RISING PRICES

HC Deb 11 May 1965 vol 712 cc271-404

3.43 p.m.

Mr. J. B. Godber (Grantham)

I beg to move, That item Class I, Vote 4, be reduced by £1,000.

The purpose of our debate is to discuss the question of prices, and the first point that I take is from a leaflet headed, "The Truth about Prices", issued by the Labour Party in February of this year. I think that it is very important to get at the truth about prices, because I suggest that the leaflet is far from it. It starts by referring to Tory spokesmen having attacked Labour for trying to bring down prices. This Tory is attacking Labour for talking a great deal about bringing prices down, and putting them up at the same time. That is the charge against the Government, and that is the charge which we shall seek to substantiate today.

Paragraph 8 of the first White Paper, issued by the Government on 26th October last, said: An attack must be made on the problem of increasing prices. Not only do they inflict hardship on those least able to bear it, but continually rising prices undermine our competitive power. That is what was said then, and that is a statement with which I would not quarrel. It shows that keeping prices down was at the forefront of the Govern- ment's intentions when they assumed power. [HON. MEMBERS: "Hear hear."] I am glad to hear hon. Gentlemen opposite agree with that, because at least one right hon. Gentleman on the Front Bench opposite has not always held that view.

In an article which he published in March, 1963, the President of the Board of Trade said: We suffer from something of an obsession about rising prices in this country, yet prices have risen over twice as fast in France as here over the past five years. Just to bring him up-to-date, it is only fair to inform him that, since his party has been in power, so far from prices rising twice as fast in France, they have risen over twice as fast in this country as in France. The position has been reversed, and I think that this brings out clearly the seriousness of the charge which we are making against the Government today.

The First Secretary's Department developed the problem of prices a little further in Progress Report No. 2, published in February of this year, in which it said: Stabilising the price level is one of the most urgent and important problems confronting the Government. It is central to the successful carrying forward of balanced growth; but it is a problem to which there is no easy answer. No Western country since the war has yet succeeded for long in combining stable prices with a high level of growth and employment. I do not remember right hon. Gentlement opposite reminding the country last October that no Western country had succeeded in doing that. Then it was only the "wicked" Tory Government in this country who were at fault. Hon. Gentlemen opposite have suddenly realised that the problem is not quite so simple as they thought. I acknowledge that this admission of the universality of the problem shows at least some advance on the part of hon. Gentlemen opposite.

The United Nations Monthly Bulletin of Statistics shows that over recent years the United Kingdom has consistently been almost at the bottom of the league table of price rises. During the election campaign we heard a lot about league tables, but we did not hear about this one from hon. Gentlemen opposite, and, as I reminded the President of the Board of Trade, it is only since the election that the position has been reversed and that our price; have risen more rapidly than those on the Continent of Europe. The party opposite is not so interested in these league tables now, but I suggest that housewives ought to be interested in them, because these are the ones which really affect their shopping baskets.

The post-war record of price rises in this country has been quite clear. During the six years when right hon. Gentlemen were in power before, prices rose on average by 6½ per cent. a year. During the first six years when we were in office they went up on average by 4½ per cent. a year, and during the last six years they went up on average by 2½ per cent. a year. Those are the actual facts, and that is the background to our debate today. But on those last figures it is important to remember the other side of the coin, because over those 12 years when we were in power, when it is true that overall prices rose by 50 per cent., earnings rose by 110 per cent.

That is the clear indication of what happened during that period, and one simple illustration of what was happening at that time is that savings went up from £100 million a year in 1951, to nearly £2,000 million a year last year. That, again, is a clear indication of what was happening during that time. Of course, what the effect on savings has been in recent months we can only speculate, but I imagine that a lot of would-be house owners are speculating hard at the moment, when it has so affected the amount of money available to building societies for home loans.

The Labour Party's election manifesto said: The success of the national plan will turn … on the success of new and more relevant policies to check the persistent rise in prices. We are entitled to ask what these "new and more relevant policies" are, and what they have produced so far. I suggest that they have produced a rise of 2 points in the Index of Retail Prices in the first six months of this new Government, and this is before the effect of the April Budget is included. This has added well over another point. The large increases in the price of cigarettes and drink have had a direct effect and numerous other things will have an indirect effect, which will work its way through the economy and ultimately affect the housewive's budget.

Before the April Budget we already had the 15 per cent. surcharge. It is true that it has now been reduced to 10 per cent., but it is still a significant item. We have had 6d. on petrol, higher interest rates and higher mortgage rates. In view of what has happened about mortgage rates I am sure that the Chancellor of the Exchequer would very much like to eat the words of criticism of building societies which he made in the House. The direct effect on prices of these two Budgets has meant that the ordinary consumer is paying more for drink and smokes; he is paying more to license his car and to drive it and he is paying more for a wide range of imported goods. After next Monday, if anyone wants to write to the right hon. Gentleman to complain about the state of affairs his stamp will cost him another 33⅓ per cent.

But the direct effects are only a small part of the story. This fact is not yet sufficiently recognised. It is the indirect effects which should be alarming people at present. At the turn of the year the Press was full of stories of widespread price rises, but a tremendous number of these increases have yet to work their way through the economy. The price rises which have taken place, particularly those in early January, have been commented on a great deal in the Press. I want to quote from only one newspaper article, although I could quote from many.

On 5th January a Financial Times article had the headline: "3,200 Grocery Items in the Flood of Price Rises". It referred to the increase in rail fares and freight charges and said that it was not very remarkable in itself, but that the significant feature is that it comes as just one part of a widespread upward movement in prices of an unusual size. Most people date the first signs of this to some six or seven weeks ago— this was at the beginning of January— but in the last two weeks it has turned into something of a flood. The sector where the increases are most widespread is groceries. Unofficial estimates suggest that 3,200 separate grocery items have been marked up in price in the present wave. It singled out furniture and said: bedroom suites have been hit the hardest, largely because of the large amount of imported wood used. That is the effect of the surcharge directly felt.

It went on to say: There are a number of reasons for this spate of increases, and gave some seasonal reasons before saying: More important, undoubtedly, is the import surcharge. One of the reasons behind the biscuit increase is that packaging is a large element in costs and a substantial proportion of the raw materials for the packaging industry are imported. … But most important of all are the expected factors: increased fuel costs, greater delivery charges … higher National Insurance contributions. Those were all expected charges when the article was written; they are now actual charges and increases. That is the comment to make in respect of that one massive list of increases. Every housewife knows clearly just what the impact of these increases has been. They have applied right across the board, from groceries, confectionery, polishes, detergents, clothes, shoes, furniture, fabrics, drugs, dressings, and other pharmaceuticals, cosmetics, pet food and coal, to such things as house-building materials and houses themselves.

We have had all these increases in the last few months, and they might have been greater in their total impact but for the previous Conservative drive to increase competition. The effects of the Resale Prices Act, introduced by my right hon. Friends, are now becoming apparent. Drinks, petrol, light fittings and sewing machines are some of the commodities whose prices have recently been cut as a result of increased competition. I would remind the Committee that the Conservative Government received singularly little help from hon. Members opposite when that Bill went through the House. The Conservative Party at least saw it through and put it on the Statute Book, despite the lack of support of hon. Members opposite, who are now only too glad to take credit for the results which are coming forward. The real position is that the effective action to reduce prices came from the Conservative Party, and so far there has been nothing but talk from hon. Members opposite.

I have referred to houses. No doubt my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who is winding up the debate for the Opposition, will have something to say about that question. One of the interesting factors in this situation has been the quite staggering effect of the initial charges which the Government put on, and which added immediately to house-building costs. The house builders' organisations issued statements as long ago as last November showing the impact of this, and it is clear from discussions that I have had with small builders in my constituency that the cost of even a small house has increased by £100 directly as a result of various measures introduced by the Government and various factors which have operated in the months since they assumed power.

These have included a substantial element due to the import surcharge, and the cost of a whole range of items has risen as a result of policies which the Government have introduced. One further aspect of the matter is that this fact is quite academic to many people who would like to have a house of their own, because at the moment they cannot get the necessary finance. It is one further evil effect of the Government's policies.

Then, what about the many firms which are producing machinery or other commodities for use within industry itself? Their price increases do not immediately hit the housewife, and probably do not immediately hit the headlines. But any such price increases are bound to work their way down through the economy, and in the coming months we shall see the effect of movements which have already started. There will be a cost escalation effect out of all proportion to what has so far been realised.

Many firms which make and assemble large machines have to import a number of components which are not readily available in this country. The surcharge can hit them very heavily. It is true that when a finished machine is exported, drawback is payable, but when such a machine is used in this country there is a direct price inflation effect. I have various figures in relation to this factor, with which I do not propose to bore the House. The point is that the harmful inflationary effect of the Government's policies is working its way through the economy, and will continue to do so for a long time to come. That is the worrying aspect of the problem.

We have seen the impact of the Government's policies already, in some degree, where they have hit directly, but their indirect effect, which will take the form of an escalation in prices, will be very harmful.

It is relevant to point out that while these increases have been taking place as the result of the Government's policies, prices of raw materials and commodities generally have not shown an overall rise in the past few months. Some commodities have certainly risen in price, and in a few cases they have risen quite sharply, but the general trend is not upwards. I have particulars of a whole range of prices covering materials in the United Kingdom over the last few months and they show that although there have been some rises, on balance the position is steady or probably falling. It is not evident——

Mr. Merlyn Rees (Leeds, South)

Is there any evidence that raw materials imported from abroad increased in price six months before the election and that this was a delayed increase, which has been held up for any reason?

Mr. Godber

One could argue that, by choosing certain raw materials, but there is a wide range of materials and, on balance, there has not been a general range of price increases, such as, for instance, the party opposite, on many occasions, alleged had occurred in 1950–51. That argument is not valid on this occasion. Anybody who studies prices can see that that is clearly so.

Against this background, the right hon. Gentleman the First Secretary set up his National Board for Prices and Incomes. I want to make it clear that I have always favoured an incomes policy, and I agree that a prices policy must go with it. Had the T.U.C. been willing to co-operate when the employers' side made an offer on prices at a meeting of the National Economic Development Council in December, 1963, we should have been a lot further along this road.

I deliberately raise this matter because when my right hon. Friend the Member for Barnet (Mr. Maudling) mentioned it a little time ago he was challenged by an hon. Member opposite about its accuracy. I was at that meeting and so, I think, was the Minister of Technology. He will recall, as I do, that this offer was made and that it was not taken up. He may advance reasons as to why it was not taken up, but it was clearly made and withdrawn later only after it had been rejected out of hand by the T.U.C.

The First Secretary has referred three industries to the Board. Naturally, we shall have to await the outcome of the Board's consideration. All the industries concerned have intimated their readiness to co-operate fully in these investigations. However, I gather that the way in which the reference was handled—and I address this particularly to the First Secretary—has created a great deal of perturbation among some of the people concerned. I want to deal with this, because it calls for an explanation from the right hon. Gentleman.

I understand the facts to be these. The leaders of these industries were told in the strictest secrecy, just before the weekend of Sunday, 2nd May, that the appropriate Ministers wished to see them early the following week. They were told that this had some relation to the Prices Board, but that they must not say anything about it to anyone, least of all to their own members, until they had seen the Ministers affected. They were, therefore, annoyed—and I would say justifiably annoyed—when on Sunday, 2nd May, many newspapers carried full stories showing such a degree of similarity as to indicate that there must have been some leak.

The headline in the Observer was: Brown's first three for price review—Soap, flour, haulage". The Sunday Times referred to the First price test: bread and flour". Reference to flour is made in both newspapers. If anybody were guessing about this, it is scarcely likely that there would be a reference about flour, because the only change in price has been a move downwards. There was also a big article in the Sunday Telegraph. It is clear that there must have been some indication given to the Press at this time.

I say to the First Secretary that this is not good enough. We have had far too much of this in the House in recent months. We have had government by leak and government by informed tales given to various people. We had one farcical situation in which a Minister had to shout to make himself heard at the Dispatch Box to keep abreast of the tape machine running outside. It is up to the right hon. Gentleman to say something about this when he replies. Certainly, this caused widespread dismay among the people concerned. It is significant that the Ministers in question were very quick to apologise for anything which happened, while disclaiming responsiblity for it. I say to the right hon. Gentleman that this seems in character with a lot of what has gone before, and that we shall want to know something more about it.

I do not intend to go into detail concerning the three industries in question because, obviously, the Board will let us have its views on the matter. I do not say that this is sub judice, but I think that it would be inappropriate to go into detail. The Times carried an interesting article on this matter on 15th May, when it discussed the relevant points.

I wish to make a general point about one of the industries concerned in the light of what I said a few moments ago about commodity prices not going up in general. It is clear that in the case of one industry there has been a very substantial rise in the cost of raw materials over the last 12 months. It is only fair that I should say that in view of what I said about the general pattern of commodity prices.

It must be clear that there is a very high degree of competition in all these three industries. It is also clear that one of them has suffered from being particularly singled out by the Chancellor of the Exchequer in both his Budgets. I refer to the road haulage industry. I suspect very strongly that that was not wholly for fiscal reasons, but due to the element of prejudice which exists among Members opposite about free enterprise road haulage compared with nationalised rail transport. I am all for nationalised rail transport proving itself on fair terms against free road haulage, but when the dice are always loaded in this way it does not strike us as a particularly fair way of approaching the issue between private and public enterprise.

We must remember that the road haulage industry includes a nationalised undertaking, namely, British Road Services. To that extent, a nationalized undertaking will come under the surveillance of the Board. I take it that is the case, although it has not been made clear, and I ask the First Secretary to confirm that B.R.S. will come under the Board's surveillance in exactly the same way as private road hauliers. If not, it will be a monstrous situation.

One absurdity arises from what the right hon. Gentleman has done concerning road haulage, and I want to put this point specifically to him. It arises from small parcel deliveries. As the right hon. Gentleman may be aware, the Post Office is increasing very severely its rates next Monday. This applies to parcels as well as to letters. Road hauliers have been asked by the right hon. Gentleman to defer their own pending increase in rates. In view of the savage nature of the Post Office's increases in parcels rates, some haulage operators in the parcels service are genuinely afraid that there will be such a flood of new business on 17th May that they will be inundated.

Surely this is a ridiculous situation, and it is due entirely to the way in which the Government have operated and to their actions. This is one of the fruits of Government intervention in industry. I put it to the right hon. Gentleman that a number of firms are genuinely anxious, about what will happen.

I referred in passing to the nationalised industries, but I wish to consider their prices a little more closely. In the leaflet from which I quoted at the opening of my remarks, "The Truth about Prices", there is a section which reads as follows: Incomes, including pensions, are being eaten away by rising prices simply because some manufacturers can't—or won't—absorb at least part of extra costs in increased production and higher efficiency. Other firms, including the nationalised industries, deserve full credit for the way they are trying to keep prices steady. This is the line which the right hon. Gentleman has particularly been following.

The right hon. Gentleman said in the House on 8th April: All the nationalised industries suffer from the fact that private enterprise puts its charges up to them. What the nationalised industries have done is to absorb a very large part of the costs pushed on to them. I hope that as a result of the new body we shall establish this as the general practice."—[OFFICIAL REPORT, 8th April, 1965; Vol. 710, c. 642.] I suggest that by this story about what the nationalised industries are doing as opposed to private industry the right hon. Gentleman is doing his best to propagate a myth. I want to try to bring him back to reality. I call in aid the hon. Member for West Ham, North (Mr. Arthur Lewis), who has helped me very materially. I am sorry that he is not here.

Sir Keith Joseph (Leeds, North-East)

Yes, he is.

Mr. Godber

I beg his pardon.

Last summer, with unusual forethought, the hon. Gentleman was kind enough to ask one or two very interesting Questions when I was Minister of Labour. I recalled those Questions. I have looked them up and they are worth calling to the attention of the House. The hon. Member asked first, what were the increases in the Index of Retail Prices in the services group and the nationalised industries, since October 1951; and what was the increase for manufactured goods during the same period and for the remainder of the index list respectively.

The answer I was able to give was that the increases in the nationalised sector during the period October, 1951, to May, 1961, represented 95 per cent. The increase in the service industries was 60 per cent. The increase in the other category to which he referred, namely, clothing and footwear, household durable goods and miscellaneous goods groups, taken together, was about 18 per cent. and the rest of the groups was about 59 per cent. The whole lot averaged about 50 per cent. over the period, including this very big figure of 95 per cent. for the nationalised industries.

In his second Question, the hon. Gentleman asked for a table of figures giving the percentage rise or fall in the Index of Retail Prices since October, 1951, and to what extent these percentage increases or decreases had been affected by fluctuations in prices in industries in public ownership and private ownership respectively.

In the reply which I gave him I said that over the full period the industries in public ownership had contributed 14 per cent. of the total rise in the cost-of-living index and the other industries 86 per cent., but—and there is a very big "but"—the position was that under the weighting of the retail price index 8 per cent. is what is provided by the nationalised industries, and 92 per cent. by the private sector. So, 8 per cent. of the weighting had provided 14 per cent. of the increased prices. In other words, their effect had almost double the effect of any other part of the retail price index. Here is a clear indication of what happened in that period up to the election on the prices in the nationalised sector as opposed to the private sector.

Since then the latest information we have was given in a Written Answer by the Chief Secretary to the Treasury which appeared in the OFFICIAL REPORT, in which he gave the increases in the nationalised industries since last October. The hon. Gentleman referred to the increases in railway fares of up to 5 per cent. and increases in electricity in the Midland Board of 11 per cent. to 14 per cent. and in the East Midlands Board of between 8.9 per cent. and 10.3 per cent. He referred to gas increases of 6 per cent. and there is a range of increases for coal, as well. All these since October of last year.

Mr. Julian Ridsdale (Harwich)

Does not my right hon. Friend think that these increases are very bad in view of the fact that during the last 10 years we have invested £6000 million in the public industries, which is more than five times our present gold reserves?

Mr. Godber

I am grateful to my hon. Friend for that intervention, which brings out the serious nature of the situation and the fact that in spite of all the help we gave to the nationalised industries they have not returned a dividend in comparison with what has been done by private industry. I am bringing this out because of what the right hon. Gentleman has said about these industries.

I received a letter only yesterday from a consumer of electricity in the area of the Southern Electricity Board. He enclosed a note on the tariff increases by the Board. The writer refers particularly to the general domestic tariff where the arrangement had been, apparently, for primary units, that is units charged at the high rate, to be based on the number of rooms in a house. Previously, it was based on 10 units per room, which meant that a house with three rooms, or a three-room flat, would have 30 units at the high rate and then go on to the low rate. For a 10-room house it would be 100 units. This was a direct help to poorer people and old-age pensioners—people living in small dwellings. It has now been completely changed. In the new tariff all households will have a uniform assessment of 56 primary units, whether the house is large or small. The cost of the primary units has gone up, making the impact even greater.

