

That is not the argument. The argument is that the Government should be taking steps, by means of their own policies, to prevent increases in the cost of living.

Sir C. Osborne

But increases in the cost of living are in the main due to the costs of production and distribution. The White Paper issued a year ago stated that of our total industrial costs 62 per cent. were for direct or indirect labour. Therefore, it is not the Government who have put up costs.

Mr. Bence

Come, off it.

Sir C. Osborne

The hon. Member says, "Come off it". I will remind him what has happened in the coal mining industry. In the old days, when the miners were paid very low wages, coal was cheap, but now that we have given them a handsome wage coal is dear. If we pay high wages, what those wages produce must cost more. Therefore, since 62 per cent. of our total costs come from either direct or indirect labour costs, it is not the Government who fix the cost of living; it is what we pay ourselves for doing the work we have to do.

Mr. Bence

About eighteen months ago I bought a French salad shaker for 1s. 9d. Since then there has been a sales campaign all round the country and it is now sold everywhere for 8s. 6d.

Mr. Ross

Will the hon. Member for Louth (Sir C. Osborne) make a speech about I.C.I.?

Sir C. Osborne

Yes, I will. I am saying that if the workers who earn less than £10 a week are to have their incomes increased to meet the increased cost of living, ultimately the money can come only from the higher-paid workers. The figure quoted by the Ford Motor Company is that its average hourly-paid worker was paid £22 8s. 4d. a week last year.

Mr. Bence

The highest-paid worker?

Sir C. Osborne

The average worker. The average industrial wage over the whole country, on the other hand, was £15 6s. Therefore, if we are going to help the lower-paid industrial workers people like the Ford hourly-paid workers must take that much less. Furthermore, if we have to include—as the hon. Member for Dunbartonshire, East (Mr. Bence) was including—the old-age pensioners, the disabled, and those in the most dire need, not only must the Ford workers take less for what they are doing but the average industrial worker throughout the country must take a good deal less.

Mr. Bence

What about the stockbrokers?

Sir C. Osborne

Please be relevant. It is utterly impossible to take great sums from the relatively few very rich people and make a material difference to the lower-paid workers. There is little we can do by sheer redistribution of the national income to help the poorest.

The great complaint among skilled workers of all ratings is that the differentials have been narrowed too much. The amount of reward in salary, wage or profit is getting so small compared with what the unskilled worker receives that today there is insufficient encouragement and inducement for men to train and take responsibility.

This was said to me when I met the nurses in my constituency. They said that the skilled people are not getting nearly enough compared with the unskilled workers. If one redistributes to the point when there is not adequate return for skill and responsibility one destroys the efficiency of the economic machine by which we live. The poor would become poorer and, as a result of that scheme of redistribution, people would be poorer instead of better off. The hon. Member for Edinburgh, East, when speaking on behalf of the poorest section of the community and saying how they had to carry an increasing burden as the cost of living rose, should realise that if he wants absolute and complete equality of income——

Mr. Bence

My hon. Friend did not say that.

Sir C. Osborne

Surely that is the plea the hon. Member for Edinburgh, East made. I am trying to point out that such complete equality would not result in the old-age pensioner and the person living on a small fixed income being better off. It would slow the economic machine down to such an extent that we should all be that much desperately poorer.

Mr. Willis

The hon. Member for Louth (Sir C. Osborne) certainly misunderstood my remarks. I did not say at any time that I advocated the redistribution of everything we have. I said that, by their own policies, the Government should take what action they can to protect the lower-paid people. The second point I made was that as we increase our production each year so the workers are entitled to share in the benefit. I also said that as this increased wealth is shared out it should be done in a flexible manner because, naturally, certain groups would require a bigger share than others. The point is that we must have flexibility about all this so that there are varying degrees in this sharing-out process.

Sir C. Osborne

I am sorry if I misunderstood the hon. Gentleman's remarks. We shall look in tomorrow's OFFICIAL REPORT to get the matter straight. I thought that he was saying that the average figures of income that have been given were not correct in their application to certain people. He said that there were hundreds and thousands of people who had not benefited to the extent shown by those figures. He then suggested that the Government should do something for these people.

Mr. Willis

To protect them.

Sir C. Osborne

The only way to protect one section of the nation against an increase in the cost of living is to take something from another group and give it to the first.

Mr. Bence


Sir C. Osborne

Hon. Gentlemen opposite must realise that the Government and the nation have only a certain amount of income—the amount which the nation earns. The Government cannot redistribute between the various sections of the country more than we earn and produce. As I say, the only way to protect the poorer section, for whom the hon. Member for Edinburgh, East pleaded, would be—if it were to be done in the way that the hon. Gentleman would wish—to take something from another group.

Mr. Bence

What about prices?

Sir C. Osborne

If the hon. Member for Dunbartonshire, East means price control, if one controls prices one must either work that section of the economy at a loss or say to those who are working in that section—for instance, coal—"You will be paid less for the work you are doing." These are the two simple alternatives the Government would have.

Mr. George Lawson (Motherwell)

The hon. Member for Louth (Sir C. Osborne) seems to be talking as though the amount of wealth available was a fixed sum. Does he not realise that it expands or contracts? The basis of our argument against the Government is that their kind of policy has resulted in our economy scarcely growing at all. If production expanded the standards of life would also expand.

Sir C. Osborne

That is true, of course, as far as it goes; but at any given moment we can redistribute only what we have. Our economic growth depends upon our ability to sell what we produce. It was no use the National Coal Board two years ago producing millions of tons of coal which it could not sell, which it then dumped into unused quarries at a loss of £1 a ton, and which had later to be brought back again at the cost of another £1 a ton. It is no use producing goods one cannot sell. An expanding economy is no good unless it is an efficient economy.

We must sell in the world one third of everything we produce in order to pay for the 50 per cent. of foodstuffs we import and the nearly 100 per cent. of raw materials we must have to keep our economic machine going. No one can compel the foreigner to buy the goods we produce. Higher quality and good prices decide that. It is upon the standard of efficiency of our economic machine that the life of the country depends.

If we are to get men to acquire skills and take responsibility we must pay them adequately for what they do. We want greater differentials, not the smaller ones for which the hon. Member for Edinburgh, East was pleading.

