§ The level of incomes from employment and from investment is by far the most important element affecting costs and prices. The total effect upon costs of the level of incomes is about four times that of the level of import prices. It is a fact from which there is no escape that if we wish to achieve steady and sustained economic growth we must between us agree upon an effective incomes policy. As I said last year, acceptance of the 4 per cent. target involves acceptance of the 3 to 3½ per cent, figure for incomes generally.
§ There are those who argue that it is futile to seek agreement on an incomes policy because the level of incomes will always be settled by the laws of supply and demand alone. With respect to them, I believe that this is a logical fallacy. It is true that wages, for example, are settled by a balance between the amount demanded and the amount the employer is able and willing to pay. To this extent the general level of demand in the economy is important, because, as we have seen in the past, an excessive level of demand leads to labour shortages, large increases in money wage rates and wage drift on a large scale.
§ But in seeking agreement on an incomes policy we are not attempting to supersede supply and demand in this sense, but rather to moderate the forces which affect this balance. One thing, to my mind, is quite certain, namely, that if all of us are determined to extract from the market the maximum possible for ourselves the result must either be inflation or Government policies designed to restrict demand and therefore curtail expansion. It is just not possible to provide a level of demand adequate for vigorous expansion without, at the same time, providing opportunities to raise employment incomes and profit margins at the expense of continuously rising costs, that is to say, at the expense of the consumer and the balance of payments.
§ Surely, all the experience of the last 20 years in this country and overseas shows that if wage and salary levels 264 and profit margins are always to be pushed to the limit that can be achieved by the sheer force of trade unions or unlimited opportunism of management, then I say again that the result must be a choice between inflation or Government policies designed to curtail inflation at the cost of growth.
§ It is not surprising that progress in dealing with these problems is difficult, for they are complex and full of emotion and often of prejudice. Most of the other Western democracies are trying to find their way forward towards incomes policy as we are and they are encountering the same difficulties. The main problem, of course, is how to translate unexceptionable general principles into effective practice. I am glad that that is accepted, because it is the basis of Government policy. [HON. MEMBERS: "Hear, hear."] How, in the case of employment incomes, to provide for the exceptional cases without letting the exception become the rule; how to ensure in the case of profits that the maximum encouragement is given to enterprise and efficiency within a total of profit incomes that is consistent with a fair incomes policy.
§ These are the practical problems which we must tackle. I have no doubt myself that the best way of approaching success will be through N.E.D.C. and N.I.C. These two bodies really complement one another. N.E.D.C. is the best forum in which Government, management and unions can together discuss these and other vital questions of economic principle. N.I.C. is a body explicitly designed to deal fairly with the exceptional case, as its recent report on university salaries clearly shows, while making it clear that the exception must not become the rule.
§ I am, frankly, disappointed that we have not yet made more progress. This is not because failure to do so is a setback for the Government, as is sometimes said, but because it is a setback to the hopes and prospects of the entire country. I intend to persevere, because in my judgment a solution to this problem would bring economic benefits to our people that would dwarf anything else that we could achieve. No one benefits from failure to agree on an incomes policy: indeed, everyone loses. If, and only if, unions and management 265 can join with the Government in a combined approach to the problem shall we have a chance to seize the great opportunities of the 1960s for securing a sustained and continuing increase in real output and, therefore, in real incomes and real prosperity.
§ Mr. Marcus Lipton (Brixton)
Will there be half a crown extra on the bottle of liquid which the right hon. Gentleman is pouring himself?