The small household is being penalised and the large household is being let off. Is that what Ministers opposite really want and expect? Is that the sort of thing they have been talking about, in their desire to help those in particular need? This has been done by a nationalised industry when, only last week, the right hon. Gentleman in reply to a Question put from this side of the House asking about referring price increases in the public sector to the National Board for Prices and Incomes, said: The answer is 'No'. On judgment, I decided not. If private enterprise had to go through the hoops which public enterprise has to do, there might not have been the same need for this machinery. We are now requiring private enterprise to tell us the kind of thing that public enterprise is already asked to tell us."—[OFFICIAL REPORT, 4th May, 1965; Vol. 711, c. 1116.] Was public enterprise asked to tell the right hon. Gentleman and his colleagues about this? Were the Government consulted? If so, were they happy that the old folk in small dwellings should have been placed at a disadvantage?

The Minister of State, Department of Economic Affairs (Mr. Austin Albu)

Can the right hon. Gentleman tell me whether or not this tariff change was considered by the consultative committee?

Mr. Godber

All I have is the actual tariff change. I was expecting information from the Government. It is for them to tell me whether it was considered and the extent to which it was considered. The point is that the tariff has been increased. The First Secretary spoke about the hoops which public enterprise has to go through. Yet this increase has been made and I believe that it is not in line with the wishes of many hon. Members. This is an indication that either Ministers opposite know what is being done and are allowing this sort of thing to happen, or they do not know and what was said by the right hon. Gentleman about hoops has no application at all. I ask him to deal with that point. I shall be interested to hear what the right hon. Gentleman can tell us which will be of comfort to those people who undoubtedly have been hard hit by this measure.

So much for the prices side. I turn now to the incomes side. The right hon. Gentleman told us on 7th April about his policy that it is a practical policy, it is an agreed policy and it is a fair policy"—[OFFICIAL REPORT, 7th April, 1965; Vol. 710, c. 533.] Those were the words used by the right hon. Gentleman. They were not exactly echoed by Mr. Woodcock, a few days later, when he said This is not a plan. It is not even a policy. Let us not make any false claims. These words are much too grandiloquent. It is not I who tell the right hon. Gentleman that he is too grandiloquent. The word was used by Mr. Woodcock and it shows a different approach to this matter. Nevertheless, it is true that the T.U.C. endorsed his policy by a large majority with one notable exception—the Transport and General Workers' Union.

I am glad that the Minister of Technology is present. I feel that I must raise this issue which is very important. The rejection by the Transport and General Workers' Union was a blow to that policy. It must also have been a personal blow to the right hon. Gentleman the First Secretary, as I think he has made clear. I regret that the union has not gone along with the policy. I believe that we should try to co-operate and progress, and I have always made that clear, but I have to ask—and I think that the Committee is entitled to know—what now is the attitude of the Minister of Technology in relation to this matter.

We are entitled to know where the right hon. Gentleman stands over this—and if he wishes to interrupt I shall be only too happy to allow him to do so. If he does not then we must make our own assumptions. I should have thought that he had a duty to make his position clear—[An HON. MEMBER: "Nonsense."] A right hon. Gentleman says, "Nonsense." I should have thought that Cabinet solidarity mattered. I should have thought that it was important to make quite clear and evident that the Cabinet speaks with one voice on this matter. Otherwise, where do we stand?

Are we to take it that the right hon. Gentleman's attitude is the one which he has quoted about the vote of his union, that the union has always been realistic about its whole approach to the whole question of wages policy and that for the union to vote this way is following an established pattern? If that is not giving his blessing to it, what is?

I think, having said that, that he is also responsible for his own election address, which was issued not very long ago. It seemed to me, although he does not state it precisely, to be indicating that he was in favour of this policy which his right hon. Friend is developing. He said: The blunt truth is that unless we modernise Britain and take advantage of the latest scientific discoveries we will not get steady expansion or a sound economy and we will not be able to carry out our plans. Now the Government has taken some big steps. Work has started on a fair and just incomes policy. I take that to mean that the right hon. Gentleman was supporting his right hon. Friend, but I do not see it as tying in with the other quotation which I have just given. I suggest to him that it is up to him to tell the committee and the country where he stands on this matter.

The Minister of Technology (Mr. Frank Cousins)

I shall be delighted, if the right hon. Gentleman will now give me the opportunity, having posed the three comments which he wants to make. Not only do I support the idea of an incomes policy, but I happened to coin the phrase "the planned growth of incomes" at the Labour Party conference and I got an endorsement for that with an overwhelming majority at that conference which endorsed the idea of a planned approach to purchasing power and improved standards of living.

I would remind the right hon. Member that when Mr. Woodcock, whom he also quoted, and I came to him, two years ago, and talked about his personal attitude, as Minister of Labour, to the whole question of the trade union movement, it was made clear that we thought that the reactions at the Ministry were undermining the belief of the trade union movement in Government intentions in toto.

The right hon. Gentleman has said that the Minister of Technology attended the N.E.D.C. I certainly did, in another capacity, and I listened to what was an attempt to impose wage restraint. [An HON. MEMBER: "Absurd."] It is not absurd. It is a statement of fact. There was a deliberate attempt to reintroduce the policies which had been put forward by other Ministers.

Mr. R. J. Maxwell-Hyslop (Tiverton)

On a point of order. Will the right hon. Gentleman take his chance of catching your eye later in the debate, Dr. King, or is he to continue to make a long statement in the middle of an intervention? Surely he can take his chance with other hon. Members in the course of the debate.

The Chairman

I am sympathetic to the point of order raised by the hon. Gentleman, but the right hon. Gentleman then invited the Minister to make quite clear his policy. I like interventions to be short, but I am a little lenient at the moment because of the broad nature of the question.

Mr. Cousins

I take notice and will be as brief as I can. We do not trust the Conservatives.

Mr. Godber

I am grateful to the right hon. Gentleman for the brevity of his last intervention. I am not clear as to which capacity he was speaking in when he said that. But, I take note of what he said. He is entitled to his own views as to who trusts whom, but in regard to his answer to my original question which referred to where he stood, I must admit that I am still by no means clear. He has said that he coined the phrase about a planned growth of wages. It is a wonderful phrase, and I give him credit for it. I must admit that I thought that it was the Prime Minister's, it is such a peculiar phrase. It can mean anything at all. It is in such phrases that the Prime Minister is so skilled.

That does not answer the point which I put to the right hon. Gentleman. I quoted to him what I understood he said on this union vote and I still do not understand how it is that he can take the position of supporting his right hon. Friend, on the one hand, and yet supporting the union, on the other. I suggest that the difficulty is probably not of his own making. The difficulty is one of the Prime Minister's making. He is the one responsible for it. We have reminded the Prime Minister in the first place that this is exactly the sort of thing which could bring divided loyalties.

If someone who is still the titular head of a union is in the Government, and the union's policy becomes opposed to that of the Government, it can cause the gravest strains. The Prime Minister rejected this views, and we have this very anomalous and unsatisfactory position. The right hon. Gentleman thinks that he has cleared the point up. He may have done so in his own mind, but, in reply to his last intervention, I would say that it is sometimes difficult to trust the comments of right hon. Gentlemen opposite.

So we have to leave it there, without any further elucidation. As to the other part of his intervention which dealt with the meetiing of the N.E.D.C., how he can interpret it in the way he has, I do not know. There was a clear proposition put forward by the employers' side, as he knows perfectly well, and to try to twist it and interpret it in the way he has is something which I fail to understand. I must leave this aspect, but we are still wondering precisely what the relationship is between right hon. Gentlemen opposite. Assuming that the policy is to go ahead, I come to another relevant aspect, the one in which wage demands are handled. None has yet been referred to the Board, though there has been no absence of candidates, if the right hon. Gentleman's own norm means anything at all. Will the Government refer claims or will they refer awards? This is a point which I put to the right hon. Gentleman in a Question in the House and got a very evasive and unsatisfactory Answer. I put it to him again. Will he refer claims, or will he refer awards? It is obviously better to refer claims and to do so early in the process, before either side has begun to lose patience.

There is one thing on which I think the Minister of Technology will agree, and that is that one of the greatest prob- lems in industrial relations is that if things are left to drag on, and tempers get raised, we get the worst of both worlds. We need to act in good time over any problem of industrial relations. I have shown how absurd it is to exclude the nationalised industries on prices. I suggest that it would be even more so to exclude them on incomes.

This question becomes particularly relevant when one looks at wage and salary agreements since November last. I shall give examples of one or two in the nationalised sector. On 14th December, a 9 per cent. rise was given to railwaymen; on 23rd December, a 9.6 to 13 per cent. rise to 77,000 G.P.O. engineers; on 14th January, a 9 per cent. rise to 80,000 railway engineers; on 13th March, a 15 per cent. rise to 6,000 G.P.O. supervisory engineers; on 17th April, the postmen's award of 20 per cent. over two years; and on 30th April, a 10 per cent. rise for 70,000 gas workers. All these, in the nationalised industries, were far above the norm.

The Minister may say that all these are special cases under paragraph 15 of his White Paper, but they should, nevertheless, be looked at. If they are not looked at, other workers in other industries feel that their whole degree of comparability in wages is being destroyed. This problem of comparability is one of the real problems in wages structure.

Any hon. Member who has had anything to do with wage negotiations knows that this is at the heart of the problem. If one sector gets a rise the others immediately look at their comparative positions in terms of actual total incomes. This is a very real difficulty and it seems to be one of the aspects of the policy which the right hon. Gentleman has been seeking to institute, although he must get going on it. It is no good turning a blind eye to the decisions reached in the nationalised industries.

It should be remembered that his own colleagues in the Government are scarcely helping him. The Postmaster-General said on 25th March: The extent of this increase has been decided in the light of the Joint Statement of Intent on Productivity Prices and Incomes. Note the words "decided in the light of". It is a very peculiar light in which he has seen it if, in fact, the norm means anything at all.

Then the Secretary of State for Education and Science proclaimed to the teachers that they would always be a special case. This special pleading is all very well, provided—[Interruption.] The right hon. Gentleman the First Secretary of State will have a chance to tell us all about these statements. I am merely pointing out that such statements do a great deal of harm to what he is seeking to produce. The Government must realise that if they go on in this way they will provoke other groups of workers—and so the process of comparability goes on.

The greatest need we have if we are to have high and rising earnings coupled with stable prices is an all-out attack on restrictive practices in industry. The First Secretary and the Minister of Labour have both on occasions said heartening things about this. One heartening action which I fully accept is the decision about liner trains. It was sensible. However, the fact remains that the only effective move to keep prices down so far has been the Resale Prices Act, which was instituted by the former Government with little support from hon. Gentlemen opposite. If we, against opposition from many of our supporters, tackled that part of the problem, we are entitled to ask the present Government to tackle the other side of it. Here, one must recognise the reason for resistance to the abandonment of restrictive practices.

No man wants to work himself out of a job and for this reason we believe that the Government made a bad mistake in their priorities in not introducing a measure of wage-related unemployment benefits. I advanced this argument fully on Second Reading of the Redundancy Bill and I will not repeat it now, except to say that such a measure would help employers generally to tackle the problem of over-manning. The Fawley experiment achieved great publicity, and rightly so, and other firms are endeavouring to do the same. However, far more must be done and this will be the only way to ensure high earnings and stable prices.

As I said, the Government have their priorities wrong. They have themselves given a savage upward twist to prices and have turned a blind eye to inflationary wage awards while proclaiming adherence to a norm which does not exist in reality. While they are starting inquiries into prices, they have so far referred nothing in the wages sphere to their own machinery. Meanwhile, the public must face the Bill. Savings are drying up and confidence is being lost. It is a sorry story, brought about by mismanagement, muddle and lack of unity within the Government them-selves. We condemn the Government and the country will increasingly condemn them as the effects of the present heavy fresh dose of inflation permeates the economy.

I say one final word to the legions, the rather depleted legions, behind the First Secretary. Many hon. Members opposite must be unhappy that the promises made on prices, made so freely last autumn, have been so falsified in the event. Let me give them a crumb of comfort, taken, perhaps appropriately, from Gibbon's "Decline and Fall." Writing of conditions of warfare at one stage of the Roman Empire, he said: A defeat, by disabling the chief from the performance of his engagements, dissolved the allegiance of his followers; and left them to consult their own safety by a timely desertion of an unsuccessful cause". I suggest to hon. Gentlemen opposite that by deserting into our Lobby tonight they will salve their own consciences and earn the gratitude of the nation.

4.35 p.m.

The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown)

I thought it ungracious of the right hon. Gentleman the Member for Grantham (Mr. Godber) to be so unfriendly to hon. Members who had stayed throughout his long speech. Instead of taunting them he should have thanked them.

As far as I could gather, his major complaint—indeed, his only complaint—which he developed throughout his speech, was that we had not succeeded in doing in seven months all the things which his party failed to do in 13 years. I suppose a reasonable complaint, but if one gets it into perspective it rather suggests that the right hon. Gentleman, if he wants us to move at this fast rate, should give us more help than he has been doing.

The other thing about his speech which interested me was his extraordinary attempt to find something odd in there having been different remarks made by right hon. Members of the same Front Bench. I wondered whether the spirit of his right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) was hovering over him. Since the right hon. Member for Grantham assured us, with his hand on his heart, that he was in favour of an incomes policy, and said that he had been trying—trying, mark you, but failing—to get one for years, he therefore thinks that I am right in trying to get such a policy now. The trouble is, according to the right hon. Gentleman, I am not proceeding fast enough.

That being so, I suggest that he has a look at what the right hon. Member for Wolverhampton, South-West has been saying during the last few weeks. He might care to look at some of the remarks that have been made by other right hon. Members of the Front Bench opposite during recent weeks. If there is anything in the argument about there being differences of emphasis or blunt differences of speech on the part of right hon. Members of Front Benches, it does not lie in the mouths of hon. Gentlemen on the Opposition Front Bench to make charges of that sort against the Government Front Bench.

Mr. Godber

I was talking about Cabinets, not Front Benches.

Mr. Brown

I assure the right hon. Gentleman that the point I am making does apply. Considering some of the things that have been said by right hon. Members of the Opposition Front Bench in recent weeks, that sort of charge, coming from the right hon. Member for Grantham, is most odd considering that the Front Bench opposite is totally divided on this subject.

I will try in my speech to deal with most of the points the right hon. Gentleman raised and any I miss will be dealt with by my right hon. Friend at the end of the debate. The first thing to get clear is that rising prices are not a new phenomenon. They have faced every Government since the war with a most intractable problem to which, let us be clear, no solution has yet been found.

Let us look briefly at the facts. Since 1956, a period of nearly 10 years, the Index of Retail Prices has risen, on average, by nearly 3 per cent. a year. This is not a new development. This virtually continuous rise in prices has continued right across the field of consumer spending. The fastest increase has been in housing, including rent and rates. I am, of course, speaking about the whole period. The next most rapid increase has been in fuel and light and in the growing area of consumer services. Food prices have tended to rise less rapidly, though they are important because they constitute much the largest sector of ordinary consumer spending; about one-third of the total.

I mention this background to show that it does not lie in the mouths of hon. Gentlemen opposite to complain of the fact of rising prices. While the right hon. Member for Grantham spent nearly an hour saying what had happened, it has been happening for a long time, and certainly throughout his party's tenure of office. The only times that the Tories even got it temporarily under control were in those years when they were applying the restrictive policies which led to unemployment and unused and under-used resources. I make it absolutely plain that we on this side have no intention whatever of going back to that time in dealing with the problem.

What did they do? We had Mr. Macmillan and his wages and prices plateau, but the plateau sloped upwards and the only idea that the Government had to level it off was exhortation. Maybe that was just as well, because if there had been a policy there was no machinery to carry it out.

Then the right hon. Gentleman the Member for Monmouth (Mr. Thorney-croft) appointed the "three wise men", the Council for Productivity, Prices and Incomes. The right hon. Gentleman had forgotten that and what a fiasco it was. I wonder whether anyone remembers anything about the "three wise men". After that, we had the right hon. Gentleman the Member for Wirral (Mr. Selwyn Lloyd) and his pay pause, in which he dealt roughly with the lower-paid, and, on the whole, more worthy, public servants and left the rest of the field alone. He got rid of the "three wise men" and set up the National Incomes Commission, whose contribution to the problem was just about as useful as that of the "three wise men".

The trouble with all these efforts was that they dealt only with incomes. I would like to make it plain, because it is one of the great differences between us, that there had been no attempt to bring prices into the exercise and therefore the Trades Union Congress and the trades unions generally, were not willing to take them seriously.

The right hon. Gentleman does not need to ask what happened at the N.E.D.C. meeting to which he referred. He knows what happened. It was because the whole range of policies the Government were then following was so clearly socially unjust and unfair, and because there was no attempt to deal either with prices or profits or any other form of personal incomes except wages, that the trade unions were not prepared to take seriously what they said they were trying to do.

Then the right hon. Gentleman the Member for Barnet (Mr. Maudling) came along and tried to interest the N.E.D.C. in the idea of an incomes policy, but with very little success. The F.B.I. examined one or two possible approaches for linking prices to private incomes, but decided that these were not workable and the right hon. Member then decided to call it a day. If Members opposite criticise our productivity, prices and incomes policy there is only one explanation. It came up all the way through the right hon. Gentleman's speech, as it oozes from every other speech made on the Opposition Front Bench. The explanation is simply "sour grapes". It is simply that they tried and failed and what they cannot forgive us for is that we are looking as though we might succeed.

When we took office we recognised from the start the need for a determined attack on this problem of rising prices. We said as much in the White Paper quoted and I outlined the Government's approach in the speech I made on 4th November, to which he has already referred. Let no one imagine that in talking about prices and incomes this is either the core of the subject, or the only way to attack it. I agree whole-heartedly that in the last analysis the answer to bringing about stability of prices and raising the real personal standards of earnings rests on productivity. It rests on getting rid of restrictive practices wherever they exist on both sides. [Interruption.] What the right hon. Gentleman is trying to say did not come across. Part of the trouble is that hon. Members opposite are not understood to be saying this, with certain notable exceptions. It is on management as well as on trade unions that the spotlight has to fall. In the end getting rid of restrictive practices is a management function. It is a management responsibility. We respond and we can get our people into a mood for responding only when the manager is willing to stop permitting it to happen. I agree on behalf of the Government, and, in so far as I can speak for it, the trade union movement, that this is the real answer to the issue.

Incidentally, when the right hon. Gentleman had a little dubious fun with my right hon. Friend I could not help thinking that I am also an officer of the Transport and General Workers' Union. I am here on the very same terms as my right hon. Friend and have been here on those terms ever since I came. This sudden discovery that there are trade union officials on leave of absence from their unions, in the case of my right hon. Friend, says very little for what hon. Members opposite have been doing all these past years.

The fact that I am an official on leave of absence from that union does not inhibit me from taking my share of collective responsibility for policy, so it is a bit foolish to suggest this is something special, as though it had never happened before. It has been happening for very many years. Even during the time of the National Government there were trade union officials on leave of absence from their unions here and being supported by hon. Gentlemen over there.

We are trying to deal with this business of rising productivity in a wide variety of ways. It is a longish job and it is the acme of folly to think that it can all be whisked away in six months. We are trying to deal with it through the "Little Neddies", through the labour market policies, through the whole range of the economic measures that we have introduced and by introducing a Bill to make redundancy payments available to people who have to move.