Mr. Bence

No pay pause.

Mr. Lawson

A moment or so ago, the hon. Gentleman spoke in terms which suggested to me that he was under the impression that we could not induce men to seek to equip themselves for skilled work. This is not true. There are thousands of youngsters desperately anxious to become skilled tradesmen, but there are no jobs for them as skilled tradesmen. Every year, we are turning down hundreds of youngsters who want to go to university. We turn them down because there are no places for them. This is the nub of our contention. The facilities available in our society are not adequate to meet the needs of our youngsters or adults either. We are not growing rapidly enough and because we are not growing rapidly enough we are not able to keep our prices down to compete with other countries.

Sir C. Osborne

There is some truth in what the hon. Gentleman says — [HON. MEMBERS: "Hear, hear".]—but it is nothing like the whole truth. When the hon. Member for Edinburgh, East urges that the poorer section of the community should be helped, I agree with him. He wanted them to be protected. They should be helped, he said, because the cost of living falls more heavily upon them. That is a fair plea. However, this can be done only in one of two ways. We can increase our national productivity greatly. This cannot be done by the Government. It is done by management and workers together, and it will not be done by having strikes as there have been at the Ford Motor Co.— 69 stoppages in 32 weeks. The Government are not responsible for that. It will be done only by greater efficiency in our industry and by co-operation between management and workers to get the maximum out of our economic resources and the highest possible quality of manufactured goods at the lowest possible price.

The second way in which the protection for which the hon. Gentleman pleaded can be afforded is a straight redistribution of the national income. I have tried to show that, if we indulge to any extent in this method for helping the poorest, we shall discourage the men and women who must take responsibility and acquire skills to make the machine work.

Mr. Ross

I agree with much of what the hon. Gentleman has said in the last few seconds, but on the question of our inability to redistribute he goes completely haywire. He will be aware that, because of the provisions of last year's Budget, during the coming year we are doing a measure of redistributing. We are allowing a certain section of the population to have an increased disposable income of £83 million. That section is not the poorest but the wealthiest section of the community. Therefore, the hon. Gentleman, by his admissions, has shown us that redistribution can take place. If he thinks it wrong to redistribute in favour of the poor, what epithets would he apply to redistribtuion which he says exists in favour of the well-to-do? Does not he appreciate that in order to get the co-operation which he and I think desirable, the sort of redistribution that we are having at the moment completely destroys that possibility?

Mr. Speaker

Order. The purpose of an intervention is to elucidate something in the current speech. It is an abuse of debate to make a speech in the middle of another.

Sir C. Osborne

I was not saying that it was wrong to redistribute. I was not making a moral judgment about it. I was merely trying to put forward practical statistical facts.

In repeating the reply given to me by the Chancellor of the Exchequer a few weeks ago, I showed that, if everything taken from the Surtax payer over £2,000 a year net were redistributed to the rest of the people, it would make 2s. 10d. a week difference to them. This is not a moral judgment but a statistical fact. There is therefore a limit to the amount that we can give to the poorest by redistribution unless we are to damage the incentives to those who take responsibility and who have the skill for making the machine work. If we do that, we shall run into the danger of making the machine break down.

Even Communist countries have differentials much greater than those in this country. They do not run on absolute equality. The last time that I was in Russia I found that the chairman of the scientific committee was paid far more money net than anyone in this country, since the Russians have no Surtax, like we have. Their Income Tax is 13 per cent. flat, whatever may be one's income. Therefore, a share redistribution cannot do for the poor what the hon. Gentleman wants it to do.

What both sides of the House must do is this. We must ensure that the goods which we produce, and which we must sell abroad to maintain even our present standard of living, must be cheaper and better in quality than they have been or we shall not sell abroad. When considering our standard of living, our costs and the poverty of certain sections of his country, I beg hon. Members to remember how lucky we are as a nation. The United Nations' per capita income figure given about six months ago shows that the average income in this country is £387 a year. In India it is £19, in Pakistan £24 and in Nigeria, £30. If we are to have real equality, international socialism, and if all wages throughout the world were average, they would not come to 50s. a week.

Hon. Members plead for equality. I remember the then Mr. Herbert Morrison saying years ago that national Socialism was not enough and that we must have international Socialism—a wonderful ideal. I want hon. Members to face the reality of it. If the world's wealth were redistributed in the way that the hon. Member has been pleading, wages in this country would be less than 50s. a week.

Hon. Members opposite should not let their hearts run away with their heads. Certainly we ought to do a great deal more for those with lower incomes, for the pensioner, the disabled and the like, but we cannot do it on the cheap. We cannot play the good Samaritan and let somebody else pay. If we are to redistribute the country's income to help the poorest of the poor, the better-paid worker must pay his share.

I beg hon. Members opposite to go back to men like the Ford workers, who have been getting on average over £22 a week and who are striking for more, and to tell them that if the men getting £10 get more, the Ford men must take less. If hon. Members opposite will face those realities, I will come with them.

9.27 p.m.

Mr. Laurence Pavitt (Willesden, West)

The hon. Member for Louth (Sir C. Osborne) has succeeded in stand ing the debate upon its head. My hon. Friends have endeavoured to raise the point of the rise in the cost of living and in doing so have tried to restore the balance not only in this House, but in the country, where we are invariably preoccupied with incomes and with production and not with how that income is able to be spread out and what happens in the sphere of consumption.

Our complaint is that over recent months in particular, we have continued to emphasise the economic aspects of wages and incomes, which, as the hon. Member's contribution has shown, are the opposite side of the coin. We continue to talk about incomes and the pay pause without paying sufficient attention to the rise in the cost of living or to what happens at the point of consumption.

The hon. Member has made the mistake of suggesting that hon. Members who have spoken from this side are preoccupied with equality. This debate is about equity. It is a feeling of gross unfairness who has animated my hon. Friend the Member for Erith and Cray-ford (Mr. Dodds) to initiate this debate, for which we are all grateful, and which has been the major theme throughout the speeches from this side.