There is no time here to go into this aspect in every detail and I can only repeat that the productivity aspect is one to which we have to devote ourselves. It is one we have got to get in the forefront of our policies and it is the one that will ultimately decide whether we succeed.

When we came to power we faced, very shortly afterwards, a great flood of price increases. I must say that for a great defender of private enterprise, like the right hon. Gentleman, I thought that the freedom and the gay abandon with which he convicted private enterprise of flooding in all the increases was rather notable.

Mr. Godber

They were the result of the right hon. Gentleman's policies.

Mr. Brown

The right hon. Gentleman has told us that these were things that had begun at the beginning of January and were supposed to be due to events which took place six or seven weeks before, which takes us up to within three weeks of our getting into office. If he really suggests that by 1st January everything was being caused by the things that we did it is silly. [HON. MEMBERS: "Surcharge."]

The Chairman

Order. I asked right hon. Members on the Government Front Bench yesterday, or the day before, if they wished, to intervene in the conventional manner rather than interrupt when seated. I address the same reproof to the Opposition Front Bench.

Mr. Brown

A continual repetition of "Surcharge" is absurd. The amount of packaging paper, on which the 15 per cent. surcharge was levied in November, that goes into a packet of biscuits does not explain the increases which the right hon. Gentleman himself found to be so improper and so heavy.

In any case, faced with this, and having no powers to do anything about it at that stage, we had to decide what to do: whether to be like the right hon. Gentleman, and just let it run its course, or to try to intervene. Without possessing, and not wanting to possess, the powers to control prices, we thought it right to intervene by bringing to the attention of the trades, industries, manufacturers, retailers and distributors concerned the serious consequences and the importance to the national economy of their making every effort to halt this flood and to absorb increases in costs with greater efficiency.

We invited them to discuss with us the increases announced. Immediately, of course, hon. and right hon. Gentlemen opposite dashed in and advised them not to co-operate with us. I am happy to say that the manufacturers, the distributors and the trade interests did not listen to that advice. The traders concerned cooperated with us and discussed with us what had happened.

I know that when out of office all the cynics and clever people know all the answers and can poke fun at the idea of discussing increases with the traders concerned, but if one does not want to take powers of compulsion discussion is what one must have. It is time some hon. Members opposite made up their minds whether they believe in a free society and consultation and discussion or in a totalitarian society with the right to direct and control.

It is said by some of the right hon. Gentleman's friends that we cannot work against economic forces, and so on. I would be the first to admit that in such an exercise one cannot prove in precise terms what one has achieved, but the fact is that when that flood was seen to be building up a number of very important traders and very important distributors and very important groups of trades publicly declared their intention of stabilising prices, of reducing prices.

Very considerable steps were taken by them—for which I am grateful not just as a Minister and not just as a politician, but in the name of the nation's house-wives—which slowed things down and prevented the flood from building up, as it seemed then to be doing. I believe without any doubt that here one can achieve something—that one probably achieves most, at least in the short run—by making everyone just that little more conscious of the importance of restraining and of resisting price increases.

The right hon. Gentleman spoke of the letter he had received; I have received many letters from all over the country from people, clearly not on our side politically, who thought that they were fighting a lone battle against the general attitude of, "Other people's prices are still going up—why not ours?" Many of them have been encouraged to question and resist price increases, and I think that this is the good result of what we then tried to do.

What is most disturbing in this connection is not merely the assumption, "If costs go up, my prices must go up" instead of the attitude "Costs have gone up; let me see what I can do to avoid passing them on". There is another tendency within that, which is even more worrying. It is the tendency so often to pass on the increases with just that little more added, perhaps, as the right hon. Gentleman said in a rather illuminating passage, because they expect more increases to happen in the future, and say, "As we are putting up the price now, we might as well put it up for the increase that is to come in the future." It is not only that. It is the question of rounding up to the next whole number, and of adding one's normal margin to the cost of the increase. That is one reason why price increases continue, and why they are so big.

We have to resist that. Some pretty fantastic consequences have been attributed, for example, to the increase in fuel tax. I have referred to what the right hon. Gentleman said about the increase on packaging paper, but if one were to believe the excuses given for putting up prices on the ground of the increase in fuel tax, one would think that the country was full of vans, running all over, each carrying one sack of potatoes, or one parcel of laundry, or one packet of biscuits. If one works out how much the fuel tax increase enters into the cost of the one packet, or the one sack or the one parcel, one finds that it is very much smaller than is being stated, and one that would not justify anything like the increases attributed to it.

It is true that if, as the right hon. Gentleman said, we had more competition we could hold prices down that much more easily, but it is not wholly true. But if we did have more competition throughout industry without reference to other factors we would find other problems on our plate. However, let us deal with the situation as it is.

It is not we who are stopping industry from becoming more competitive. The whole mood of private enterprise has been to remove competition and to insulate itself against it. Anyhow, as the Committee knows, we are strengthening the legislation relating to monopolies and restrictive practices, and we shall do everything we can to improve and increase the possibilities of genuine competition. Nevertheless, when all is said and done, there is no doubt—and this has been accepted by the four national organisations on the management side of industry—there is need for machinery to inquire into cases where price behaviour appears, prima facie, to be inconsistent with the national interest. We have been pursuing this policy with vigour. The right hon. Gentleman has rather indicated that he is glad we are doing so, and is encouraging us to go on and hoping that we will succeed, so I do not need to spell out the successive steps we have taken, throughout in closest consultation with both sides of industry.

The right hon. Gentleman chides me for not having gone further in seven months, but from his own experience he must know that if we are to have consultation of the fullest and fairest kind so that we carry people with us it does take time. To have gone through the three successive stages—the declaration of intent, which one had to get over first, then the agreement to the machinery, and then the agreement to the rules and criteria by which that machinery would be guided—and at every stage with the fullest consultation, involving lots of people and lots of associations and lots of groups—to have got all that through in six months is, I think, a pretty good achievement, and it is not much good telling me that I should have done it a lot faster——

Mr. Godber

I accept that it does take time to have such consultations—I do not deny that. But in relation to prices the right hon. Gentleman has said a great deal pending the setting up of machinery but has not been sufficiently forthright to keep the balance in some ways in the wage and salary scales, where things seem to get out of hand in relation to his particular norm. That was my point.

Mr. Brown

I was dealing with the right hon. Gentleman's implication that we should have gone a lot faster on salaries, incomes and wages. He should read some of the speeches I have recently made to full conference of executives of unions, to the National Committee of the A.E.U., to the Executive Committee of the National Union of General and Municipal Workers, to all kinds of trade union conferences—even to the Labour Party conference last year. He would not then rebuke me for not having faced up to people on my own side at least as strongly as I have those on the other side. I wish that the right hon. Gentleman and his Friends would do the same about prices.

Some people now say that we have not achieved as much as we should have done in the time. Others have been saying up to now that we have been rushing on too fast. At this stage I am not very clear what the view of the party opposite is. Have we gone too fast, or have we not achieved enough? Are they fully behind us? Does the right hon. Gentleman speak for them, or does his right hon. Friend the Member for Wolverhampton, South-West? And is the right hon. Member for Leeds, North-East (Sir K. Joseph) entitled to arbitrate and give us the particular connecting policy?

One interesting comparison that I commend to hon. Gentlemen opposite who are so much in favour of private enterprise and competition is that of the price criteria we published in our White Paper last month—against which the Prices Board will operate, and against which all other negotiators have been asked to consider their functions—with the criteria, the "guide posts" as they call them, for price behaviour set out in the Economic Report of the President of the United States. It is very significant and interesting to note that even in that high temple of fierce competition they find it desirable to lay down the same kind of code of price behaviour as we are asking to be observed here, and as we have set up our Board to operate.

Sir K. Joseph

I am not quite clear whether the right hon. Gentleman wants more competition or not. He said just now that if we had more competition we might have other problems. In the situation we have today where vacancies far exceed the number of men and women available to fill them and tens of thou- sands are not even notified because there is no hope of people being available, will he make clear whether he does or does not want more competition?

Mr. Brown

That is exactly the sort of question which cannot be asked and answered in those terms. There are some industries—we were discussing one the other day—where all the technological requirements are towards larger units controlled by groups. If we force them back to fierce competition we shall not get development in the industry. On the other hand, there are industries where genuine competition would be the right thing. The reason why we are to strengthen legislation on restrictive practices and so on is that where competition could be strengthened without bringing in its train other undesirable consequences we want to have it. We cannot make a global decision which applies in one industry and not in every industry.

I turn to the suggestion that recent price increases result in large part from the Government's actions. Here I take the Budget decisions of last year and this. We have had three Budgets. The first was the Budget of April, 1964, presented by the right hon. Member for Barnet. That Budget imposed increased Excise Duty on tobacco, beer, wine and spirits, equivalent in the case of tobacco to 3d. or 4d. on a packet of 20 cigarettes, calculated to add just under one whole point to the Retail Price Index. When considering what has happened to prices we cannot leave out of account impositions made last April which would be having an effect on what was happening in the autumn of last year.

Then there was the Budget introduced by my right hon. Friend in November, which increased duty on motor fuel and added a further 0.2 of a point to the index. Then there were increases in indirect taxation last month which increased the index by 1 1/5 point, largely as a result of the increase in duty on tobacco. We have made clear the reasons for the actions we took then. When right hon. Members opposite are still criticising today what we did in November as though we did not inherit the economic legacy in October, a large amount of gall and a wonderfully selective memory has to be taken into consideration.

Be that as it may, we decided, as a matter of social policy and justice on top of the steps we had to take then to deal with the economic legacy, to increase social service payments to a large number of people and to abolish prescription charges. I do not remember the party opposite dividing the House against us on any of the social benefits, but I remember that they divided against providing the money. What they are doing today is to continue to protest about the wickedness of finding money for social benefits of which presumably they are in favour.

Sir K. Joseph

This is just not true, and the right hon. Members knows it. We did not vote against social benefits or against the substantial rise in weekly contributions which financed them.

Mr. Brown

I am sorry that the right hon. Member says that this is just not true. What I said is absolutely true and what he said has no relation to what we are talking about.

Sir K. Joseph rose——

Mr. Brown

The right hon. Member will have his turn later. I said that his party did not vote against the social benefits. No doubt they will do their best in due course to claim a share of the credit for them, but they did vote against the increases in taxation which provided a large part of the money for them. That is what I said. Let the right hon. Member go on saying "no." We can have ready for him tonight the actual vote. We can look up his name in HANSARD, unless he took the precaution of being absent. We can see the absolute party division.

Tobacco and drink have a fairly heavy weighting in the Retail Price Index. They take about 140 points out of 1,000 between them. Let us get this clear. When referring to tax on those items we are not talking about necessities of life. No one has to buy those things in any fixed quantities. The obvious probability is that higher taxation has some effect in depressing consumption. Although they enter the index to that extent, it does not necessarily follow that they enter into people's actual expenditure to the same extent.

The principal object of the April Budget was to ease the pressure of demand in the economy and to help us to get the balance of payments situation better and more quickly under control. Again we judged it right that part of the extra revenue should come from indirect taxation. I do not deny that these Budget increases increase the cost of living. I have never found it necessary to deny that in the House or in the country. They may, in the case of motor fuel, add to the general costs of trade and industry, so leading to higher prices throughout the economy, but hon. Members must not exaggerate this point. It does not enter into the individual items as much as they think; indeed, in many cases it is hardly detectable.

Secondly, increases in indirect taxation add directly to the cost of living, but this is inherent in any measures taken with the deliberate intention of reducing the growth of purchasing power. If they did not have that effect they would not carry out the intention which leads to the taking of that step. We recognise that the consequential increase in the cost of living can aggravate wage demands and make more difficult the prices and incomes policy, but that has to be balanced against the other risks to economic stability. On that balance we decided to face the problem and explain why.

The House has debated at length the increase in postal charges, which the right hon. Member for Grantham raised today. The reasons for those increases, as he knows only too well, were reasons to which hon. Members opposite chose to shut their eyes. We did not introduce the White Paper "Financial and Economic Obligations of the Nationalised Industries". The same principles apply with regard to the Post Office. The fixing of financial targets and the requiring of this public service to meet them was their policy. For a long time before we came to power in October they had decided in the case of the Post Office not to recognise what was going on and even to leave the essential forecasts out of the White Paper which they published.

Not only did they shut their own eyes to it but they deprived anyone else from seeing it. This, which required the telecommunications side to subsidise the postal side, which seemed to be the real point which the right hon. Member was making, would not have made economic sense given the different structures of the two sides. Hon. and right hon. Members opposite are in no position to argue the contrary because it was their party's policy, their Ministerial policy, to make each of the two sides pay for themselves. Therefore, if they want to say that we were wrong, they have to say that they were wrong all the time they were in power. I do not think that they want to say that, but if they do they cannot make the attack on us which they are seeking to make.

The recent pay award to the postmen has been hailed as making nonsense of our policy, but, as I have explained and repeat, the circumstances of their case warrant our regarding it as an exceptional one of a kind envisaged in last month's White Paper. It is essentially a "catching up" exercise based on the Priestley principle of "fair comparisons" for the Civil Service. If hon. Members opposite want to say that we should end the idea of fair comparisons for the Civil Service and wind up that machinery which they operated, let them say so, but so long as it exists Governments must observe and honour it. I repeat that there is no solution in this whole policy to be found by returning to the essentially unfair policy which was tried before of penalising the lower paid, the weaker groups of public servants, and relying on the fact that they probably have not got the bargaining power nor the meanness or lack of humanitarian spirit, to fight back. The postmen, the teachers, the nurses, the M-rate men in the Government service—they have all been made to carry this burden for far too long. The solution must be found outside of them. Of course they have to be part of it, but the real solution is outside of them, and it has to apply to those who are ahead in the queue before we can expect to apply it to those who are behind in the queue.

It is not merely a question here of incomes and income relativities. It is also here, even in the public service, a question of productivity. As the House knows, my right hon. Friend the Postmaster-General announced recently, not only the steps which have been going on to improve productivity and efficiency in the postal services, but the decision, supported by everyone concerned—the official side and the staff side—to engage a firm of consultants to advise on management problems and improvements which might be made in the Post Office. This again showed not only our resolve that efficiency should be improved to take care of increases in costs, whatever their cause, but our resolve to do it in the public service as well as to exhort the private sector.

I come now to one other question raised by the right hon. Gentleman, namely, the prices of the products of the nationalised industries. The right hon. Gentleman tried to show that there has been a tremendous rise and that it is out of proportion with what has gone on in private enterprise. I just do not accept that. I do not believe it is true. I think that what I said in the earlier debate the right hon. Gentleman mentioned, that the public service and the nationalised industries have done a magnificent job, absorbing costs imposed upon them by private enterprise industries, is absolutely true and can be proven to be true by reference to any particular case.

One of the points the right hon. Gentleman wanted to know from me was whether these prices were taken into account and considered in the operation of the productivity prices and incomes policy. I remind the right hon. Gentleman of what I said in paragraph 8 of the White Paper: These considerations apply equally to prices of goods and of services whether provided by private or public enterprise. The Government regard the nationalised industries as being under the same obligations as private enterprises to contribute to the general objective of price stability, while taking account of their financial and social obligations. This means that we regard the nationalised industries as being under an obligation in their price behaviour to meet the criteria set out in paragraphs 9 and 10 of the same document. I will not read them all out to the Committee. I trust that right hon and hon. Members have read them or, if they have not done so, will do so. What I will say is that undertakings are expected to make all possible efforts to absorb increased costs by improving their own efficiency. Only after making such efforts will increases in labour, capital, or other, costs be regarded as justifying higher prices.

The paragraph also accepts that an increase in prices may be justified— here we are talking of the private sector—by the need to earn a sufficient rate of return to secure the capital it requires to meet home and overseas demand. The nationalised industries are expected to be as efficient as they possibly can in order to absorb these increases in cost to the greatest possible extent. I repeat that I do not think that their record is at all a bad one. The right hon. Gentleman quoted the case of one regional electricity board. Obviously I did not know that he intended to raise it. Therefore, I was not briefed with all the possibilities, but I will have it looked into. If we can bring the right hon. Gentleman an answer on it before the end of the day, we will do so. If not, I will either write to him or answer him a Question on it, as he chooses.

As the right hon. Gentleman raised an electricity case, let me say this. Hon. Members should be aware of the record of the electricity generating industry, for example, in this. It has reduced the capital cost of a kilowatt from above £60 in 1954 to below £40 in 1963. Hon. Members will be aware of the enormous strides in mechanisation and efficiency which have been made by the National Coal Board and which have raised the overage output per man shift from under 28 cwts. in 1960 to more than 34 cwts. in 1964 and which, incidentally, have brought experts from all over the world to study the progress being made in our nationalised coal industry. The gas industry, too, has made great technical advances. Its scheme for importing liquid methane by tankers has made transport history and it has developed two entirely new processes for producing gas from light oil. We hear a lot about the Fawley scheme, and no one on this side would want to detract from that at all, but let us hear a little more from hon. Members opposite about the very great advances which are being made at the same time in the public services.

Mr. Ridsdale

Would the First Secretary of State pay tribute to the fact that since 1954 £3,000 million have been invested in the electricity industry? Is he satisfied with the return on this?

Mr. Brown

When the hon. Gentleman made this point before, the figure he gave was £6,000 million, but perhaps he was talking about a different period of time.

Mr. Ridsdale

I said £6,000 million, referring to all the public industries, but nearly £3,000 million applied to the electricity industry.

Mr. Brown

If financial obligations like that are imposed, one of the things that happens is that prices must be raised to provide the additional return on the additional capital which has been insisted on. I am asked if I am satisfied with the return. One is never satisfied in this field, either in the private or in the public sector. One must keep the pressure up as much as one can. Do not let us talk and act as though a great deal is not already happening in the public services. It is. That suggestion may score a temporary point in the House of Commons, but the morale of the managers, the technical people and the workmen in the industry must be thought of. Unless from time to time we give them a pat on the back for what they are doing as well as urge them to do more, the very morale which is a factor in getting this done will be lowered.

It also means that the nationalised industries must be free to earn a reasonable rate of return on their capital—indeed, they are expected to—after taking into account their various non-economic obligations. As I said just now, the policy includes among the factors to be taken into account, as to private employers, not merely the cost factor we were talking about, but also the need for a sufficient rate of return to enable them to get the capital they require. So, in the case of the nationalised industries, allowance must be made for them to obtain a reasonable return on their capital.

Clearly from the point of view of ensuring that the resources of the country are deployed in the way that contributes most to the strength and growth of the economy, it is vitally essential that the nationalised industries should earn a reasonable return on their capital and should work to secure financial objectives. That is why the previous Government—that is why right hon. Members now sitting on the Front Bench criticising our policy—produced this White Paper in 1961, Cmnd. 1337. It was the whole point of the document. It was under the policies of that White Paper that the current objectives for the electricity industry, the gas industry, and so on, were laid down.