The hon. Member for Louth is in the same difficulty as his right hon. and hon. Friends on the Treasury Bench. In seeking to make a case the hon. Member has to deal with averages. That is precisely the difficulty of the Treasury, that in making a policy it deals with averages. When it comes to dealing with the ordinary man or woman, whether a housewife or an old-age pensioner, in our constituencies, there is no such thing as the average. Everybody has a different basis. For that reason, our legislation is always a blunt instrument. It is difficult, also, to take action on averages.

I warn the hon. Member for Louth that although he may know that the average depth of a river is only 4 ft. and he happens to be 5ft. 8 in., if ever he wants to cross he ought not to be governed by the figure of average depth, because he might drown in the process.

Sir C. Osborne

I can swim.

Mr. Pavitt

What we on this side are pleading for is not so much the worker in productive industry, but the housewife, the person who, at the end of the week has to lay out the money, but who finds that in spite of the Government's pay pause, whereby the amount of money remains the same, prices continually rise. I refer in particular to the people with young families—for example, to the housewife who has been earning and whose family has had two incomes and whose hire purchase has, perhaps, grown more than it should. When the family is young, the housewife has to look after them. Consequently, when prices rise, their incidence is unfair upon this section of the community.

The problem of the old-age pensioners has been mentioned. How deplorable it was to learn from the reports in the newspapers this week of the annual conference of the National Federation of Old Age Pensions Associations about pensioners taking one shoe to be repaired because the cost of leather and repairs means they cannot afford to have two shoes repaired at once. It is this sort of thing which the Government should take into consideration in the action which they pursue to maintain a stable economy and prevent inflation. There is not only the question of incomes; there is also the question of how best to secure value for money in the laying out of incomes.

The problem of differentials has arisen. My hon. Friend the Member for Edinburgh, East (Mr. Willis) pointed to some of the special problems in Scotland. In London, we have been faced since 1957 with colossal increases in rents, due to the 1957 Rent Act, not only on decontrolled houses but over the whole range of rented properties. People living in industrial areas like mine are faced with these increases. A much larger proportion of their income is now having to go on rents, and that is not compensated by a 2½ per cent. pay increase. A constituent of mine came to my advice bureau last Friday. He had three children. He had a good job and is earning £11 10s. per week. His rent is £4 15s. It is extremely difficult for a man with that kind of pay to say "For the sake of the country's economy, I can ask for a pay increase of only 2½ per cent. or 6d. in the £".

From time to time in connection with the pay pause we have debated the way in which we have got to maintain steady prices and a steady account. But, whereas the Government take very definite action to keep down wages, they take very little action to make sure that the cost of commodities does not rise to undue proportions. There is the question of equity—not just the £83 million to the Surtax payers but that fact that £19 million of that was in respect of unearned income. It is true, as the hon. Member for Louth has said, that the spreadover does not make a great deal of difference financially to our 52 million people, but it makes a difference to their intense feeling about being treated unfairly in difficult circumstances. I can assure the House that if anyone is prepared to give any of the old-age pensioners in my area another 2s. 10d. a week, that would not be chickenfeed to them. It would be an extremely important contribution and enable them sometimes to stay up a little later instead of going to bed with a hot-water bottle at half-past seven because they cannot afford coal—which is still happening in 1962. It is on things of this kind that we want action by the Government.

We recently approved the giving of £78 million to farmers because of the difficulty over the price of meat. Hon. Members who went home and discussed this matter with their wives found themselves standing in the dock trying to explain how it was that the farmers had had to be subsidised to the extent of another £78 million when the price of meat had never gone down during the last five years but had only gone up. We appreciate that there are technical arguments on this, but the housewife is not interested in them. She is interested only in whether her husband's pay packet will feed the family for the week, and she looks to the Government for protection in such matters.

The nurses are told that they can have a rise of only 6d. in the £because the country cannot afford more. Yet at the same time everything that a nurse buys goes up in price because the cost of advertising must be passed on to the consumer. If the nurse is fortunate enough to get leisure time, and is not too tired to look at television, she learns that she can look a little lovelier each day if she spends money on certain commodities. The whole impact of creating a seller's market is that those who are poorly paid are encouraged to spend money on things that they might not otherwise think so necessary or desirable. Naturally, a nurse will suffer a sense of injustice when she has to pay the high prices which £1,000 million of television advertising brings, and which she cannot match up to in terms of her pay packet.

If the Government are really serious about this, they should be prepared to take action on prices as they are prepared to take action on pay. It is their responsibility to take action to keep down prices, especially the prices of essential commodities. Yet, at a time when there is this feeling of unfairness among the wage earners, the cost of living has risen by two points. There is no way in which the consumer can protect himself. That is Why we complain about the way we are unable, in this House, to give adequate time to the subject. This is a purely accidental debate. But there is no sense of urgency on the part of the Government in dealing with what hon. Members have shown to be an urgent matter.

The production workers have strong pressure groups in their trade unions, capable of adopting sanctions at times in order to try to get benefits for themselves. The employers and producers have their own strong associations, such as the F.B.I. But when a consumer is charged an unfair price for an inadequate or poor product, what sanction has he? How can he possibly make any impact? What pressure can he exert to bring down prices to a reasonable level?

As is so often the case, voluntary associations have had to lead the way. There is the Consumers Association's Which? and there is Choice, put out by the B.B.C. They endeavour to keep the cost of living down, but they have very inadequate resources to pit against those of the forces which are trying to keep prices up. If the Government intend to tackle this matter, I hope that they will be prepared not just to do so in general terms, but to give specific help to those parts of the community who are hit most by the cost of living. This is not a matter only of geographical areas, but of the categories which have already been mentioned.

In recent years there has been an increasing trend away from negotiations purely on wages, hours and conditions, to what are called in modern jargon "fringe benefits". The Government consider whether "fringe benefits" might not be given to sections of the community like those living on fixed pensions, on whom the cost of living rises weigh most heavily.

I am encouraged to be somewhat selective by the hon. Member for Louth, because he was very selective in the averages which he chose. He chose his cases, as we all do, to give his argument maximum weight. I very much liked the kite which he flew about higher-paid workers giving something to lower-paid workers. There are a number of variations on that theme which are interesting.

For one brief period, before I became a politician and when I was idealistic, I joined a national average group which did precisely that for some time. I would be only too pleased if Mr. Cotton and Mr. Clore were prepared to join with Members of Parliament to have some kind of equalisation. Perhaps they could share some of their wealth with some of ours, and even help hon. Members who, like myself, do just one job as a politician in the House and try to keep their costs of living down and bring some happiness into their families and not worry their wives too much about the cost of living.

We are asking that this debate should initiate some fresh thinking and, more important, fresh action on the part of the Government so that we get away from the obsession that when there is pressure the first thing to happen is to have a cut down. There is always a cut-down of investment when there is pressure, but I must not follow that theme too far or I shall be doing precisely what I accused the hon. Member for Louth of doing— standing the debate on its head and talking about economics.

We want something which will provide a feeling of fairness in the community. If it is necessary in the national interest to adopt economic policies which are unpopular, let there be a feeling that no section of the community is being penalised for the benefit of another. For this to be done effectively, we need consideration of the factors which affect the cost-of-living index; we need something to be done in the realm of consumer protection in the standard, quality and price of essential commodities. We need that especially if we are to avoid over-inflation of prices so that goods are put out of the reach of people with ordinary jobs because of over-selling and over-advertising and all the other things which are inevitably finally paid for by the person who buys the commodity in question.

It is those things which we want the Government to consider instead of merely tinkering with the problem and setting up a committee which will report in four or five years. We want some positive action to help the housewife, the families with young children and the old people, those who make up the bulk of the community.

9.44 p.m

Mr. Malcolm MacMillan (Western Isles)

The hon. Member far Louth (Sir C. Osborne) re-enunciated at least two fundamental truths tonight in recognising that increasing prices and the increasing cost of living hit the poorest sections of the community and that the impact is heavier the further one gets—paradoxically in a way—from the Government who cause those things. There was a great deal of truth in what he said, as was illustrated by the remark's of my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) and my hon. Friend the Member for Edinburgh, East (Mr. Willis).

At least two differentials, which are so dear to the heart of the hon. Member for Louth, have been clearly established in the matter of the standards of living as between the communities in London and the Midlands and those not only merely in Scotland but even more drastically in the far north of Scotland. I assure the hon. Member that to go further away from Westminster and the activities of the Government is not to escape the effects and impacts of their policies anything like in proportion to the distance. When one reaches my constituency, one finds that we feel the impact of Government policy and deliberate acts of Government policy far more than any other section of 'the community, or any other area of Great Britain.

Sir C. Osborne

Is the hon. Member for the Western Isles (Mr. Malcolm MacMillan) therefore arguing that the better-paid workers of London and the Midlands should forgo some of their wages in order to help the poorer-paid workers of Scotland?

Mr. MacMillan

One of the tragedies is that the hon. Gentleman sincerely believes these ancient fallacies which he argues with such vigour, as though they were true. More than fifty years ago Labour leaders were being told that it all the money in the country—and here again comes this word money, which is not to be confused with wealth—was distributed among everybody, working-class people would be only 6d. or 1s. better off. It would take a long time to discuss this, but it has been argued on innumerable occasions.

We realise that to bring about a higher standard of living there must be increased productivity, people must get bigger shares from the cake, we must have a bigger cake, and so on. At the moment we are arguing the case made by my hon. Friends, that not only must we endeavour to produce the greatest possible justice within the expanding limits of our economy, but that it must appear to all classes that we are concerned with social justice and decency in the treatment of all our people.

I would not confine any benefits that could arise from such a policy conducted and prosecuted in a sensible, systematic, way to any one class. I would not confine those benefits only to old-age pensioners or to the poorer sections of the community. There is a case for a differential, but there is no doubt that the lowest-paid worker has been left behind in the advances which have been made as a result of the activities of workers not only in London but in the Western Isles and other parts of Scotland.

For example, the nurses have been left far behind. It is no good asking them and the teachers to produce more. It must be remembered that when talking about the nursing profession we are not talking about midwives only, and it is therefore difficult to ask nurses to produce more. It is not possible to measure increased productivity among groups of people like teachers and nurses. The hon. Member for Louth has disappeared and I trust that he has taken his arguments with him.

Sir C. Osborne

I was about to leave the Chamber. I have one or two things to do outside the House. Having been a Member 'for some time, the hon. Gentleman should realise that it is not possible to be present in the Chamber all the time.

Mr. MacMillan

I know that the hon. Gentleman is never discourteous, and I apologise if I suggested any such thing.

The further north we go into Scotland and into the Highland areas, the more we feel the impact of these deliberate acts of Government policy which have led to a rise in the cost of living. This is more apparent now than ever before, because it is leading to a disastrous depopulation of many areas in the north. It is forcing the younger people to leave those areas, and even those who are left are not able to continue the indigenous industries because of the increased cost of transport, increased freight charges, and so on. These increases are having a disastrous effect in those areas.

The Financial Secretary knows these things to be true. We are not in conflict with the Government about their lack of knowledge of the facts, but because they are not prepared to take action to deal with the especially difficult situation in the areas which are particularly badly hit by their policies.

My hon. Friend the Member for Dunbartonshire, East (Mr. Bence) referred to the difficulty of getting more than one chip with his fish. I apologise if I appear to have borrowed that chip and to be carrying it on my shoulder. In an area like my constituency the catching of fish is one of the major economic activities. Attempts to develop that industry are frustrated because of the high freight charges arising from deliberate acts of Government policy. That is one of the reasons why we carry that solitary "chip" on our shoulders and feel that the Government, while aware of the problem, are quite unwilling to do anything to mitigate its impact upon our people.

That does not apply only to fishermen, to the cost of their gear and re quirements and the cost of exporting their catches to the mainland markets and to the fish and chip shops. It affects equally the agricultural community in those areas; the farmers and the crofters who have to export cattle and import seed and agricultural equipment and other requirements. It applies to the community in general.

If we look at the difference between the cost of living in the Outer Isles and places like Inverness and Glasgow we find that there is an increase of anything from 10 per cent. to 12 per cent. In the food ranges, most consumer goods cost anything from 20 per cent. to 50 per cent. more. My hon. Friend referred to individual items. I will not mention plums again tonight. But, taking a wide range of individual commodities, essential Things—not luxuries because people do not go in much for luxuries in the Western Isles—one finds that prices rise well above prices in other parts of Scotland.