Generally speaking, we think that the policy was sound. Generally speaking, we think that the industries should work under this financial obligation. It is certainly not for hon. Members opposite to complain if, despite what these industries are able to do about increasing their efficiency, they have to raise their price structure to get the returns which hon. Members opposite imposed upon them. If right hon. Members opposite have changed their minds on this White Paper, by all means let them say so. It is that policy we are working on. We think that it is right, but we should be very glad to hear if right hon. Members opposite have changed their minds. If they have not changed their minds, the point they make has no validity whatever.

However, the right hon. Gentleman raised a question which has rather more validity. It is whether nationalised industries, despite all the statements I have made, are being let off lightly or are being favoured as against what is expected from private industry.

Let me repeat that the truth is just the very opposite. The nationalised industries are put through a succession of hoops in the matter of prices far more than a very large area of private enterprise ever has to face. May I explain to the Committee what the hoops are so that hon. Members can consider them and perhaps comment on them afterwards? First, the boards of the nationalised industries have to live with a much livelier and much more inquisitive set of shareholders than pretty well any company in private industry. Whereas the average company chairman meets a handful of pretty docile shareholders once a year, the chairman of a nationalised industry has to keep his Minister regularly informed of what is going on in the industry for which he is responsible, and the Minister is answerable to the House of Commons.

It is no secret, certainly from right hon. Gentlemen opposite, that these subjects include major proposals affecting prices and charges. In fact as well as in form, responsibility for fixing charges, with the exceptions which I will mention, lies with the nationalized boards, but this does not mean that the Minister is not told in advance of what is being proposed and does not have all the opportunities of seeing that the wider national interests and considerations are taken into account. This is hoop No. 1 through which they have to go, and hon. and right hon. Members opposite know very well that they go through it.

The nationalised industries certainly are brought from time to time under scrutiny, either by special independent committees of inquiry or more regularly, by the Select Committee on Nationalised Industries which at the moment is looking into the affairs of the London Transport Board. There is no doubt about the value of these inquiries. The Select Committee in particular has produced excellent reports, and without question all this puts great pressure on the nationalised industries. Private enterprise does not have to face either of these. [HON. MEMBERS: "It faces competition."]

Thirdly, the actions of most of the nationalised boards are subject to continuous review by consultative machinery. Precise arrangements differ in different cases, but with a few exceptions, such as London passenger fares, responsibility lies with the nationalised industries themselves. But in most cases consultative bodies have been set up by statute with the responsibility, among others, of considering and reporting upon proposed increases in charges. It is the general task of these bodies, which include the Domestic Coal Consumers Council, the Industrial Coal Consumers Council, and consultative councils for each area gas board and each area electricity board, to look after the interests of the consumer in their respective fields.

Their remit includes the prices charged for the industry's goods and services as well as matters of day-to-day administration. My right hon. Friends have drawn the attention of the chairmen of the independent consultative bodies to the considerations of national interest relating to prices set out in the White Paper. They have asked them to see that these are taken into account in considering what is done by the industries for which they are the consultative body.

That is the third hoop. Where is the equivalent in private enterprise? [HON. MEMBERS: "Competition."] I dealt earlier with the argument about competition. It is true of some industries and it is not true of quite a number of others. It is not true at all of some powerful and very big industries.

There is a fourth hoop which we have now set on top of all that. We have made it clear that we will, if in a particular case it would be helpful, refer the price decision to the National Board for Prices and Incomes for review. I have made that clear. I meant it and I stand by it. The hundred or so hon. Members opposite who added their names to a Motion by one of their colleagues seemed to act without thinking about this point, just as I think the right hon. Member for Grantham was about to do but suddenly stopped when he asked me a question.

I said that I was going to refer to the National Board for Prices and Incomes the prices of bread, flour, soap and detergents, and road haulage charges. As for the "Sunday leaks", this sounded good in the way the right hon. Gentleman put it, but of the two newspapers which he mentioned one got two out of three right, one got three right out of three, and nearly all the newspapers mentioned drugs, which have not been referred. I can give the right hon. Gentleman my personal assurance that these were subjects which have been speculated about for a pretty long time. Why the right hon. Gentleman should be surprised about flour I do not know, because when one talks about bread one talks about flour. Bread and flour, soap and detergents and road haulage charges and various other things were possible subjects for reference. Journalists cannot always get it wrong and the Government must not be blamed if journalists get it right. I assure the right hon. Gentleman that there was no more to it than that.

Mr. Godber

It is quite clear that when these people in the industries concerned went to see the Ministers concerned, the Ministers apologised that this had happened and clearly they were under the impression that there had been a leak, just as the industrialists were under that impression. If the right hon. Gentleman gives me that assurance I accept it, and I am sure that the industrialists concerned will accept it.

Mr. Brown

There is at least one Minister here today, and I am sure that he never accepted that there had been a leak anywhere. In the sense of apologising for it, I am sorry that these things happen. It must be embarrassing to anybody who is negotiating and cannot tell his members what is going on and then his members read it in the newspapers. Unhappily, not having had the opportunity which I have had to realise the limitations on the accuracy of newspapers, so many of our friends are apt to believe that what they read in them must be true and official. Not only can I answer for my own Department, but I can answer for others: there was no leak that we can trace at all. There was no informed talk to correspondents, and I am absolutely certain from the fact that the newspapers did not get it all right, and that they got different subjects as well as the right ones, that this was a matter of pretty intelligent guessing where one can hardly go wrong if one chances one's arm.

When I announced this reference to the Board, I announced the road haulage charges reference, and the Road Haulage Association includes British Road Services as a member. That service, as well as private road hauliers, is one of the major current references and is therefore in part a nationalised case. Those who say that we have not referred a nationalised case or ought to refer one should do their homework. We have already referred one. I have little doubt—though it is not for me to say—that the chairman of the Board will be asking British Road Services to help in the inquiry.

I have tried to explain to the Committee and the country—and I hope that the committee will not feel that it has been in a sense of trying to make a party debating speech—the policies which we are pursuing in this extraordinarily difficult field of rising prices. There is no question of the imperative need for price stability, but it is a fact that up to now all attempts to achieve this have at best proved short-lived. In my view the attitude and approach of the right hon. Gentleman for Grantham this afternoon was in very large measure the reason for previous attempts failing and would make anything that the party opposite tried to do fail again today.

The real question is which approach to this matter is likely to have a fair chance of succeeding. Is it the approach of right hon. Gentlemen opposite and the expedients which I mentioned and which they tried, or is it a carefully devised policy, worked out in the closest cooperation with trade and industry and applied by the sort of machinery which we now possess in the National Board for Prices and Incomes? The Committee must judge. I have no doubt from my contacts with both sides of industry and in the country that, apart from hon. and right hon. Members opposite, everybody in the country is with us and is devoutly wishing us to succeed.

5.30 p.m.

Mr. Paul Bryan (Howden)

When we accuse the Government of breaking their election promises, the standard defence is that there has not been time to carry them out. That, quite naturally, was the line which the First Secretary of State took in the first sentence of his speech. Is is not a bad reply, but, of course, the strength of it will get diluted as time goes on.

Although the Government have been in power for only six months, that is not too short a time to form a pretty intelligent judgment on which of their election promises they are likely to carry out. For instance, we were told before the election and during the election that they would not increase taxation in order to carry out their programme. Since then they have increased taxation by about £500 million, and any intelligent guesser would say that they are most unlikely to reduce taxation by £500 million before they go out of office, especially as they can bask in the comfort of knowing that they are not likely to be in power much longer.

Six months is not a long time to make any marked reduction in prices or to curb them to any great degree, but we can, from what we have seen so far, pass some sort of judgment of future prospects based on their published intentions. Any reasonably well informed citizen who follows television and the Press, if asked what the main Socialist weapon to curb prices, would, I suppose, answer, "The First Secretary's prices and incomes policy". One hesitates to discuss or to criticise this policy because hon. and right hon. Members opposite are very touchy about it.

Only this afternoon the right hon. Gentleman said that if we talked about it it was a matter of sour grapes. I assure the Government that when I talk about it, discuss it and criticise it this afternoon I shall not be sneering at it. There is no guilty conscience on my part. I am not sniggering at it or ridiculing it in any way. I am not a cynic or even a member of the Wolverhampton school. I believe that any Government in this country must go for an incomes policy.

But this Government's policy for prices and incomes has been so over-boosted that the degree of success it is likely to achieve will be a big delusion. Moreover, if all the energy, all the publicity and all the hard work by some very able and "top" people on both sides of industry had been concentrated on overcoming the obstacles to productivity and to competition—if much greater emphasis had been put on that side of it—we could expect a more promising result.

The right hon. Gentleman said that the great difference between his incomes policy and any that had gone before was that he was the first Minister to bring in the question of prices, and he added that he was the first one to produce machinery which looked as though it would succeed. I wish to consider this, and I shall approach the matter from, as it were, the shop floor level, a level rather lower than the level at which it has been discussed so far in our debate. I have read and studied the various White Papers which the First Secretary has published on the subject. Reading them in Westminster, one finds them well written and sound, though fairly unreal. The farther one goes from London and Westminster, the more unreal they seem, and by the time I get to the West Riding of Yorkshire, where I come from, one can almost hear people saying, "That's nowt to do with us".

The very tone of these White Papers seems such a long way from what really happens in the factories, the mills and the offices where the millions of decisions are made which result in price levels in this country. As the Chancellor of the Duchy of Lancaster knows, I have been in the textile industry for many years, and I am a director of a clothing factory in the West Riding of Yorkshire. Our prices went up not long ago. They went up for the reasons that so many people's prices went up in most of the clothing industry. They went up because power costs more, because parcel post and rail carriage rates had gone up, because packaging costs, wages and interest rates had gone up, because of the 15 per cent. surcharge, and so on. Each item had gone up. I am not saying that each was a huge increase on its own, but all of them added together made an increase in prices absolutely inevitable.

When this sort of thing happens, I as a director of such a company would not be moved very much if I saw a headline in tomororw's newspapers "Trouser prices up. Brown acts", because I should know that this did not mean he would do anything.

The Chancellor of the Duchy of Lancaster (Mr. Douglas Houghton)

Will the hon. Gentleman kindly tell the Committee whether his profits have gone up?

Mr. Bryan

I shall come to that. My speech will cover it all.

The result of all this might be that my firm received one of the letters which the First Secretary of State sends round from to time. That letter would, no doubt, ask one to absorb these costs. But, to answer the Chancellor of the Duchy, this is exactly what has been taking place in most of the clothing trade. One's turnover has gone up every year over the past five years to quite a good extent. One's profits have gone up very much less. In other words, one is absorbing one's costs. But you do so not because you have had a message from a Minister, but because of competition and for no other reason at all.

In their White Paper, Prices and Incomes Policy, the Government sets out the "Criteria for price behaviour". As I read it, I feel quite virtuous because I find my company has kept the rules. But, again, the reason is competition; there is no other central motive. In fact, the conditions offered by the criteria for price behaviour are rather kinder than the discipline of competition. The Government say that one may raise one's prices if there is a question of raising more necessary capital. On that sort of basis, I could justify, if we could make it, a higher profit that we make today. It is admitted that profits are the key to capital. This is the only place where I have seen that recognised in a Government publication.

As time goes on, there may be the fear—if fear it be—of being brought before the National Board for Prices and Incomes. I can see the Board being effective on some of the goods which have been talked about earlier on—mass products like flour, cement, and so on—but, for the vast variety of goods which most of industry turns out, I cannot see what effect such a Board could have. If one were brought before it, one would know so much more about the whole subject under review than anyone doing the questioning that matters would not get very far.

Then we come on to the delicate problem, which, no doubt sensibly, is avoided in the White Papers, of what happens if compulsion must be used. It is not mentioned, but we really must talk and think about it now to see whether, in the event, it could be effective. In any industry producing a great variety of goods in quality and type, I do not see how any Government could possibly catch up with the problem. It reminds me of what happened during the war, when the Government tried to fix prices for the Utility scheme. Down came Government inspectors to examine one's prices. The gentlemen who came were temporary civil servants, and the reason they were so was that they had not been able to make a living in the trade themselves.

Not because they are evil, but because, on the whole, manufacturers will, naturally, quote prices for making, and so on, which are on the top side rather than on the bottom side, these official efforts do not get very far. The result under the Utility scheme was that far too big profits were made which had to be taken away afterwards by Excess Profits Tax. If compulsion is in the air or is regarded as a possibility, one must have some idea of how it will operate. I do not see how it can.

The First Secretary may think that what I am talking about applies to a few small firms in a few "one-horse" towns in the West Riding. In fact, it applies to the great bulk of industry. I would be interested to know the percentage of industry, to which the Secretary of State refers, where competition is unimportant because of the small number of operators. The line I have been taking would seem to apply to the West Riding in general and very nearly the whole of Lancashire, too.

Competition is still a far more powerful price reducer for industry than directives or exhortations. I do not go along with the right hon. Gentleman when he says that there was a tremendous impact when various companies announced that they would not, at his request, put up their prices for the time being. Great firms like Marks and Spencer's and Sainsbury's will not turn down a Government request flat. They have their public relations to think of. Naturally, they will hold prices for a bit. But the main reason why Marks and Spencer's reduces its prices is that it has the British Home Stores and Little-wood's breathing down its neck. That is what brings prices down. The right hon. Gentleman made quite a good point about America, the home of all competition. He pointed out that even in the United States Government have issued a guiding statement. Nevertheless, one only has to go there on business to know that competition is the real driving force.

The second element in the incomes policy is the question of wages, and this is obviously very important and varies in importance as to whether one is talking about a labour intensive industry or otherwise. The right hon. Gentleman claims that he is getting more co-operation from the unions than any of his predecessors. In theory, he can probably substantiate his claim. But we have to see what the situation is in practice. I wish him luck.

I think that he based his hopes on more co-operation first, on the claim that a Socialist Government would show more of a sense of social justice. We shall see about that. At the moment, that claim appears to rest on the Capital Gains Tax and taxing businessmen's expenses. That sort of thing is pure danegeld and, like danegeld, it will not satisfy for very long.

The second claim is that people understand the policy better because it has been better explained. One has to give the right hon. Gentleman marks for the way it has been explained all over the country. It is understood because it is an easy thing to understand. I am not saying that people are evil when I say that, being human, they understand it in their own favour. That is bound to be so. I do not say that a wages policy is wrong—obviously it is not—but much too much is being expected of it.

The White Paper says, in paragraph 13: … less weight than hitherto will have to be given to the factors mentioned in paragraph 12 … Those factors are … comparisons with levels or trends of incomes in other employments … At the moment, I see not the slightest change in wage bargaining in this regard.

In our trade, not long ago, we had negotiations on wages, and quite reasonably and expectedly, and as before, the union representative put forward as his strongest argument a league table of wages, claiming that the clothing workers must keep their place. That is obviously the strongest argument to put to employers, who know that they must not get too far down the table, as otherwise, they will not get labour in competition with other employers.

This is such a strong argument that it will be very hard for a long time to come, or indeed in the foreseeable future, to expect it not to be used. As to the guiding light, or the norm, whatever one calls it—I am not saying that it will be insignificant and will have no effect—it will be a useful starting point for employers, but negotiations do not go on for long before such things are forgotten in the general bargaining. One should not expect too much of it.

The right hon. Gentleman did not speak of wage drift, but it is very important. In the debate on the Budget, he said: … the problem of wage drift is ahead, but if we can get stability into the basic bargaining, we are on the way to being able to tackle wage drift for the first time."—[OFFICIAL REPORT, 7th April, 1965; Vol. 710, c. 534.] Perhaps we can hear tonight of the Government's views on that. It is a difficult problem; the outward and visible sign of inflation. If it is a sin, I suppose that it is the employer's sin. He will be told that it is not in the national interest for him to overbid for skilled workers for his factory. But there can be honestly differing views on this.

If, for instance, the managing director of I.B.M., in Scotland, making highly-sophisticated products, is short of skilled labour, he may well think that he is making the sort of thing that Britain should be producing and that, therefore, he has the best claim to the skilled labour in the area and the reason to give the highest price. However, neigh-bouring manufacturers may be able to make much the same arguments themselves.

As a trouser manufacturer I can claim, in this respectable country, that trousers are top priority. The fact that a committee of experts has come out with a finding, after much consideration, as to where the national interest lies will not get us as far as the right hon. Gentleman thinks. In the programme "Gallery", on television, the right hon. Gentleman said: If some idiot obstructs and frustrates everyone else then you will have to compel him. After this has been going on for a while, people might ask, "Who is the idiot?" It may not necessarily be the person talked about in that programme.

The right hon. Gentleman said today that the problem of rising prices had not been conquered in any Western country since the war and that is true. But when one studies their struggles against rising prices one sees that the most effective weapon has been competition. It is a very old-fashioned weapon, but it is in the only one that has worked strongly. But competition cannot work except in favourable conditions.

The first of these conditions is a sound financial situation. If there is roaring inflation, prices go up anyway, and there is no competition anyway. The abolition of resale price maintenance is a step forward. We have discussed that already, but what is worth mentioning is that it has brought with it an appreciation among the people of the value of price cutting. One hears much less now about the claim that people positively like the simplicity and security of fixed prices. The abolition of resale price maintenance and the Bill on monopolies which is slowly going through the House of Commons will have far more effect on the level of prices than all the White Papers which have been published.

Having said this about competition—and no doubt we shall hear much more about it later in the evening—I believe that the most revealing factor in all these White Papers, declarations of intent and so on, is that there is almost no mention of it. It is right at the bottom of all the factors which are alleged to matter.

There is good reason for that. To get these declarations of intent signed, people had to be kept happy, and competition is a very prickly and uncomfortable plant to have around. Nobody likes competition. Nobody who has to face it likes it. The Government have not yet faced it. We faced the importance of competition last year with the abolition of resale price maintenance, and we got ourselves into a lot of trouble doing so. But we saw it through, and it is now working.

The talking of the new Government has been tremendous—they will go down as the Government with a big mouth, but a faint heart. Before the election we had an awful lot from the Prime Minister about industries with a soft centre; this is Government which is soft all the way through, a sort of marshmallow Government. When the firing starts, that is the time that they run away. They have a wage policy, but they run away from the postmen. They are in favour of competition, but they run away from the Coal Board. On Thursday night they believed in steel nationalisation, but 300 of them ran away from two little rebels.

5.52 p.m.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

I want to comment on one or two of the remarks of the hon. Member for Howden (Mr. Bryan), but I should like, first, to congratulate my right hon. Friend the First Secretary on tackling prices, one of the most difficult jobs in the economic field. It is easy for any hon. Member to say that the First Secretary is not succeeding. It would be a miracle if he did succeed, especially in six months. I hope that all hon. Members opposite who speak in the debate later will at least express the hope that he succeeds. There is still an impression that some are rather glad that he has not succeeded in a short time.

This is something not just for the First Secretary, but for the nation. Unless we succeed in doing something about this matter, we shall be in a disaster. The hon. Member for Howden said that it was too soon to expect results, but that seems to be contrary to the attitude of the Conservative Party, which, until now, has seemed to think that all these problems should have been solved in six months. Of course, the hon. Gentleman was right to say that it is much too soon.