Mr. Bence

Is my hon. Friend aware that one need not go so far afield from Glasgow as the Western Isles in order to discover the kind of examples to which he has referred? In the new town of Cumbernauld which is sixteen miles from Glasgow, because of the lack of shop facilities, housewives, as they have told me, have to pay a ld., 2d. or 3d. more for everything compared with what they would have to pay in Glasgow or Falkirk.

Mr. MacMillan

That is true, and it affects different areas in different ways. I was pointing out the rough difference between the costs of these items in areas like Glasgow and Stornoway and elsewhere in the Western Isles.

A large part of the cost is represented by the cost of transport, particularly freight charges, and the Government have been aware of this for many years. Despite the fact that their policies have a considerable impact on those areas, no special steps of any kind have been taken to deal with this type of differential. When the hon. Member for Louth was talking about differentials he might have kept these things in mind. This has been reflected officially in the acceptance by the valuation appeal courts which were so convinced by the arguments about the cost of living that in the Stornoway area and in the Island of Lewis they reduced valuations by about 10 per cent. That was not the full recognition of the economic basis on which demands for reduction were argued but 10 per cent. is a fairly substantial figure.

If we examine one or two individual commodities we find that bread, for example—by no means a luxury, but a necessity in every home—in the smaller islands such as Barra can be as dear as 1s. 5d. a loaf. Sometimes it is more. That does not mean that the shopkeeper is profiteering. He may have a smaller profit margin than the baker or grocer selling bread in Scottish cities. It is because he has to pay the high cost of transport and freight. If one goes to the only town or burgh of any size in the Islands one would pay about 11d, a pint for milk, for local milk as well as imported milk, but to a large extent the price is settled by the price of the imported milk which includes transport costs.

Soft drinks, which have attracted the attention of the Government again recently, would cost 10d. to 1s. a bottle in Glasgow. But already in many areas in the Western Isles the price is about Is. 6d. and 1s. 7d. a bottle. Now it will probably soar to somewhere around Is. 10d. or possibly 2s. The increase is never restricted to the 10 or 15 per cent. when it comes to the retail price.

Another item touched on a number of times tonight— which is a considerable understatement—concerns oil heaters and the fuel used in them. Here again, largely as a result of Government policy, prices have risen. The cost of money borrowed by the Hydro-Electric Board has risen because of the Government policy, with the result that the Board has not been able to provide electricity supplies in islands such as Barra and North Uist. People are thrown back on oil fuel of various kinds. Because of the burdens which they are carrying under the present Government policy, the cost of oil fuel for domestic purposes, for agricultural purposes and certainly for transport in the area has risen, and the cost of living has been sent soaring in this respect. In every respect, every one of these deliberate acts of Government policy is having an effect which, in the sum, has caused the cost of living in the area to soar above even that which my hon. Friends have described as the present exorbitant cost of living in the cities.

If I make a special plea, therefore, for exceptional action in areas where the impact of Government policy is exceptional, I am asking for no more than equal treatment with other areas, not for especially favourable treatment in any way.

Every one of these things is frustrating one of the most hopeful industries in Scotland—the tourist industry. The more that transport and fuel costs rise, the higher the cost of living as we go further into the Highlands and Islands, the less likely are we to develop a tourist industry, which is such a potentially valuable and a potentially expanding industry in Scotland. The further north one goes into this paradise for tourists, the less likely one is to get tourists into the area because of these high costs, and once they have been bitten by high costs and by the other difficulties arising from them, they are even less likely to come back a second time.

My hon. Friend said that one needed four blankets in Scotland to two in England. This is a case of one wet blanket on the tourist industry's prospects. In fact, it is not a question of the weather, because in my constituency recently we have enjoyed more hours of sunshine on average per day than have most parts of Britain. It is not the weather which is endangering the development of the tourist industry but the impact of all these increased transport costs and the freight charges which arise directly from Government policy, together with the inability of the Hydro-Electric Board to supply electricity because of the high cost of borrowing the money which the Board must have for its development.

The result of all this is that we cannot retain the younger population, in particular, and there is an increased tempo of drift and depopulation in the area, with a consequent ageing of the remaining population. Eventually one reaches the point of no return at which the population is too old and cannot move and at which the young have either gone or are going, and then less and less can one retain hope in the future and an ability to restore the local economy and raise the standard of life.

Special action must be taken, as it was between 1945 and 1951, when a good example was given. If special action is not taken, the drift will continue. All the protestations of Government after Government of their desire and resolve to retain communities in the Highlands and Islands will count for nothing, and all that has been done in the past will be largely wasted endeavour and wasted resources. This is an area of great potential for the production of new wealth; it could make a greater contribution to national wealth and the national economy, provided that at this point it is given a sufficient transfusion of capital. Because of poverty and neglect through the generations, they have not been able to accumulate capital for themselves over the years. As long as capital is denied to the area and we make it impossible for new industries to develop and the indigenous industries to survive because of increasing costs, particularly of transport and freight, the more difficult it will be to retain the population.

It being Ten o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Whitelaw.]

Mr. MacMillan

Finally, I will give two examples to the Financial Secretary in ordinary human terms. They are inevitably inseparable from statistics and the census. In the ten years from 1951 to 1961 in one Island in the Outer Islands, notably an island where industry is unable to develop because of the lack of electricity— I refer to the Island of Barra—the population fell by over 25 per cent. It had been falling for years before that. In the neighbouring smaller islands the population fell from 20 to 30 per cent. In the Outer Island of Lewis, with 24,000 people, the population fell by about 11 per cent. in those ten years. Between 1945 and 1951, with the policies in the Highlands, which were directed at that time by the Labour Government, aimed at stopping the drift of population and developing the potential wealth of the area, while controlling as far as possible under Government policy the cost of living, we saw a halt to the drift of population for the first time in a century. By 1951, for the first time in generations, emigration and depopulation halted. A build-up was beginning. Since 1952 it has gone into reverse. Today the tempo and the effect of depopulation, particularly the drift away of the young and enterprising, are more marked than they have ever been in the recorded statistical history of depopulation in the Highlands.

That is very serious. It is related directly to the impact of Government policy. At this moment we have little to look forward to. The present programme of the Government seems to consist of nothing but stripping away such valuable services as nationalised road haulage and running down the railways, which in turn will throw an impossible burden upon the undeveloped and under-developed road and rail system. It will add again to the cost of living in the Highlands.

Every action of the Government in all these fields has had an especial and extra heavy impact upon these areas further away from the centres of population and further away from such facilities as railways, markets, sources of raw materials, etc. It is not much good us running away from Westminister, because things will only get worse as we got further away. The only solution seems to be when the Government themselves start running away from Westminster and a better Government take their place. They have nothing to offer by way of policy or programme, but only a counsel of despair to hold on a little longer and perhaps per ardua ad astra wonderful days will come. While other countries send men in orbit round the world, there will be plenty of ardua for us before we see the first blink of the first Government astra.

10.3 p.m.

The Financial Secretary to the Treasury (Sir Edward Boyle)

The hon. Member for the Western Isles (Mr. Malcolm MacMillan) has made a temperate and interesting speech, as he always does, and I will see that it is brought to the attention of my right hon. Friend the Secretary of State for Scotland.

Mr. Willis

It was meant for the Financial Secretary.

Sir E. Boyle

I listened to the part of it which was meant for me. I have no doubt that my right hon. Friend will take an interest in that part which affects him.

I congratulate the hon. Member for Erith and Crayford (Mr. Dodds) for seizing a very legitimate parliamentary opportunity this evening. I am sorry that we have not had a better House for this debate, but the hon. Member will appreciate that not very many hon. Members on either side realised that this debate was due to take place.

Mr. D. Jones

There has been a good House on this side.

Sir E. Boyle

I am sure that many other hon. Member would have attended and might even have taken part had they known that the debate was to take place.

The hon. Member for Erith and Cray-ford said early in his speech that he did not want to make too many party points. I was rather reminded, when he said that, knowing what happens when we debate these subjects, of the remark by Dr. Johnson's friend Edwards, who said that he tried to be a philosopher but that cheerfulness kept breaking in. Understandably, panty points have broken in frim time to time during the proceedings.

I will begin by answering in general, as best I can, some of the speeches which have been made, and then I want to say something rather more consecutive about prices and incomes in the concluding parts of my remarks. To take up one or two of the points made by the hon. Member for Erith and Cray-ford, I do not want to say a great deal about 1951, which is a long time ago. However, it is only fair to remember, if one is talking about Korea and prices, what was the gravamen of our charge at that time, namely, that it was a pity that stocks had been allowed to run down so much before the Korean War, with the result that we had to stock up again just when prices were rising very rapidly. I do not think that the Leader of the Opposition at that time really denied that. He recognised that there had been a very sharp movement in the terms of trade against this country in 1951 and the low level of stocks must have affected that.

Mr. Dodds

Does the Financial Secretary appreciate what he is now saying? He is saying that the stocks went down absolutely to their lowest, so we had to buy on a rising market. Despite that this country had the lowest increase of prices of any country during that period because we had a Labour Government to introduce controls.

Sir E. Boyle

Whatever the relative position of other countries, no other country in Western Europe had a 14 per cent. price rise in 1951, as I remember. At the end of 1950—I was fighting a by-election at that time and, naturally, I remember the figures—wholesale prices were 17 per cent. higher than the year before and it took the next year to work through.

Mr. Ross

Did the hon. Gentleman talk about wholesale prices?

Sir E. Boyle

I said that wholesale prices at the end of 1950 were 17 per cent. higher than at the end of 1949. This worked through to a very rapid increase in retail prices during the course of the next year.

The point that the hon. Gentleman made was about wages and prices during the 1950s. The hon. Member for Erith and Crayford was not merely speaking about prices, but about the movement of wages and prices during the 1950s. On that point, I am tempted to quote what the Leader of the House said in the debate on the Address, because I think that it is very relevant to any debate on prices. My right hon. Friend said: The facts are these, and they are quite simple. From July, 1945, to October, 1951, the average weekly rate of earnings went up from £6 Is. 4d. to £8 6s., a rise of 37 per cent., but there was an increase of 40 per cent. in the cost of living which wiped it out. In the last ten years the rate has gone from £8 6s. to £15 Is. 4d., a rise of 80 per cent. as against a 35 per cent. increase in the cost of living.— [OFFICIAL REPORT. 7th November, 1961; Vol. 648, c. 929.] It is a perfectly clear point and one that I have often made in debates in this House. On the one band, we on this side take the greatest pleasure in the fact that real wages have risen substantially during the 1950s. There is no inconsistency between taking that pleasure and in believing that we will achieve a more rapid increase in living standards if increases in personal incomes are matched by increases in productivity. The hon. Gentleman finally referred to profits. If I may, I would recommend him to paragraph 55 of this year's Economic Survey, which says quite clearly: Company profits reached a peak about the beginning of 1960 and fell quite steeply thereafter. Movements in tax payments lag substantially behind movements in profits; and between 1960 and 1961 company profits rose by £122 million. … In 1961, however, company profits were £200 million lower than in 1960. That is the important figure.

In general, during the 1950s, movements in wage rates and movements in profits went very closely together, which is only natural, and the figures about this were perfectly clearly revealed in the last report of the Council on Prices, Productivity and Incomes, issued last July. In 1961 as a whole, company profits were substantially down on 1960.

I know the point made by the hon. Member for Cardiff, South-East (Mr. Callaghan) about taxation, but I do not think that it is one of his most powerful comparisons. We all quote these statistics, but some make better points than others. That was not quite as good a point as others, because 1952 was only one of two years in which the Excess Profits Levy operated, and no one on either side believed that the Excess Profits Levy had come to stay. I was a back bencher at the time, and I must say that I never thought it a good tax. I am glad that it lasted only two years, and I believe that that was the view of most of the House. Many hon. Members were extremely critical of it—

Mr. D. Jones

Is the hon. Gentleman saying that during 1950 profits, dividends and wages went apace?