The hon. Gentleman advocated competition, but is not the trouble that we have competition all over the world and that our people are not facing up to it? This is one of the problems facing the steel industry. It is one of the justifications which the Government put forward for proposing to nationalise the steel industry which has not faced up to the necessity to compete. That is because it is living in a sheltered paradise.

Sir William Robson Brown (Esher)

Nothing came out of the debate last Thursday to show that the steel industry is one of the industries suffering from a double handicap. One is fixed prices, which were fixed too low, so low that during the last couple of months the Government themselves have had to accept that prices were too low and that profits were unreasonable, so that the price of steel was raised by a minimum figure of £1 5s. a ton. We had better learn some economic lessons from the steel industry. The House of Commons does not understand it. It has always misunderstood it. Hon. Members on both sides ought to study it much more closely than they have.

Mr. Woodburn

I appreciate the difficulties of the steel industry, but it has never been in a position of being able to equip itself in the modern way or able to face world competition.

Sir W. Robson Brown

Because its prices were far too low.

Mr. Woodburn

I would say, going back through my experience of the steel industry, that it was able to charge £24 a ton for steel axles when they could be bought from Belguim for £16 a ton. More than that, during the period when we had to sell goods to the Argentine in competition with Switzerland and Belgium, it was impossible to do so if British steel was used in the wheels and axles and other components of goods exported to the Argentine. It was only when some firms which wanted to start up outside the combine, such as Jessop's, of Sheffield, provided the material, that we were able to use British steel for an Argentine contract.

Before the First World War, the Australian Government gave this country a complete monopoly in the sale of steel railway material, but the Australian Government were so fleeced by high prices, because the industry took advantage of the monopoly, that for the first time in history they invited competition in railway materials from Switzerland and Belgium.

Sir W. Robson Brown

I am sorry to interrupt again, but which year is the right hon. Gentleman talking about?

Mr. Woodburn

I said that it was before the First World War.

Sir W. Robson Brown

That is a long time ago. We are facing the facts of life now, in 1965, and they are pretty tough.

Mr. Woodburn

Things were much the same between the wars, when Lord Nuffield said that he was forced to go to Belgium and elsewhere to buy steel because of the high prices maintained by the British steel firms.

After the First World War, the British steel industry suffered an almost complete collapse and, obviously, had neither the capital nor anything else to pay for modern developments. I understand that by comparison with other countries British steel units are too small and that many British steel makers cannot find the capital and that there is no possible inducement of future profit which will encourage the spending of hundreds of millions of £s on re-equipping the industry whose capital will not be forthcoming except from the Government.

Without that capital, the industry will continue to plough along in its present form. The Government's justification for nationalising the steel industry is that this capital must be put into it because the industry must be re-equipped if it is to be as efficient as the German, Japanese, continental, or American steel industries with whom it has to compete in world markets.

Mr. R. E. Winterbottom (Sheffield, Brightside)

Just to get it on the record, would not my right hon. Friend agree that the latest price increases did not affect some steel which we export and which is still being sold abroad cheaper than the cost of production?

Mr. Woodburn

That is a possibility, but that is not an economic way to conduct a business, nor does it provide the capital which is needed in the industry.

It must be recognised that there are all sorts of problems of this kind. Steel ought not to be sold abroad too much in its raw state. It ought to be exported incorporated in engineering products and in shipbuilding plates. However, not long ago the shipbuilders were complaining that their competitiveness was handicapped by the quality and price of the steel plates supplied to them. That is an unsatisfactory way in which to engage in the competition which the hon. Member for Howden advocated. The competition is not in this country, but in the world markets and we are not facing it. Competition is not having the suggested effect upon our industries and it is, therefore, difficult to see what great virtue it has.

There is, however, the problem to which the hon. Member has referred concerning labour. If there is a whole lot of competition for labour, labour is tempted to take advantage of it and raise its price, as happens in the ordinary market with supply and demand. One of the great tributes that should be paid to the trade union movement was that especially after the war, when we were in office, it held back and neither the miners nor any other industry took advantage of their economic position in the sellers market at that time to push up their wages to anything like the extent they could have done.

We are living, however, in an atmosphere when everybody wants more—the doctors, the teachers, for example, and right down the whole list. They all say that the other fellow is getting more and, therefore, that they themselves should get more. There is no solution to this problem. If they all want more—I suppose that it is money they want—the best way to do it would be to print "£2" or "£3" on the £1 notes for them, although obviously, of course, one does not get more simply by increasing the number of "tickets" that people get at the end of the week. Increases are impossible unless there is greater productivity and production.

My right hon. Friend the First Secretary correctly stressed that there must be an increase in productivity. This necessitates an increase in efficiency. We cannot have efficiency without the best methods and without improving both methods and machinery. This is what is required of the steel industry, which could have done it but has not. It depends entirely upon the Government coming in to help the steel industry both with money and in other ways. I do not see the validity of the argument about steel in this connection.

Sir Andrew McCance was head of Colvilles before it was nationalised. He was head of the company when it was nationalised and also when it was denationalised. Is it suggested that he behaves badly when he works for the nation, but behaves well when working for private enterprise? If we have good men in the steel industry, why should they not work for the nation as their shareholders just as they work for their private shareholders? A great deal of nonsense is talked. If there were any patriotism in the industry, they would work for the nation as earnestly and as sincerely as they work for anybody else.

The problem that we are facing is that of inflation. It is a vain hope that prices will come down, because if they come down the whole economy will slow up. The history of prices is that there must always be a feeling in the community that things will get dearer, otherwise purchasing stops. If people are told that in six months' time everything will be cheaper, all purchasing will stop and there will be deflation. Therefore, progress necessitates a constant slight pressure upwards. The Government's problem is to keep the pressure from being more than just a little above the line—not to let it go below the line, but to keep it just above. The figure of 3 per cent. has been mentioned. Whatever the percentage, it should not go above, that. This is essential for development, because without it the whole process is slowed down.

On the other hand, when there is this pressure on resources one is apt to get the wrong kind of competition, of which the hon. Member for Howden spoke, with people running about looking for labour. There is the problem of counteracting this tendency. Purchasing power must be kept within the level of productive resources. Inflation is not an absolute thing at any time. It is relative. If we create credit or purchasing power up to the point that we can get labour and materials to supply the need for which the purchasing power is provided, there will not be real inflation. It may not be universal.

At one stage, we had inflation in the Midlands and the south of England and deflation in Scotland at the same time. We could have afforded to expand the purchasing power in Scotland, but not in England, where deflation was needed. A certain amount of this trend is still continuing. There is over-pressure on both labour and materials in the Midlands and, perhaps, a lesser demand in Cheshire, Scotland, perhaps Cumberland and, to some extent, Northumberland. Here we require a differential regional policy for expansion.

One of the curious things that a former Chancellor of the Exchequer, the then Mr. Heathcoat Amory, did was to decree that the Scottish banks could extend credit, but that the English banks could not. That was ridiculous, because if people could not get an advance from an English bank they needed only to go to a Scottish bank for it. Had Mr. Amory said that all the banks were to extend credit for exports in Scotland but not for England and the South, that would have been a geographical distinction in the extension of credit. This is what is required when dealing with a geographical disequilibrium in regard to employment and pressure on materials.

When, however, we have the pressure which is now taking place, the policy of my right hon. Friend becomes extremely difficult. I sympathise with him in trying to make a success of it. For example, according to this morning's Press, hire-purchase credits are at a higher level than ever before. Everybody knows that to expand purchasing power quickly the best thing to do is to expand the hire-purchase business. The Conservatives know this. In 1959, they gave a free run to the banks and to everybody else to pump out hire-purchase money. The figure went up to such an extent that, I think, the hire-purchase people lost about £60 million in unpaid debts arising from the boom that won the 1955 election. The boom came all right. Hire purchase is something which whips up purchasing, sales and demand and puts up trading in the way that is happening now.

It may be necessary that that should be slowed down if we are to keep the purchasing power within the range of the productive machine. If the productive machine goes beyond its capacity, we cannot stop employers trying to get labour to produce the goods which people want. It is almost more than human nature could stand that a firm should allow itself to slacken and close down because it must not bribe people to come and work for it. At one time after the outbreak of war, Rolls Royce employed people as scouts searching the country to get toolmen and others to come to its new factory, otherwise it could not have started. The company was prepared to say to them, "Write your own price, turn up and you will be started." That is competition, but of a kind that forces up prices ridiculously.

A great deal has been said about the nationalised industries. I hope that the right hon. Member for Leeds, North-East (Sir K. Joseph),when he winds up the debate for the Opposition, will deal with some of the nonsense which is talked about nationalised industries. The electricity industry has tremendously increased its productivity by improvements in efficiency. Technicians have improved the production of electricity by using less coal and labour and producing more current. Considering the relative value of money, electricity is much cheaper than before the war.

The same is happening with gas. That industry is making amazing technical progress. When the former Conservative Minister was responsible for it, he boasted of its prowess and progress because of the technical efficiency of the people running the industry. Instead of loafing about drinking cups of tea and living at the nation's expense, the people in the gas and electricity industries are as keen on their job as any director of a company. I think that credit ought to be given to them for what they do.

The Post Office ought to be given credit for what it has done. Until recently, if I wanted to telephone my wife in Edinburgh it cost me 3s. 6d. to do so. Now it costs me 2d. I ask the right hon. Gentleman to give me an example of private enterprise which has reduced prices on that scale. With S.T.D. it is possible to telephone to the other end of the country for 2d. A couple of years ago it cost anything from 3s. 6d. to 4s.

Mr. Russell Johnston (Inverness)

The right hon. Gentleman must have a very quiet wife if it costs him only 2d. to speak to her.

Mr. Woodburn

I heard one hon. Member complaining that his daughter had run up a huge telephone bill. I pointed out that he made a mistake. He should have gone to the coin box and put in his 3d. At the end of the allotted time he would have been cut off. There is a remedy for people who run up large bills by making long telephone calls. I am surprised at the comment of the hon. Member for Inverness (Mr. Russell Johnston), because I should have thought that his wife, being a Scot, would be economical, too. When women know that they have to pay for things, they can be very economical.

Another example of increased efficiency is to be found in the Post Office engineering organisation, which has reduced costs in every way. One of the troubles of this country is that nationalised industries have to be mean compared with private enterprise. Directors of private companies can hold banquets and invite Ministers to take part in their hospitality, but if a director of a nationalised industry were to try to do that sort of thing all sorts of Questions would be asked in the House, and numerous restrictions would be placed in him. The country ought to be as generous to public enterprise as it is to private enterprise. If it was there would be less competiton to get into the cushy jobs in private enterprise.

The directors of the steel industry are emperors in their own territory. Nobody questions them. They do not adopt a democratic system. Their shareholders are not interested in the business. They are interested only in getting a reasonable dividend. The trouble with the steel industry is that it does not want to give up its power. The nationalised industries have done an extremely good job of work.

The question that we have to decide is what to do about the present situation. We must get some sort of a balance between purchasing power and the production machine. If we want more wages, and more salaries, and not just bits of paper, we can get them only by improved methods and increased productivity. Nobody wants to work harder. Nobody wants to work longer hours for the same money. The only thing left to do is to improve our methods of production.

An example of such improved production is to be found on the railways. It is, necessarily, a slow and painful process. Once the redevelopment of the railways is carried out, they will be run with fewer people. I noticed the other day that a large number of men will no longer be required because of improvements in operating methods.

The first thing that happened when the railways were nationalised was the closing of an office in Newcastle which did nothing but look after the exchange of tickets. Nearly 1,000 people became redundant overnight. We also got rid of duplication. Instead of having a number of different types of wagons, we had one or two types. We got rid of all kinds of overlapping, which, of course, had the result of reducing the cost of running the railways even during the difficult period immediately following nationalisation.

Much the same thing has happened in the mines. There has been a complete readjustment since 1933. In 1947, we established a programme for the closing down of inefficient mines and the redevelopment of up-to-date ones. This process has gone on continuously, with a great deal of heartrending and disturbance of miners' lives, but they have loyally accepted the situation.

We are now witnessing the readjustment of the aircraft industry. All this tends to bring about an increase in production, with the employment of less labour. There is more efficiency and, therefore, we make better use of the country's resources.

We must remember, however, that a large number of people are doing useless work. We talk as though we were poor, but if the people who check the pools, and other people who do completely useless work, were employed on productive jobs we could increase our productivity by a considerable amount. It is difficult to compel people to go into new jobs. The problem is to decide to what extent we can get rid of passengers, the people whom we carry, and get more people into productive work.

My experience in industry leads me to believe that it was regarded as the Cinderella of this country. It had to do all the work, but the profits were expected to go to the people who were not themselves doing anything productive. The agent selling the goods sometimes got more than the man who was producing them. This, of course, is quite common. The middle man seems to come off best.

I remember Dr. Addison. This is an old example, but it is true today. In the difficult days of competition, a farmer bought crates costing 1s. 3d. in which to send his cabbages to market. He did not get enough for his produce to pay for the crates, yet those cabbages were being sold at 6d. each. The profit, of course, was made by someone else. There is a great deal of waste in distribution. Much of the profit goes in distribution costs and is not received by the people who produce the goods. It is true, as the hon. Gentleman said, that this method does not provide the capital for redevelopment, but that capital must be found and we hope that something will be done to balance the situation. In any case, the Government's task is to try to keep production and distribution in balance.

If people take the attitude that the other fellow has received something, and that they must, therefore, receive it too, we shall merely be caught up in a cycle of everybody wanting more and more. It starts with a 2½ per cent. increase. That is not enough, so the next increase is one of 5 per cent. That, in turn, proves to be insufficient, so the next increase is one of 10 per cent. This is complete madness. It is impossible to go on manufacturing money without manufacturing goods. The present process is senseless, and will get us nowhere. The Government, sooner or later, must bring the two things into some sort of relationship.

The old method of dealing with the problem was to have less employment and to drive people on to the streets and thus create a new kind of competition. Nobody wants that, but the present system of full employment can continue to work only if people are sensible and reasonable. The great majority of people are, but there will always be some who want to whip up a little excitement. The question is whether my right hon. Friend will succeed in persuading employers and those who sell goods to keep down their prices, and whether he will succeed in persuading the workers to keep down their demands. We must succeed in getting employers to accept that profits are not sacrosanct. We must all exercise restraint, or nobody will be encouraged to do so.

My right hon. Friend has made great strides in getting at least verbal consent and a declaration of intent with regard to his policy. We know that the way to hell is paved with good intentions, but I think that my right hon. Friend has persuaded big organisations to abide by his suggestions. These organisations have a lot of influence, and I am sure that the workers, who listen to what they have to say through the medium of television, and so on, have a great deal of good sense as well, and will appreciate that they have a part to play. If they can be set a good example by their employers, and by the leaders of industry, they will exercise restraint, and it may be that we shall be on the way to a new development in industrial relations. When a worker sees a closed office door, he wonders what manipulations are taking place in an effort to diddle him.

It would help if there were a little more frankness and unashamedness. It would help if the employers did not shut their doors because they were ashamed at what went on behind them. I told Lord Nelson of Stafford—as he now is—that if he talked to the workers they would understand, but that so long as suspicion existed they would not allow the employers to get away with anything at their expense. There must be a new industrial relationship and a spirit of co-operation. No workers would object to their employers making a profit provided they know what is happening and know that they are not going to suffer in the process.

We must have co-operation and good will, and one of the Minister's triumphs at the moment is that he has induced a spirit of good will, which, I hope, will result in a successful conclusion to his endeavours.

6.21 p.m.

Sir Cyril Osborne (Louth)

If the First Secretary had been here I would have liked to congratulate him—if that would not have been too much of an embarrassment to him—on the policy that he is pursuing. Ever since the time of Sir Stafford Cripps, who tried this policy, I have been one of its supporters. But an incomes and prices policy cannot be successful unless output-per-man-year—as Sir Stafford Cripps used to put it—is increased. Productivity is the key to success, and speaking across the Floor of the Committee I would like to wish the First Secretary the best of luck in the job that he is trying to do.

When I heard the First Secretary speak I was reminded of the debates that we had in 1948 and 1949, when Sir Stafford Cripps made eloquent pleas for the same purpose. When the right hon. Gentleman has spoke at Question Time I have heard the echo of Sir Stafford Cripps' voice, and I have wondered whether the First Secretary could succeed where Cripps failed and, if so, how?

I hope that the President of the Board of Trade will tell his right hon. Friend that it is wrong to feel that hon. Members on this side of the Committee hope that he fails. We do not. For the good of our country, we hope that he succeeds. If it is not too great an irrelevancy to say this, I would say that if the right hon. Gentleman succeeds in this vital and most difficult problem he will have a better claim to be Prime Minister than anyone else on the benches opposite.

Apart from immigration, which, I feel, will, unhappily, destroy the English way of life one day, inflation is our greatest problem. It is tragic that there are just over a baker's dozen out of 630 Members, to discuss this vital question. If we were discussing Vietnam, the Concord project, or the TSR2, the Chamber would be crowded, but when we are dealing with the one problem which could ruin our whole economic system very little interest is taken.

I regard inflation as a cruel and cowardly way of swindling the thrifty and the best section of our nation of their hard-earned savings. I would remind hon. Members that it was the second great inflation that finally drove the German middle classes to despair, and opened the door for Hitler. The most crucial of all problems is that of prices and incomes. I have always argued that a successful policy in this respect must take the form of a package deal, and must include everybody. It must cover wages, salaries, rents, dividends, capital gains, and every other form of personal income. Nobody ought to be allowed, or ought to try, to contract out. We all accept the basic truth that if we pay ourselves more and more for producing less and less prices must rise.

How are we to keep prices down? In the international world of exports, so long as America and our other great competitors inflate as fast as we do we are not at any disadvantage, but we are cruelly crushing the best of our own people. It is against this that I have spoken so often during the 20 years that I have been in the House.

Having praised the First Secretary's efforts, I am bound to say that I feel that he will fail. I regret to say it. I fear that prices will continue to rise, first, because I do not believe that the First Secretary can obtain the full support of the trade unions, at the shop level. That is his problem. He can obtain the support of the top trade unionists, but his problem is to obtain support at the shop level. Without it he must fail. It is to the people at shop level that I want to address my few remarks, and I want to make three points.

In 1964, wages and salaries accounted for £17,550 million, while rents, dividends and interest absorbed £3,014 million. The amount taken up in wages and salaries was roughly six times that which went to other forms of personal income. It is, therefore, reasonable to say that unless those who represent wage earners and salary earners co-operate wholeheartedly the First Secretary's policy can never succeed.

I ask the President of the Board of Trade, first, whether the First Secretary is satisfied that he is getting all the support that he is entitled to expect from his old trade union colleagues. Is the Minister of Technology doing all he can to help his colleague to get this policy accepted in his own union? Why is not the First Secretary's own union doing more to support him? Why was it the only one of the great trade unions to accept the policy with such luke-warmness as to give it pneumonia?