Sir E. Boyle

Profits are the key point here, because, as the hon. Gentleman knows, we now have a combined rate of Profits Tax on a level of profits which governs not only dividends, but the level of undistributed reserves and, therefore, the likelihood of shareholders getting capital appreciation——

Mr. D. Jones

The Financial Secretary has not answered my question. I hope that he will not shirk it.

Sir E. Boyle

I am not shirking it. I think that the key point is that profits were £200 million lower than in 1960. My right hon. Friend who is now the Secretary of State for the Colonies was extremely outspoken about dividends in the debate we had last summer. I do not have a detailed breakdown of dividends, but I can tell the hon. Gentleman that replies given in the House show quite clearly that the majority of companies have taken notice of what was said about dividends at the time of the July measures—

Mr. Ross

Would it be worth while recalling what was said last night? During the Committee stage of the Finance Bill it was said that over the last ten years company profits had risen by £ 1,000 million.

Sir E. Boyle

So many things were said last night that, for a moment, I did not appreciate to what the hon. Gentleman was referring, but he himself is a good debater, and knows very well that we cannot have a high rate of investment or a high rate of economic growth without a good level of profits.

What I was concerned about was whether profits and personal incomes were moving in a disproportionate way as compared with one another, and my point was that last year it did not happen. On the contrary, company profits, as a whole, fell during 1961.

I shall not comment on the very agreeable speech of the hon. Member for Dunbartonshire, East (Mr. Bence), who reminded me of what I believe was one of the worst poems ever written by Julia Moore: While eating dinner this dear little child Was choked on a piece of beef. I will leave the subject of beef to my right hon. Friend the Minister of Agriculture.

The hon. Member for Burnley (Mr. D. Jones), who, I thought, made a sincere speech, said that too many wealthy people were too complacent about poverty. I shall say two or three things to him on that——

Mr. D. Jones

Poverty in particular.

Sir E. Boyle

I do not think that the hon. Gentleman is right about this in general. As one who has been in the Government for some time now, I can say that the question of the living standards of the poorest people take a good share of the time and consideration of the Government.

The hon. Member had some hard things to say about National Assistance. I wonder whether the feeling in the country is quite as he made it out to be. When I was at the Treasury in 1955 and 1956, National Assistance total payments amounted to £ 100 million; they now run at about £170 million. My own belief is that a great many of the poorer people, just on the fringe of National Assistance, have never had it better from the National Assistance Board. That is to say, a great many people get, not the maximum payment but an average weekly payment of, it may be, 25s, or 30s. a week from the Board.

As the hon. Gentleman knows, the system of disregards is more generous than it has been before, and I believe that this is a sign that we do take note of the problems of the poorest.

Mr. Ross

Does the hon. Member appreciate that what we are now discussing is the question of the cost of living index, and the rise in the cost of living? Unless there is a change in relation to these fixed payments we are not meting out justice. Since the announcement of the last increase in National Assistance payments—on the figures given two months ago by the Minister of Pensions and National Insurance—it would take an extra £1 million a week to make up for what has been eroded by the rise in the cost of living. Since then there has been another two points increase. Secondly, there has been no change in the National Assistance scales, and, therefore, the increase of 5s. a week has been wiped out by the increase in the cost of living.

Sir E. Boyle

It has happened in the past.

Mr. Ross

It is happening now.

Sir E. Boyle

I am answering the hon. Member's point. I do not blame him. He makes rather long interventions, but having done so he must listen to the replies. I am pointing out that this is not a unique happening; it happens in all Governments. He must recall that sometimes the situation has been the other way round. On the last occasion but one when National Assistance scales were raised those on National Assistance had a real increase in their standard of living. We must consider this over a term of years and not over a period merely of some months.

I have answered a good number of points that have been made in the debate, and I want now to say something rather more constructive about prices and incomes, because they are extremely important. The trend during the period from 1958 to 1962 may be broken into two fairly distinct periods. From the beginning of 1958 until the middle of 1960 the overall level of prices was fairly stable. The stability of the retail price index during that time was due to two main factors. The first was a big fall in world commodity prices in 1957. I am going on to say—as my right hon. Friend who is now Secretary of State for the Colonies has often said in the past—that I am sure that our return to the use of monetary policy has had some impact on the terms of trade. It is remarkable how favourable movements in the terms of trade have often coincided with the determination of Governments to strengthen sterling by the use of the monetary instrument. The other factor was the reduction of Purchase Tax and certain Excise duties in the 1957 Budget.

On the other hand—anticipating the obvious objection from hon. Members opposite—we all know that if demand in the economy is excessive no power on earth can keep prices stable. I am sure that, for the reasons stated by hon. Members on both sides of the House, we have at times to use indirect taxation upwards as well as downwards.

The main reason underlying the rise in retail prices in the last four years has been the increase in personal incomes. If the hon. Member for Edinburgh, East (Mr. Willis) looks at page 13 of the Economic Survey he will see that the rise in the total of wages and salaries takes up a good part of the increase in personal incomes. If he looks at the table he will find that between the fourth quarter of 1960 and the second quarter of 1961 the biggest increase was in wages and salaries. There is no doubt about that.

Mr. Willis

The hon. Gentleman will agree that my main point was that the figures given on Tuesday are not to be taken as easily as he suggested.

Sir E. Boyle

I agree, but when one is answering a supplementary question one is likely to invoke the enmity of the House if one gives an answer of such a length as one would give in replying to a debate. It has been done by Ministers before now, but it has never been popular.

Between 1958 and the beginning of 1962, industrial production rose by about 12 per cent. and the gross domestic product at constant prices rose by 2 to 2½ per cent, a year. Allowing for the improvement in terms of trade over the period this increase in production would have allowed aggregate wages, salaries and profits to rise by 2½ to 3 per cent. a year if the overall price level was to remain stable, but increases in income were very much larger during this period.