Mr. Woodburn rose——

Sir C. Osborne

I cannot give way. The right hon. Gentleman spoke for a long time. He must allow me to make my speech. I do not want to be put off.

Why is it that the First Secretary cannot obtain the support of his trade union? It is essential to him if his policy is to succeed. I want to give the Committee certain facts which I obtained from the Minister of Labour a month ago, relating to the period of the new Parliament between 1st November and 31st March. In that period 320 wage claims were granted, affecting 5¼ million workers and costing the nation £130 million a year. This was not in respect of any extra production or efficiency. That, by itself, must put up prices, and it is putting them up now.

In that period 21 salary increases were granted, covering about 692,000 workers. The Ministry was unable to tell me how much they would cost, but it must run into many millions of pounds. I was also told that 32 wage claims were in the pipeline, covering 1,365,000 workers, as well as 27 salary claims, covering 1,450,000 workers. Let us face the issue. Every person who puts in a claim says that it is a special case and wants it to be treated specially. No one wishes to be subjected to the 3½ per cent. ideal increase. Unless these wage and salary increases which are accompanied by no extra production, but very often by shorter hours, are resisted, prices must continue to rise. No exhortation from the First Secretary, however brilliant or emotionally moving, can prevent that.

I should like to give the President of the Board of Trade a quotation made in the House on 10th March, 1947, by Sir Stafford Cripps, which sums up the position. He said: … we— that is, the nation— cannot afford increases in wage levels or shorter hours unless they increase productivity …".—[OFFICIAL REPORT, 10th March, 1947; Vol. 434. c. 994.] If, as the result of higher wages or shorter hours, we can achieve greater productivity per man, then both are justified.

The trend so far has been that time after time the union leaders have promised that if wage increases were granted, increased productivity would follow—and it has seldom done so. Someone has to be tough about this with the unions. Unless we are tough with the unions and say, "You cannot have any more increases in wages until extra productivity has been achieved", it will be impossible to check rising prices.

Mr. Cyril Bence (Dunbartonshire, East)

Is the hon. Gentleman suggesting that large manufacturers in mass production units are granting wage increases to their workers and making no effort technologically to absorb those wage increases, but are giving them, and automatically increasing prices?

Sir C. Osborne

I do not think that any intelligent person could really think I was suggesting that, and that is my answer to the hon. Gentleman.

Mr. Bence

That is what the hon. Gentleman said, that they are giving wage increases.

Sir C. Osborne

I gave way to the hon. Member in the belief that there would be an intelligent intervention.

What I am asking the President of the Board of Trade is, will he ask his right hon. Friend the First Secretary to repeat the warnings and the unpalatable advice given 15 years ago by Sir Stafford Cripps? If the right hon. Gentleman wants more quotations I have about 20 magnificent ones which were used by Sir Stafford Cripps. Above all, will the right hon. Gentleman express to his colleagues in the trade union world that trade union members, no more than any other section of the community, have not somehow a divine right to increased wages every year? That is what is wrong with our economy. Until that idea is destroyed, prices must continue to rise.

Will the Government tell the House of Commons when they expect the 7 per cent. Bank Rate to come down? Nothing in our economy has contributed more to increased prices than the 7 per cent. Bank Rate and all that goes with it. Certainly, it is more costly internally than it is worth to protect the £ overseas. This morning, in its centre page, The Times published this alarming report from its political correspondent. It stated As they"— that is, the Government— ride out the storm which has burst over steel nationalisation, the Government are quietly assessing the prospects of fulfilling their election promise to introduce favourable rates of interest for owner-occupiers of houses. The latest information is that while Bank Rate has to be kept at 7 per cent. to safeguard the pound, there is no chance that the Government will be able to make a move. No move, no reduction in mortgage rates until the Bank Rate comes down. Then there is this almost terrifying sentence: An announcement of intention must be delayed until the autumn at the earliest. I ask the President of the Board of Trade: is it true? Does this mean that we have to have a 7 per cent. Bank Rate until the autumn? May I remind him that when autumn comes we shall have the autumn pressure on sterling? Or will the Government reduce the Bank Rate from the present figure of 7 per cent. to 6 per cent. so as to put it up to 10 per cent. in October?

I believe that the Chancellor has been shockingly ill-advised over the Bank Rate. He has become the moneylenders' best friend, a kind of Socialist Shylock. How long do the Government expect this crisis to last? The best indication that the crisis is continuing is the high rate of interest plus a credit squeeze. There is considerable confusion in the best informed circles, not only in this country but overseas, about what the Government think.

I put a Question to the Chancellor last Tuesday and I received a Written Answer in which he said that he hoped to restore the equilibrium by the end of next year. [Interruption.] I should be obliged if my hon. Friends would give me a chance. Does it mean that the Bank Rate is to be kept on until the end of next year, which, as the Chancellor said in reply to me yesterday, was a possibility?

On the same day the Finance Ministers of the Six were meeting in Cannes to consider the application of Her Majesty's Government for another loan of £500 million. I hate to see our country going round the world with a begging bowl, trying to get money——

Mr. Bence

The hon. Gentleman's party did it after Suez.

Sir C. Osborne

I do not care who did it. I hate to see a proud and great nation like ours go round the world cadging for money.

A special correspondent of The Times, reporting from Cannes, said that the French Finance Minister said that the Chancellor's target would be achieved by early 1966. On the same day the Chancellor told me that it would be the end of 1966. Surely we are entitled to know which is correct.

Last weekend the Paris correspondent of the Sunday Times quoted the Chancellor as indicating that the deficit would be completely eliminated by the middle of 1966. This is such an important problem and point that the Committee is entitled to know what are the Government's intentions. What do they hope to achieve by the end of next year, by the middle or by the beginning? Furthermore, it was also stated in The Times that the Chancellor had given to the overseas Finance Ministers a schedule of his programme—times and amounts by which we should recover. If the right hon. Gentleman has given that information to the Finance Ministers we in this country ought to have it—we ought to have it in the House.

The Times quoted the French Foreign Minister as saying that if the present measures being taken by the Chancellor are not successful, other and sterner measures would be taken. The House of Commons is the place where we should be told about that. We should not have to read it in the papers, or as written by the Paris correspondent of The Times. We are entitled to be told. I ask: may we have these full details on this issue?

There are two other aspects on the issue of the 7 per cent. Bank Rate. We cannot have lower prices until we get the Bank Rate down. This is a money-lenders' paradise which the Socialist Government have created.

I should like to turn to two other aspects of the problem of housing——

Mr. Bence

Inflation.

Sir C. Osborne

I do not like inflation. I hate it. Nothing increases wage demands—sometimes justifiably—and puts up prices quicker than increases in house rents. If a man has to pay very much higher rents at home, he has a pressure from home to demand more wages. This goes on as inflation. I should like to ask the Chancellor how much is the 7 per cent. Bank Rate costing on the interest on a modern council house? How much extra has to be found either in rent or in subsidy?

This is not a new matter. I am delighted to quote what the hon. Member for Salford, West (Mr. Allaun) asked on 19th July, 1960. Putting the question far better than I could put it, he asked the then Conservative Chancellor of the Exchequer: Is the Chancellor aware that a £1,500 council house will now cost £5,510 by the time that it has paid interest for 60 years at the rate of 6 per cent.? I ask what it would cost at the rate of 7 per cent. He went on: Is he aware that this difference of 1½ per cent. will add £1,160 to the total cost of the house,"— that is a council house— or 7s. 6d. a week extra on rent?"—[OFFICIAL REPORT, 19th July, 1960; Vol. 627, c. 240.] I think that if that was the question posed when the Bank Rate was 6 per cent., I am entitled to ask what is the extra cost now that the Bank Rate is 7 per cent., and how much longer will it go on?

It was announced in the Press this morning that the hire-purchase debt for March had risen by another £16 million to £1,139 million, which is a record for all time. Two of the main causes of this increase were electricity and gas showrooms, which showed big increases. These are nationalised monopolies. Surely the Chancellor could do something to curb them. Can he not do anything, under a 7 per cent. Bank Rate, to stop this hire-purchase debt increase? Will he tackle this debt and try to reduce it? I hope that it would not be unfair to ask whether he is frightened of losing votes in so doing.

May I remind him that the autumn drain on sterling will start in a few months' time? I should like to know what defence we shall have against it. Our economic position is far more serious than hon. Members on either side of the Committee begin faintly to understand. What defence have we against this drain, except American loans? While we keep borrowing and borrowing, how can we expect to restore foreigners confidence in our economy? Above all, I beg the right hon. Gentleman to do what he can to keep the Bank Rate down.

My last point is this. Hon. Gentlemen who, ever since the election, have been chiding us on this side that their problems were inherited——

Mr. William Baxter (West Stirlingshire)

Does the hon. Member agree with that?

Sir C. Osborne

Let me deal with the matter.

They say that they inherited a problem of the nation living £800 million beyond its Own capital—[HON. MEMBERS: "Hear, hear."] Just wait. There was a £800 million deficit in our trading. This has been the excuse which they have made. I do not blame them. If I were in their place, I would make it, false though it is. It has been used as an excuse for everything. They say, "We inherited this mess, £800 million of it." Fine. Let me examine it, because I believe that it is certainly not the whole of the truth. I do not believe that it is half true. I believe that it it only partially true. There are four factors in this £800 million.

The first is the flight of capital. How much capital flew from London to Zurich, to Rome, to Bonn and to America after the election? I think that it was well over £100 million, if not up to £200 million. Why did it go? For the simple reason that people were frightened that there would be another devaluation. They felt that if they left their money, they would lose as much of it as would be accounted for by devaluation. Most Europeans had suffered devaluation in their own countries; they knew what it meant. One could not blame the Frenchman for taking his money from London back to Paris if he feared that by leaving it here he would suffer a great loss. How much of the £800 million was due not to the old Government, but to a fear of the new Government, justified or not? It was not our fault; it was the fault of hon. Members opposite.

The second important factor is what we call in trade the leads and lags in overseas payment. This arises from the fear of devaluation, whether justified or not. Anyone who doubts this should go into the City and ask any foreign exchange dealer. He will tell him how much of the £800 million was due to leads and lags. I should like to know that.

The third factor was how much was due to national stockpiling of materials? A very considerable amount. As soon as the election result was known, many industrialists and traders bought all the materials they wanted quickly. Why? They feared, from previous experience, that a Socialist Government would impose controls. How right they were. The 15 per cent. surcharge was clamped on.

Therefore, the first three of the four factors in this £800 million were not due to this side at all, but to fear of Socialism—

The President of the Board of Trade (Mr. Douglas Jay)

The figure of £800 million was actually an estimate, made before the result of the General Election was known, of what the deficit on current and capital account would be by the end of 1964. As a result of the measures taken by the Government, which were effective, it turned out to be not £800 million, but £745 million.

Sir C. Osborne

This is perfectly true. Of course, this happened before the election. It is no good waiting to escape from the hangman's rope once one is dangling. One escapes before he gets it round ones neck. People move very quickly when it comes to international finance. They were not taking the risk.

I am making a point which should have been made long ago—that more than half of the £800 million was due to fear of Socialism and not to the policies of this side of the Committee. There is no doubt that this was due to our living beyond our means. We are still living beyond our means. I am waiting for a Socialist Chancellor to have the courage to say to the nation, "You cannot live any more beyond your means. You have to go without. You cannot have it until you have earned it and there is no more money available."

Mr. W. Baxter

Why does the hon. Member speak of a Socialist Chancellor? Does he think that it is only a Socialist Chancellor who would take the necessary measures to rectify the wrongs which were done to the country by the previous Administration? Will he recollect that, on previous occasions, he has paid compliments to the late Sir Stafford Cripps for the measures which he took to rectify the wrongs which had existed in the country?

The Deputy-Chairman (Sir Samuel Storey)

This is a speech.

Sir C. Osborne

I have taken too long already and I must bring my remarks to an end.

The present Chancellor is taking very much the same steps that were taken by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in 1961, which were bitterly opposed by hon. Gentlemen opposite and for which my right hon. and learned Friend got the sack. We will never get prices down or keep them steady unless the Chancellor has the courage—as Sir Stafford Cripps had over food subsidies, when he said, "£480 million and not 1d. more" in 1947. If the present Chancellor will say to the spending Departments, remembering that the Government spend the most, "You must cut your expenditure", that will be the best way to get prices down and keep them down.

The whole problem lies with Government expenditure and, as I said earlier, discipline in the trade union world. If the First Secretary can deal with those two things, he will deserve the thanks of the whole nation.

6.51 p.m.

Mr. Lewis Carter-Jones (Eccles)

I will deal with two major points in my speech this afternoon; monopolies and the advantages of engaging in immoral mathematics.

But before discussing those two themes I would like to find out from hon. Gentlemen opposite whether or not they accept the view of the right hon. Gentleman the Member for Wolverhampton, South-West (Mr. Powell) who, in a clarion call last year, advocated that an element of laissez faire economics should come back into the Tory Party. Do hon. Gentlemen opposite now respond to that call?

In February of last year the right hon. Member for Wolverhampton, South-West, writing in New Society about whether or not management has a responsibility for prices and profits, said: Management has no business to accept any such responsibility, or rather, since "management" is really a collective abstract expression, managements have no business to accept such a responsibility, because the duty of every manager is to conduct the business, including the price policy of the business, in the way in which the return to the management is likely to maximise the return on the capital invested in the business. He said there, in effect, that the first duty of managements is to their shareholders and that they have no responsibility to society.

I will give a classic example of this; and may I say that I am delighted that my right hon. Friend the First Secretary has chosen to have soaps and detergents investigated among the first subjects for investigation by the National Board for Prices and Incomes. The findings will make extremely interesting reading. It so happens that there was an article on this subject in the Observer last Sunday. It also so happens that I had been doing some research on it previously.

Two firms in this country control 70 per cent. of the output of soap and detergents. They are Unilever, with the two household products Omo and Surf, and Procter and Gamble, with two detergents named Daz and Tide.

Sir K. Joseph

So that we may know, would the hon. Gentleman tell us what share the Co-op has of the market in these products?

Mr. Carter-Jones

I do not know. I am merely pointing out that these two firms have 70 per cent. of the output. I hope that the right hon. Gentleman will allow me to advance this part of my argument and I am sure that we will be able to find out what share of the market the Co-op has. Either I will find out and let the right hon. Gentleman know, or he will find out and let me know.

Having mentioned that 70 per cent. of the output in these products is held by those companies, it should be remembered that 15 per cent. of the total turnover goes on Press and television advertising, although in that 15 per cent. is not included the sort of thing that infuriates the housewife; the free offer and the free gift. During the past 12 months Omo, Daz, Surf and Tide have increased in price by 12 per cent., a considerable increase. [HON. MEMBERS: "What about the Co-op?"] I wish that hon. Gentlemen opposite would listen to what I am saying. Although I hear them mentioning the Co-op, I do not accept their argument, although our investigations into the question asked by the right hon. Member for Leeds, North-East (Sir K. Joseph) will no doubt give us the relevant figures.

On investigating these matters one comes across a front organisation known as the Society of British Soap Makers, which ostensibly speaks for all soap manufacturers. When Unilever is asked, according to the Observer, how many members that society has, the reply is 200, but when Procter and Gamble is asked the same question it states that there are 100 members. In fact, the society's membership totals 60. So far, we know that the society has a membership of 60 and that two firms control 70 per cent. of the industry's output.

The next point to bear in mind is that basically the British are a clean people. They wash quite frequently. It is a good thing that they should. There are two elements in washing; the conventional soap and synthetic detergents. The raw material for ordinary soap has gone up in price while the raw material for detergents has remained fairly constant. Indeed, in certain cases it has fallen. Despite this, the price of the detergents I mentioned increased by 12 per cent. during the last 12 months.

My major point in mentioning these facts is that if one has a monopoly situation, and it is argued that there are advantages to be had from large-scale production, then should it not be possible to produce a washing-up detergent more cheaply by large-scale production than it is for a smaller firm to produce one? Procter and Gamble charges twice as much for its Fairy Liquid as Sainsbury's virtually identical product. Unilever's Omo is sold in Holland and in this country. It is remarkable that during the last 12 months the price of Omo has gone up by 4 per cent. in Holland, but by 12 per cent. in Britain.

If we are to have an accepted policy for wages, incomes and prices, the first thing we must do is prove clearly that we mean business when we talk about prices. It is necessary for us to prove to the British worker, management and housewife that when we tackle the problem of prices we mean to tackle it vigorously. Only by doing that will we create a climate in which the public will accept some measure of control. The remarkable thing is that a firm like Sainsbury's, which is prepared to cooperate, can produce an identical product at half the price of the big boys. Yet we are told where there are the advantages of large-scale production, purchases will be cheaper. There is a contradiction here somewhere.

The second element is that when comparing the identical product of the same firm, namely, Omo, as sold by Unilever in Holland and Unilever in this country, it is discovered that the price rose by 4 per cent. in Holland and 12 per cent. in this country. The Dutch already have a far more effective means of price control than we have, and, taking this product as an example, it seems to be possible to keep prices down or at least to create a climate in which prices are held.

One of the most difficult things in school-teaching is to teach percentages, no matter to what age group. At the O-level stage it can sometimes be got across that if the price is added to the cost price, that percentage of the cost price is added and then this is added to the selling price. If the sum is done incorrectly at O-level or the 11-plus the child fails. If it is done incorrectly in big business someone makes a fortune. If an investigation of this sort of thing could be made it might indicate what sharp practice goes on in industry.

The best example occurred within striking distance of this building. When the 15 per cent. surcharge was imposed table wines in a certain establishment went up immediately. "Regrettably," they said, "because of the surcharge." The significant thing, however, was that the 15 per cent. was imposed not on the cost price of the article, but on its selling price. The result was that the price of the article rose from 10s. to 11s. 6d., whereas the real rise should have been from 10s. to 10s. 4½d.

If one uses the argument of the right hon. Member for Wolverhampton South-West, one notices that he says managements have no obligations in this field. They are allowed, in fact, to make a "sucker" out of the housewife. If this form of morality is used when no obligation is felt, then such immoral mathematics can be justified. In no circumstances would I or my Friends on this side of the Committee accept this premise. I honestly believe that a climate which would show that the Government mean business when they say that they will tackle prices will create a situation leading to much better labour relations, productivity and a much more favourable balance of payments for us.

There are people who say that they are patriotic. These are the people who say, "The 15 per cent. surcharge has been imposed, but we shall not pass it all on to you. We will absorb some, so our customers may benefit." Then they promptly slap 10 per cent. on the selling price. These are the acts of traitors. The surcharge was imposed because of our financial difficulties. The hon. Gentleman who spoke before me said that the situation was grave and that the action was taken in a very grave situation.

Some people hypocritically claim to be sharing part of the cost and probably making an extra fortune out of doing so. Unfortunately they are allowed to get away with it. We can only tackle this problem as individuals. When we prove to the country, as a Parliament, a Government, that we shall not allow this type of sharp practice, because that is what it is, to destroy our economy, then we will go a long way towards winning the faith and support of the people.

It is remarkable how some people can, when the occasion suits them, do all sorts of peculiar things to justify a price increase. We are told that industry benefits from competition, the vigorous impact of one firm against another, which gives us the dynamic economy we have. Yet at the beginning of this year, in one fell swoop, these highly competitive people found it necessary to increase the price of 3,200 items of groceries. This is not competition, it is connivance. Are right hon. Gentlemen opposite willing to accept the situation that firms can get together to fix prices so that people are hit at one and the same time?

Sir K. Joseph indicated dissent.

Mr. Carter-Jones

The right hon. Member shakes his head, but it happens.

The remarkable thing is that two reasons were given for the increases. One was the 15 per cent. surcharge and the other was the increased cost of petrol. Since these were food items, the surcharge did not apply to them and the first excuse was invalid. On the other hand, if it was argued that it was the increase in petrol which had sent up prices, a most embarassing position arose. As far as I can work out, the increased cost of petrol runs something like this. If one should happen to want to move three tons of sausages 100 miles the effect of the increased petrol tax on that is one-hundredth of 1d. per lb. of sausage, which seems to be rather a poor reason for increasing the prices of sausages by 1d.

If one really wants to go into the language of immoral mathematics one has it here. That is the lighter side. Once one gets into the home it ceases to be light. Somebody's pocket is being hit and somebody is having to pay for this imposition, imposed because the country was in dire need. People who exploit the situation are, by my standards, traitors.

There has been a sort of acceptance on the other side of what my right hon. Friend the First Secretary has been trying to do in this connection. What he is attempting will be more successful if he can reveal to the worker—whether organised or not—to managements and to housewives that he really means business. If some of the sharp practices in pricing policy are brought under the glaring light of public scrutiny the result may be im- provements for us all. If my right hon. Friend can so time things that prices are investigated just a little ahead of wages, he stands an extremely good chance of being most successful.

7.10 p.m.

Mr. David Price (Eastleigh)

The hon. Member for Eccles (Mr. Carter-Jones) will excuse me if I do not follow him into the economics of sausages, but I can deal quickly with what he said about the effect of the 15th per cent. surcharge, plus two Socialist Budgets, on the wine trade in terms of the cost increase on the wine merchant. It represents an increase of 1s. 5d. on a normal bottle of French table wine and 6s. on a bottle of imported rum. Had the hon. Gentleman come to me about the wine merchant whom he alleges to have passed the full 15 per cent. on to the retail price I should have been delighted to tell him of a most admirable merchant from whom I buy my wine and who is adding only the bare increase to his selling price. That is the answer to the hon. Gentleman, because I am glad to say that in the wine trade in London there is intense competition. I add that this is a trade in which I take certain interest, but I assure him it is entirely as a customer. I have no interest in it from the other side of the counter.

This has so far been a quiet debate and, I think, a serious one. I have disagreed with a great deal more that hon. Members have said than I have agreed with, but one thing on which we are all agreed is that we do not like incipient inflation. That sort of inflation goes rather the way this debate has—it quietly meanders on. It does not come dramatically, like galloping inflation. The Committee may recall the rather colourful language of a distinguished American economist who said: A little inflation is like a little pregnancy, it keeps growing. The problem to which hon. Members have been addressing themselves is that of how to prevent inflation. I am sure that we will all agree that there is not one single simple solution. In fact, I would go so far as to say that, given the various criteria in our economy and in our social and political expectations at the present time, I do not believe that there is an answer to inflation, but that there are merely methods of trying to live with it and to contain it.

I should like to put before the Committee what seem to me to be the relevant factors in our total economic and social position today that make it impossible, on either side of the Committee, to put forward a plan that one can say with integrity that if it were followed one could guarantee that in ten years' time prices would be the same as they are today.

The first factor is full employment. By that, we now do not mean full employment as defined just after the war by the late Mr. Hugh Gaitskell, but 1½ per cent., or, at the most, 2 per cent. of unemployment at any one moment of time.

The second factor is the exposed nature of our economy, to which we have to give more consideration, possibly, than other countries. We are very exposed to short-term fluctuations in our funds, remembering that, very broadly speaking since the end of the war our short-term liabilities as against our short-term assets have been as 4 is to 1.

Thirdly, what this country faces—what I think the whole world faces—is a phenomenon that has been called the revolution of rising expectations, which means however far we can work out, as academic economists a high growth rate it is not fast enough. We all do this in our model building, whether a 3 per cent., 4 per cent. or 5 per cent. model. Nevertheless, the plain fact is that for most people the growth rates for which a model can be built are inadequate to their expectations.

Fourthly, in response to this, we in all the major countries are pursuing to a greater or lesser extent policies of economic growth which, again, make it harder to contain inflation.

Fifthly, we have the factor of Parliamentary democracy. I do not criticise any of these factors as such. I am merely trying to put to the Committee the general economic and social background against which we must try to deal with inflation.

I put it another way. If we had general agreement in the country—indeed, in this Committee—that the first and major ecomic and social objective of Government was to stop inflation and that all the other objectives were to have a much lower priority, then I believe that we would do very much better than we have done, or are likely to do, in containing inflation. But the moment one says that, one thinks, as other hon. Members do, of the other objectives of national policy—above all, of growth, which we dare not subordinate.

We also have the fact that in this country we run what we call a mixed economy. It is neither the full old-fashioned free market economy nor is it the complete totalitarian, dictatorial economy—whether we call it Communism or Fascism, I do not mind. That means that all the traditional sticks and carrots that were available under a free market economy, and are available under a totalitarian economy, are not available to us—at least, not to the full extent. I have to ask, as I have asked myself for many years, whether what our economy lacks most is adequate sticks and adequate carrots. I shall come back to that point in a moment.

Because of the social consequences of inflation, apart from the economic ones, there is always pressure on the Government of the day to announce a policy for dealing with inflation. The present Government have given us their solution in their White Paper "Prices and Incomes Policy"—Cmnd. 2639. Their chosen instrument is the National Board for Prices and Incomes which they have established.

I have nothing against the First Secretary's effort in setting up this Board, but if any hon. Member asks me whether I think it will succeed in the terms in which the First Secretary is hoping that it will succeed, I have to give the answer that, regrettably, I do not think it will succeed. If hon. Members then ask, "Are the Government doing enough?" my reply must be, "No". I say that because I do not believe that the National Board for Prices and Incomes, or the White Paper—or, indeed, the whole range of Government policy—can come to terms with market forces, which are the real cause of incipient inflation.

Let hon. Members remember that, whether one is working in an old laissez faire economy or in a Communist economy, completely State-controlled, market forces are still there. If anyone doubt that, I can refer him to some of Mr. Khrushchev's speeches on the failure of the agricultural programme in the Soviet Union.

Having said that, I must make it clear that I do not believe that the National Board for Prices and Incomes is valueless. I believe that it has at least two useful purposes. First, I think that it is capable of playing an important educational rôle to the public—a sort of W.E.A. extension lecture on a very large scale. I do not scorn that, though some might.

Secondly, it can create an atmosphere in which some marginal restraint is possible. I would go that far with the First Secretary of State. I do not scorn any success he may achieve in that direction, but I do not believe it is sufficient. One or two hon. Members have spoken about asking people to be reasonable, but in economic terms what we are asking is that people should accept 3½ per cent. as the norm rather than 5 per cent. Each wage claim in its own context seems very reasonable to those concerned, particularly when one reads paragraph 15 of the White Paper, which gives admirable reasons why one should be the exception to the norm.

Just as the little pregnancy grows, so the little inflation grows. It is the sum of all the increases of 1½ per cent. more than the norm which, added over the years, creates incipient inflation. It is the firm which passes on the cost which it cannot absorb and a little more in anticipation of another increase next week on the principle that it cannot put up prices every week.

To deal with this problem, the first and over-riding responsibility of the Government is the management of the economy. Let us try to anticipate supply and demand and get them into balance. Having said that, one is only beginning to come to the point. I have watched a number of Chancellors over the years. One of the difficulties which a Chancellor faces is that the information by which his advisers attempt to estimate supply and demand is not adequate. I put it seriously to the Government that one of the first things we need to do is to get better and quicker figures on which the Chancellor of the day can get a better estimate of supply and demand. In particular, our figures about the state of forward orders and figures of stocks in progress are inadequate and always late.

This clearly will mean putting more imposition on industry, on commerce and public services to provide meaningful information. Nowadays advance statistical sampling techniques are available. It should be possible therefore to get more of this information quicker without having to do 100 per cent. surveys.

For a long time I have been of the opinion that we need extra regulators in the armoury of the Chancellor of the Exchequer and the authorities. The Committee may be interested to know that on various occasions when I have discussed this matter with very distinguished figures in the City of London I have asked them, "If you were Chancellor of the Exchequer what new regulators would you add to the armoury?", the kind of reply I have had has always been negative. In the words of a distinguished banker, "Mr. Price, you don't come to the City of London and ask a question like that; we are intellectually sterile".

I suggest to the President of the Board of Trade—who, I understand, is to wind up the debate—that there are at least three regulators which could be added to our armoury. The first is a flat sales tax. I am quite sure that any economist in the Committee would agree that technically that would give the Chancellor one of the easiest regulators to boost demand or to restrain it as required. Secondly, we ought to have a pay-roll tax, because that would give the authorities the further advantage that it could be made at differential rates in different parts of the country. That is a thought which I should have liked to put to the right hon. Member for Clackmannan and East Stirling-shire (Mr. Woodburn), who is not present in the Committee at the moment.

The right hon. Gentleman was on a good point when he said that we get an excess of demand over supply in London and the booming Midlands just at the moment when we are getting things moving in the development districts. Therefore we should develop a new regulator by which we could restrain demand in the South and the Midlands without checking demand in the development districts. I have northern Scotland particularly in mind.

We have to accept that there will have to be alterations in the pace of growth in the economy. I know this has been condemned in the past as stop and go. I would not say stop and go but rather going slower and faster is inevitable if the economy is to be properly regulated. I was interested in the comments of my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) in the debate last night. He said: If by those much abused words 'stop and go' we mean 'slow down and speed up', I am sure that 'stop and go' is essential. The only alternative is either to run the economy very slow, indeed, which is unthinkable because it means massive unemployment, or to have a series of controls, which I do not believe a democratic Government could possibly acquire in time of peace."—[OFFICIAL REPORT, 10th May, 1965; Vol. 712, c. 136.] I agree entirely. I go back to my earlier point. The more we can refine and improve the technique of estimating supply and demand, the more possible it ought to be to get nearer to a steady pace which we all would like to have. It is quite unrealistic to imagine that over the years the economy can grow at an absolutely even pace. There will have to be fluctuations unless we are to be content with a very slow pace.

I equally agree with the remarks made by my hon. Friend the Member for Howden (Mr. Bryan) about the importance of competition. The First Secretary of State told us in his first economic speech in this Parliament, in the debate on the Address on 4th November: In general terms we need to create a competitive climate in which efficiency is rewarded and inefficiency penalised."—[OFFICIAL REPORT, 4th November, 1964, Vol. 701, c. 220.] I entirely agree with that. Anything which the right hon. Gentleman and his colleagues in the Government do in pursuit of that aim will have the support of myself and, I know, of many of my hon. Friends. There are moments when I reflect that possibly on these matters the division between the two sides of the Committee is not a real division. The real division is between those who take a forward, aggressive, courageous view of change and those who want to dig in on their prepared positions whatever they may be politically.

How can we get more competition? The former Administration took many valuable measures, particularly the Resale Prices Act, to which reference has been made already, and the Restrictive Trade Practices Act. I am delighted that the President of the Board of Trade is following up the intention we in the previous Administration had of widening the scope of that Act. It is extremely important that it should extend to the field of services. I am also glad that he is going ahead with further monopoly legislation, but the fact that a particular manufacturer is a sole producer does not necessarily mean in cost terms a monopoly situation. It depends upon the ability of the buyer without much increase in price to move to an alternative product.

I have believed for many years that we have approached our monopoly legislation or the definition of a monopoly situation the wrong way round. We have looked at it in terms of control of production whereas we should look at it in terms of the control of the market. I have always been attracted by the approach of Professor Hicks in his "indifference curves". He does this rather elegantly in considering how much a trader can go on raising the price without his customers moving to an alternative product.

The classic case, if I can go back to drink again, is Guinness. The manufacturers of Guinness claim that it is unique and they tell people that it does them good. But we who may not be quite as keen on Guinness would regard Guinness as being just one of many stouts. If the manufacturers of Guinness were to push up the price, very soon even the dedicated Guinness drinkers would buy an alternative stout. This is what I mean by the ability to move into an alternative product.

This is relevant to the remarks of the hon. Member for Eccles. He mentioned what he thought was an unfortunate situation, on which I gather he has done quite a lot of work, in respect of detergents. If my memory serves me right, the last Government referred detergent manufacturers to the Monopolies Commission. I add, on the question of monopolies, that under both Conservative and Labour Governments we have taken the view that this country could not, because the domestic market is not large enough, take the rather crude and simple view that the Americans have pursued in successive legislation, starting with the great Sherman Act.

When we join the Common Market and are part of that very much larger market, I hope that we shall press upon the other member countries and upon the Commission to adopt something similar to the American approach to monopolies of scale. I believe that then the home market would be large enough to be able to contain it. Over the last sixty years the rather crude approach, as some people think, taken by the Americans to monopolies of scale has in the long run, in spite of some rough edges in it, been to the benefit of growth in the American economy and to the American consumer.

There are limitations on competition. The first limitation is those nationalised industries where there is not an alternative product into which one can easily move. By contrast one of the successes of the gas industry is that a declining industry has been able successfully to respond to the challenge of competition from electricity and oil. I was rather surprised at the simple faith the First Secretary has shown in the value of consultative councils. Secondly, there is an obvious limitation on the full bite of competition when one has a booming home market in which it is easier to pass on price increases.

We should also remember on the subject of competition that people do not compete because it is tremendous fun to compete. It is the job of the authorities—that is, the Government and we as a legislature—to ensure that we so arrange both the general control of the economy and our legislation that we compel people to compete. As one distinguished American once said to me, "In my country if you are not on your toes you end up on your knees".

Nobody likes competition for himself. The view that I so frequently find going round British industry and round the constituencies is that everyone is in favour of competition for the other chap but not for himself; that if it is applied to himself it is unfair competition. It was the same over the Resale Prices Act. The attitude was, "Get rid of R.P.M. for everything that we need as customers; but for us as sellers it protects our standard of living and is essential". It is exactly the same with restrictive practices. We are all against restrictive practices. We can find restrictive practices in every field except our own. In our own field we find some very good reason for justifying their continued existence.

The First Secretary of State said in his first speech on taking office that he wanted to reward efficiency and to penalise inefficiency. What have the Government done in pursuit of these two great aims? It is perfectly true that, as a result of the two Budgets—and now we are on the second Finance Bill—we have all been penalised. Indeed, the increase of over £1,000 million of extra taxes and extra charges in a full year is a considerable penalty for us all. I can find little in the way of incentive.

I suggest to the President of the Board of Trade another way in which we can get a little more competition. I seriously put it to him that, if we do not manage to get something successful out of the so-called Kennedy Round in the G.A.T.T., he should very seriously consider selective unilateral reductions in our own tariffs. I am not a free trader. I am a low tariff man. I believe that on the foreign side there is no substitute for joining the Common Market. To my mind, the quicker we do so the better.

The other thing—this is my last general thought—is that we must devote far more thought to how, on the one hand, we can increase the supply of labour and how, on the other hand, in the context of increasing demand and increasing output, we can reduce the demand. So we must work on either side of the equation. It is the imbalance in the equation between supply of and demand for labour that is the real reason for the rise in wage costs.

To increase the supply of labour we must go even further than we have gone in providing more training facilities. This all will be going ahead under the new industrial training boards. We must take an entirely new look at our apprenticeship system. In many industries the apprenticeship system goes back to the days when the apprentice was no more than the brewer up of tea for the journeyman. Today, with all the modern aids and facilities that we have in better factories and better firms, we need a completely new look at the whole subject.

It is not for me to suggest to the trade union movement how it might take action, but for many years I have wondered why the trade union movement has not blacked employers who did not provide decent training facilities. I believe that this would be proper protection for their members and would be thoroughly in the national interest.

We obviously must have greater mobility of labour. Over the years gradual steps have been made towards this. I believe that probably the most important single factor here is the provision of more houses, not only to rent but to buy, in areas where more skilled labour is needed.

Coming to the other side of the equation, reducing the demand for labour—I declare an interest. I am an old works study man and I am by profession a management consultant. Through these techniques there are enormous opportunities for reducing the amount of labour that is required to do a particular job. We are only on the threshold of automation. At the moment we are just thinking about it in industry. When we start to think about it through the whole of the services, both public and private, there is an enormous harvest to be reaped, particularly in offices and in transportation.

We continue to design our hospitals on the broad conceptions that were no doubt right in Florence Nightingale's day, to the extent of still laying the beds out in a military line, sticking the patient in bed and leaving him in bed because the sergeant-major can deal with him better in bed than when he is mobile. We must go back to square one and think the whole thing out without prejudice, asking "Why?" the whole time.

I made a passing reference to getting rid of restrictive practices. This features in all our speeches, but, as I said earlier, when one comes to it in practice it is rather different from making speeches about it on the public platform. There is in this country an implicit syndicalism of management and worker to resist change. I blame neither one nor the other. I merely report the fact. Again, change is one of the things where we are all for the other fellow changing. We are not nearly so keen on changing ourselves, except possibly the young ladies in matters of fashion. We need stronger management if we are to have an adequate rate of change.

Equally it must be recognised that, just as one gets bad management, so one gets the awkward squad in the trade union movement. It does not do any good to pretend that all managements are good and all trade union leaders are shining with the national interest. We would have more success in getting rid of restrictive practices and getting wages and salaries more related to productivity if we were nearer to the shop floor in our agreements and less involved in great national agreements covering vast millions of men in industries whose working conditions vary greatly.

Finally, the Government must set an example in their own field. I end by returning to the National Prices and Incomes Board. Paragraph 15 of the White Paper gives the reason why any of us can claim a bigger salary or wage increase than the norm. I am no lawyer, but I believe that I could argue a very good case for any group of workers or professional men who cared to employ me to argue it for them. I cannot see how we can ever persuade any group of people that they are the people to exercise restraint. I rather think that the White Paper means that we are all now exceptions.

The incomes policy of the right hon. Gentleman the First Secretary of State is not exactly a rip-roaring success at present. I want stable prices, and I am sure that the whole Committee does, but I do not think that we shall succeed on the right hon. Gentleman's measures alone. They are not enough. Voluntary restraint can help, but it cannot stand up against strong market forces. Action must be taken against those forces. We must recognise that what the right hon. Gentleman is living in is a fool's paradise. If restraint is to succeed—and it can have some marginal influence—the Government must set an example.