In answer to the hon. Member for Burnley, who said that people should have the advantages of increased productivity, I would ask him to study paragraph 7 of the White Paper, Cmnd. 1626, which states: But some arguments which have in the past been widely used to justify higher wages and salaries certainly ought not to be given the same weight as hitherto. For example, arguments derived from the increased cost of living, or from the trends of profits or productivity in a particular industry, cannot in present circumstances be regarded as providing of themselves a sound basis for an increase. The paragraph continues, and this is important: There may, however, be cases in which an increase could be justified as part of an agreement under which those concerned made a direct contribution, by accepting more exacting work, or more onerous conditions, or by a renunciation of restrictive practices, to an increase of productivity and a reduction of costs.". The point of that reference to productivity is that it would be unfair if the parts of the economy where there had been increased productivity, only the workers in those parts were to get the benefits of it.

D. Jones

o not think that the Financial Secretary is being quite fair. In reading that paragraph he put greater emphasis on the last part of it. I would like to quote the first part and put the emphasis on that. It states: But some arguments which have in the past been widely used to justify higher wages and salaries certainly ought not to be given the same weight as hitherto. For example, arguments derived from the increased cost of living, in particular or from the trends of profits or productivity n a particular industry, cannot in present circumstances be regarded as providing of themselves a sound basis for an increase. If one puts the emphasis on that part of the quotation one gets the matter in its proper perspective. I am interpreting it in precisely the same way as the trade union movement is now interpreting it.

E. Boyle

haps we may both be allowed to read the passage in our own way. I have no with to run away from the question which the hon. Member for Burnley asked. I am pointing out that in certain parts of the economy it is more easy to increase productivity than in others and that it would be wrong for only the workers in those parts to get the benefits of that increased productivity simply because they happen to work in them.

I was also asked what the Government's incomes policy has achieved so far. It is difficult to answer that question precisely. [HON. MEMBERS: "0h."] However, I anticipated that this point would be raised and the best I can say is this: I think that it would have been reasonable to suppose, in the absence of an incomes policy, that the hourly wage rate in April this year would have been about 6 per cent. higher than in the previous year. In fact, the increase was about 5 per cent.

The difference between those two figures can be roughly regarded as showing the effect of the Government's policy so far. That may not seem a very big change, but one must remember that a high proportion of the increases in wage rates in the year ending April, 1962, was the consequence of settlements made before the incomes policy was announced. If one takes the six months' period from October, 1961, to April, 1962, wage rates actually rose during that period by 2½2 per cent. They would, I believe, have risen by 3 per cent. with-out our incomes policy.

The difference between 2½2 per cent. and 3 per cent. is appreciable and I entirely dispute, just as the O.E.C.D. Report disputed, that the incomes policy of the Government has been a failure. It has already made a difference to the rate of wage increases. I cannot now deploy all the figures to the House because time prevents me from doing so. However, this difference has been partly due to some fall in the size of the average award, particularly since the publication of the Government's White Paper. I believe that this was the most important White Paper on any economic subject since the 1944 White Paper on Employment Policy.

There has also been an effect on the postponement of increases because the bargaining was more protracted than usual or the dates of the increases were deferred until the end of the pause. Retail prices in the United Kingdom have risen sharply since last July, more than the average rise since 1950, but some of this, as my right hon. and learned Friend made perfectly clear, was due to a temporary rise in the price of potatoes and other vegetables. I believe that there should not be any substantial further rise in retail prices during the remainder of the year. The price prospect for the second half of this year is distinctly brighter than what we have experienced during the first half.

It is not easy to estimate what would be the long-terms effect on prices of continuing our present incomes policy, but just for the purposes of illustration I will put it to the House in this way. On the assumption that future wage increases are damped down as much as the calculations I have given suggest that they were damped down between October, 1961, and April, 1962, and on the assumption that increases in other incomes are similarly kept under control and that import prices remain at their present level, it is possible that retail prices will rise 1 per cent. to 1½ per cent. each year less than they otherwise would. This may not seem a dramatic figure. However, if we could achieve over a term of years an average rise of retail prices 1 per cent. to 1½ per cent. less than we have experienced during the 1950's, this would make a substantial difference to our competitive power abroad. Of that I have no doubt whatever.

If any country wants to achieve rising living standards, this must be based not simply on boosting exports or boosting some particular kind of economic activity. It must be based on the ability to achieve a first-class economic performance right along the line.

D. Jones

Which the Government have not done.

E. Boyle

I am pointing out that the biggest problem we have faced during the 1950s has been the perpetual tendency for increases of personal incomes to advance more rapidly than increases in production. I agree entirely from those who say that, from time to time, there have been periods when we have had superadded to the problem I have mentioned the additional problem of excess demand on our resources. However, looking ahead to the 1960s, I am quite sure that the prospects in this country for rises in living standards and safeguarding the living standards of those who are poorest will be infinitely brighter if we stick firmly to the incomes policy on which we have embarked.

There is a section of the Press which is looking all the time for signs that the policy is failing, which is all the lime asking its readers the question whether the Government will shortly be forced to abandon their, policy. Although this is not a major economic debate, I am very glad that it has taken place, for it gives me an opportunity to tell the House plainly that we have no intention of abandoning this policy. I think that the results we have already achieved show its importance, and I am quite sure that, if we can achieve that slowing down in the rise in retail prices which I have indicated to the House, the benefits for our competitive power and the living standards of all our people will be infinitely greater than even hon. Members on either side of the House suppose.

10.28 p.m.

Mr. William Ross (Kilmarnock)

When we take into account the gravity of the implications of the hon. Gentleman's peroration, the first question which comes to mind is, what on earth have the Government been doing for ten years? They have lived with their aura of never having had it so good—"There is nothing to worry about. I'm all right Jack". Belatedly, we now come down to the crux of our continued economic existence, far less prosperity, and of the influence which Britain will be able to have in the world. This is my complaint against the Government in this matter.

As a result of the Government's recent actions, millions of our people are having to face present increases without any help at all, apart from the help which the House can give them— help which is denied by the Government. I refer particularly to those who are dependent on National Insurance and on supplementary assistance through the National Assistance Board. In November, 1960, something was given, but that has been eroded away. It is not good enough for the hon. Gentleman to say that there have been times in the past when this has happened. We raised this debate tonight to try to make the Gov- ernment face their current responsibilities in respect of these people, old-age pensioners and the like. It is no use talking about average earnings in their case. What is their income? — £2 17s. 6d. for a single person or £4 12s. 6d. for a couple. Let us consider the effect of rising prices upon them.

The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.