At present Ministers in the spending Departments show their loyalty to the First Secretary by reeking inflation all over him on the Front Bench opposite. Indeed, his right hon Friend the Minister of Technology gives the First Secretary of State that "cold Mafioso" stare which in Sicily signifies early and brutal death—if not actual physical death, then at least death to his incomes policy and to his political career. I have no such brutal motives. I am far more charitably disposed towards the right hon. Gentleman than I fear is the Minister of Technology. As an idealist I should like to see his incomes policy succeed, but as an economist I am certain that it will not succeed, because it is powerless to deal with strong market forces which are the real cause of continuing inflation.

7.45 p.m.

Mr. Kenneth Lomas (Huddersfield, West)

I have been a Member of Parliament only six months, but I have repeatedly learned in that time that I have been right in believing during my life in the trade union and Labour movement that right hon. and hon. Members opposite do not know how the other half lives. They cannot understand what it is like for people on £12 or less a week to keep wife and family together.

We have had an example of that in the speech of the hon. Member for Eastleigh (Mr. David Price). The cost-of-living to him was a matter of wine and rum, which hardly affects the great mass of working people.

Mr. David Price

With respect, the hon. Member should give way——

Mr. Lomas

The hon. Member talked about what he called "creeping pregnancy" and referred to the wages which were allowed to slip through the incomes policy. The hon. Member must understand that when wages are as low as £9, £10, or £11 a week we are not only concerned as a Labour Party and a Labour Government with an incomes policy, but with social justice. It is elementary justice that these people who are at the bottom end of the scale should have a proper wage on which to bring up themselves and their families. The hon. Member is talking complete nonsense, unless he is prepared to deprive these people of a reasonable and decent standard of living.

The hon. Member went on to speak of the virtues of competition, but my hon. Friend the Member for Eccles (Mr. Carter-Jones) has already shown quite clearly that in the giant soap and detergent monopolies one finds one firm marketing five or six different products which appear to the general public to be competitive, but which, in fact, are working for the benefit of the same organisation. It is difficult to follow the hon. Member for Eastleigh in his arguments.

The hon. Member for Louth (Sir C. Osborne), in an entertaining speech, made a few pertinent points, but I was reminded of the old saying, "I fear the Greeks, even though they offer gifts", when he offered his congratulations to the First Secretary on his incomes policy. My faith in the Tory Party, however, was justified, because the hon. Member said that the policy would fail. It will not fail. This time we have a Labour Government, and the trade union movement and the nation as a whole realise that they can depend upon that Government keeping their word. As my right hon. Friend the Minister of Technology has said, the mass of the country have been saying, "We cannot trust the Tories", and 13 years of Tory rule have proved that conclusively.

We are told by hon. Members opposite that wage claims are responsible for forcing up the cost of living, but the facts are different. On 1st January this year, for example, a £3 million pay award at 3½ per cent. to 4 per cent. was made to 150,000 printing workers. This raised the costs in that industry by 1 per cent., but this did not prevent the printing firms from putting up their prices, in many instances, by as much as 7 per cent. They jumped on the bandwagon, just as others jumped on the bandwagon when the 15 per cent. surcharge was imposed and sought to put that charge on items like food to which it had no relation whatsoever.

Hon. Members opposite also bitterly complain that under Labour we have a Bank Rate of 7 per cent. We did not want this, and they should realise that the fact that we have it today is a direct indictment of the policies which the Tory Party pursued in the 12 months before we threw it out. The Conservative Party tends to speak in debates of this kind as if all was well in the world until October, 1964, and as if the 13 years were golden years. They may have been years full of promise, but the promises were never fulfilled. We still had the same terrible housing problem and the same spiralling prices. People at the bottom end of the income scale and those in the public services know only too well what it is like to live under a Conservative Government.

The Government of the last 13 years have been a Government of drifters, of people who allowed events to take charge instead of taking charge of events. They allowed things to happen and did nothing whatever about them. They took no action to try to help the consumer and the housewife and to stem the rising cost of living. They merely let these things happen. They became the Micawber Government waiting for something to turn up. Eventually, last October, thank goodness, a Labour Government turned up to get us all out of a mess.

During the past 10 years, prices rose by about 50 per cent. The share of our world trade has gone down, yet the terms of trade moved in our favour. How that could possibly happen one does not begin to understand, except, of course, that we had a Conservative Government in power. The net result of price increases, because that Conservative Government did little to try to counteract them, was that the people on low incomes, the ones who could least afford it, were most affected.

Mr. Cranky Onslow (Woking)

A few minutes ago, the hon. Gentleman's hon. Friend the Member for Eccles (Mr. Carter-Jones) spoke about dishonest arithmetic. Does not the hon. Gentleman realise that, in fact, our proportion of world trade has declined only relatively and that absolutely there has been an increase in British exports?

Mr. Lomas

This is playing with words again. Our share of the world markets decreased during the time when the Conservative Party was in power.

I was saying that the Conservative policy of allowing prices to rise and doing very little about it meant that those who could least afford it were affected most. When we came to power, therefore, we decided that, as a matter of social justice and priority, we had to do some- thing to help those least able to stand the rising cost of living. This is why we immediately began to do something for the sick, for the aged and for people in need. Hon. and right hon. Members opposite scoff at this and say it is nothing, yet we have challenged them over and over again to say where they would have got the money from.

The right hon. Member for Leeds, North-East (Sir K. Joseph) said that they had voted for the increase in National Insurance contributions. I remind him that the increase in sickness payments started in January; we made that gesture and gave something for Christmas to people who were on National Assistance. We did what we could as at a time when we were faced with a terrible economic crisis which we had inherited because the Tory Government had been fiddling and juggling with the whole financial machine of this country in the hope of gaining some election advantage. We decided what the priorities were and we tried to do something about them.

Soon after taking office, my right hon. Friend the First Secretary of State acted on the realisation which he had had for a long time that it was essential to have some sort of sustained growth and some kind of joint determination on the part of both sections of the community in order to create a climate in which an incomes policy necessary to our economy could survive. In December, the Declaration of Intent was born. Some firms heeded the directions and advice given to them and realised that, to get this country out of the economic mess we had inherited, they must co-operate; and they did so. But there were others who were prepared to let the country go on as before—down the slippery slope leading to economic disaster.

In my view, we must first try persuasion with the industrialists, but, if persuasion does not work, the price review body must have power to act against those firms which refuse to work in the national interest. The price review body is now beginning work and the results will come before the House in a fairly short time. I hope that it will not be necessary for the whip to be used. I should much prefer the carrot to be used every time. But we as a party realise that these things must be tackled firmly. We must attack the giant monopolies which by their price rings, cartels and secret agreements tend to hold the housewife and the consumer to ransom. This is the line we are following. We are taking positive action wherever we possibly can.

The right hon. Member for Grantham (Mr. Godber) seemed to imply that wage rates should remain as they are or move only at a steady 3½ per cent. per year, but, as I have said, our aim is to secure some kind of social justice, apart from anything else, for the people of this country. Therefore, wages must not only be related to the job done by the worker but must be related to the needs of the individual and the benefits which he should be entitled to have in any decent civilised society. It follows, therefore, as night follows day, that some people must have greater wage increases than others.

I have personal experience of these questions in one of the public services, in the National Health Service. In 1961, it was people in the public service who felt the axe of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) first of all, at the very time when he demonstrated the true philosophy of Conservatism by saying to the nurses that they could have only 6d. in the £, while giving £84 million to the Surtax payer.

We believe as a party—and I certainly believe as a trade unionist—that it is essential for people at the very bottom of the scale to be assisted, and by this I mean not only people in the hospitals, local authority workers and manual workers, but everyone below a reasonable and decent standard of life. As members of a community, we should do what we can to raise their standards. But, of course, this is something which the Conservative Party cannot begin to understand.

By their policies over the past 13 years, and by their attitudes, right hon. and hon. Members opposite have constantly attacked the public sector, the weakest sector, the sector where workers are not so well organised as they are in some other employments. These were the people the Conservatives went for, and we are now trying to put things right. We are trying to spread the load of taxation wherever we can. This is where I disagree emphatically with the hon. Member for Eastleigh, when he argues for a sales tax. Indirect taxation on the necessities of life tends to penalise the very people at the bottom of the scale, the people whom we on this side are seeking to help in every possible way.

My right hon. Friend the Chancellor of the Exchequer can take credit for his Budget and what it is designed to do within the limits in which he was forced to work to. His proposals on expense accounts, allowances for cars and the Capital Gains Tax are what stamp his Budget has entirely different from anything we have had during the past 13 years. It is part of the Government's policy to create a climate in which it will be possible for our incomes policy to thrive.

I accept, of course, that one cannot have an incomes policy just by Government directive. It calls for co-operation from the trade union movement. It puts a great responsibility on the trade union movement, and it is to the trade union movement that we must now look for cooperation and understanding. I suggest to my right hon. Friend the First Secretary that he might adopt this rough and ready yardstick to determine which people should, as it were, slip through. Taking an average wage of, say, £15 or £16 a week, people who are well below that level should be entitled to much more than the 3½ or 4 per cent. People on the average wage should have the recognised figure of about 3½ per cent.

People with £25 or £30 a week, on the other hand, should realise that, in the interests of those at the bottom, there must be some give and take; they must be content to accept a sightly smaller increase in their pay packet. This is the only way. What we are seeking to do is to carry through a levelling-up process and, until we have done that, we cannot hope to have any semblance of an incomes policy. We must level up to a much greater extent than we have at present and then, having done that, we can move on to make the incomes policy work.

It is the duty of the Government to ensure not only the right to work but the right to live—to live a decent life with all the benefits and advantages that the second half of the twentieth century should bring. After 13 years, we now have a Government who are doing something constructive about it, who are really tackling the problem as it exists, who are seeking the co-operation not only of management and trade union but of the whole nation in order to evolve a system under which, using all the modern methods of production and mechanisation, we can build a better kind of society in which everyone will enjoy its benefits. The Government are planning priorities. Many years ago, Aneurin Bevan said that Socialism is the language of priorities, and indeed it is. That is what we are trying to do. We are trying to decide the priorities that should go into a just and decent society.

I want to see management doing all it can to assist in creating a situation in which the manual worker, the man on the shop floor, will be able to enjoy a decent three weeks' holiday with pay, to step up fringe benefits to which the workers are entitled and to do away with class distinctions of "blue collar" and "white collar".

I believe that this is the kind of world we can move to and I believe that the people elected this Government because they believed that the Labour Party wanted and believed in expansion and modernisation and that it would apply modern minds and modern methods to modern problems. If we go ahead on those lines, then the nation, the trade union movement and the employers will in the long run be eternally grateful that, last October, the nation was wise enough to get rid of 13 years of stagnation and elect an energetic, dynamic, and forceful Government.

8.1 p.m.

Mr. Russell Johnston (Inverness)

As the First Secretary of State said, prices have been rising continuously since the war. I was pleased by the way in which he tackled this question during his speech. He was frank about it. He said that prices had risen and had continued to rise since the Government came to power and that is true. He said that the Government were now making a determined effort to tackle the problem and, again, that is true.

I was reminded by the hon. Member for Louth (Sir C. Osborne) that this was not by any means the first time that a comparable effort had been made to tackle what frequently seems to be, as the hon. Member for Eastleigh (Mr. David Price) said, a problem which cannot properly be solved. We remember the White Paper on Personal Incomes, Costs and Prices, issued by Sir Stafford Cripps in 1948, and that it was accepted by the trade union movement. If we are to be more successful on this occasion, a new feeling, as many hon. Members have said, must permeate all parts and aspects of Government policy.

One thing which has emerged clearly in the debate is the wholeness and completeness of the problem and the fact that it invades every Government activity. It seems simple to relate wages and incomes to productivity, but immediately one is drawn not simply into wage bargaining, but, as the hon. Member for Huddersfield, West (Mr. Lomas) said, into endeavouring to hold wages and differentials and Government expenditure generally in the kind of tariff framework within which one proposes to work and within the question of what sort of sum one is prepared to expend for social objectives.

The right hon. Member for Grantham (Mr. Godber) mentioned education, referring to the fact that the Secretary of State for Education and Science has apparently said that the teachers would always be in a particular, privileged position. Is this to be the case or not? I agree that pensions are to be increased and paid for as well. These are all factors in the equation and a very complex equation it is.

If we proceed to tackle regional slums, whether in the North-East or in the Highlands, this means, in the short term, that we are prepared to put up money which will need taxation to raise and which will affect prices even if, in the long term, it is an investment. The problem enters every Government activity.

The Liberal Party was prepared to accept higher taxation to ensure that higher pensions would be paid, so I am satisfied that in this respect the strictures of the First Secretary of State do not apply to us. We thought that a pension increase was fair, just as we have accepted the need for rationalised aircraft production. Nevertheless, we are by no means satisfied with the progress made or with the area of intent that the Government demonstrated. I shall explain a number of reasons why we are as yet not satisfied.

The first concerns productivity—the most vital of all. There is the need to encourage and reward it and I will quote from an article by Mr. William Rees-Mogg in the Sunday Times of 25th April. He said: To increase productivity requires better personal incentives, and we certainly have not had them. It means an emphasis on productive investment (Mr. Wilson called for that in New York; Mr. Callaghan devalued the investment allowances) … It means an attack on restrictive practices by trade unions … the reference to restrictive practices was struck out of the remit of the Royal Commission on trade unions. It means a concentration on growth industries … almost all growth companies are damaged by the new Corporation Tax. Leaving that aside, the question of productivity bargaining is equally important, as mentioned by the right hon. Member for Grantham. I wonder whether the productivity agreement at Fawley would have been reached had there been an incomes policy at the time. A leading executive of Esso has said that he did not think it would. There is no doubt that the strain on the union structure would have been acute. The Fawley agreement was negotiated by low-ranking shop stewards and union officials and they had the support, strangely enough, of the then Communist-led E.T.U., which saw the advantage for its members. This is a case where we think that there is a new look by the Government.

On the other hand, what about the conscientious, public-spirited Right-wing trade union leaders who have been very anxious to support the Government's guiding light and who, no doubt, have been dutifully reading the various puritanical leaders which appear regularly in The Times? What about the area leaders and officers in South Wales, in view of the report that the Steel Company of Wales is offering earnings increases of up to 50 per cent. in return for the abolition of craftsmen's mates and other big increases in productivity? Will they reckon up to the same kind of attempt as the Fawley agreement?

Secondly, there is the question of Government expenditure. As we know, it tends to rise and very often for the best reason—for example, because of the need to spend more on pensions and education. It is estimated that this year it will rise by about 10 per cent. I think that the estimated figure is £8,482 million, as against the actual figure of £7,713 million last year.

What will be the effect on this of the compensation to be paid out if steel is nationalised? I do not intend to discuss that at length, but I would have thought that if this was a matter of priorities—and the word was frequently reiterated by the hon. Member for Huddersfield, West—it was more important to try to keep down Government expenditure than to embark on what is indubitably a highly contentious and uncertain experiment which will certainly cost a great deal in compensation. If the First Secretary discusses the matter with housewives and asks what they think about the need to expend money in this way, he should listen and listen again.

The Liberal Party feels that there must be greater incentives to risk, to skill and to mobility of labour and capital. We are still not satisfied about two aspects of the direction in which the Government are moving. First, we are not satisfied with their anti-monopoly legislation, although we are pleased to see that they are proposing much more action in this respect than was evidenced by the Conservative Party during the last 13 years.

I was interested, and later amused, to hear the hon. Member for Eastleigh say that he was pleased that the Government were embarking on extending antimonopoly legislation. I did not notice such enthusiasm when he came to my constituency before the election. Nevertheless, we feel that there is no evidence of sufficiently strong action about monopolies in general, or restrictive practices.

Secondly, we are still very concerned about the tariffs situation. I know that the Government have reduced the import surcharge, but this is the only tariff action which they have taken since they came to power. The net result of many surcharges is to protect in such a way as to encourage not efficiency but laziness and to cosset rather than to provoke. There is no incentive to risk or skill.

Those are my only major criticisms. As long as the hard sanctions of economic policy are working in a direction opposite to the intent, it is evident that we cannot expect success in the incomes policy for some time.

8.13 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

We have listened to a very interesting speech from the hon. Member for Inverness (Mr. Russell Johnston) on behalf of the Liberal Party. The Liberals seem to be making a serious effort to try to understand the difficult problems facing industry and the trade unions. I am glad to note that they recognise that the Government are seriously tacking the problems, a very different situation from when the previous Government did not even begin to tackle them. When the Conservatives spoke of an incomes policy, they were primarily concerned with keeping wages at a low level and they did not seriously tackle prices. The White Paper, however, clearly lays down that not only must wages and salaries be kept at a reasonable level, but the general movement of prices must be kept under review, as must money incomes of all kinds. This is the fundamental difference in the attitudes of the present and previous Governments.

I want to comment on the responsibilities of the trade union movement in seeking a solution to our economic problems. We are often told about restrictive practices among trade unionists, but there is very little understanding of the reasons why workers take certain lines of action to safeguard their jobs. Yet this is the essence of the so-called problem of restrictive practices.

When there is unemployment and when it is understood that by finishing a job at a certain time a man may find himself unemployed for three or four weeks or even longer, as is and has been the case in some areas, a man is deeply concerned about cornering a job for his particular craft. This arises from the average worker's fear of being unemployed. There is nothing worse than unemployment for knocking out the stuffing and lowering the dignity of a worker.

When we consider restrictive practices and the responsibilities of the trade union movement, we have also to consider full employment. I was rather disturbed, to say the least, by the remarks of the hon. Member for Eastleigh (Mr. David Price) who said that it was necessary not to have a stop-go economic policy but a policy which was going ahead a bit at one time and slowing down at another—the same policy in different terms. We know what that can lead to. It led to unemployment in some areas, and this fear of unemployment has had a terrible effect on workers in industries where there are so-called restrictive practices.

Therefore, the first essential in solving the economic problem is to ensure full employment, so that the workers know that when new techniques are developed and when new machinery is introduced and when new methods are used, they will not suffer as a result and be turned onto the streets to face this terrible problem of unemployment. That is the first essential if we are to get the full support of the trade unions and the workers for technological change.

Let us consider the position in countries like America. In a recent debate, an hon. Member opposite said that technological change had been introduced into the American coal mining industry with the full support of the American trade union movement. What the hon. Member did not say was that at the same time as that was carried through, there was mass unemployment among the miners in the areas concerned, to such an extent that certain areas in the Appalachian Mountains are still derelict within the most prosperous state in the world. That is because there was no planned approach to technological advance. This is something that we must deal with. To get this change, there must be a planned approach. We cannot leave it to the competitive market merely to solve the problem in this way.

I am not against competition as such. I am not against the idea of having public ownership with a certain measure of competition in quality between publicly-owned industries. That is rather different from competition in which the profit motive is the basis. I would not object to a municipally-owned enterprise—say, in Liverpool—competing with a publicly-owned enterprise, provided that the benefits of both were applied to meeting the needs of the people. It is, therefore, a question not merely of competition, but of how it is used and the results of the competitive system.

I return to the question of the trade union movement and its responsibility. The trade union movement is bending over backwards to help to solve our economic difficulties. The trade union movement is going all the way, and sometimes, from my point of view, perhaps a little too far in the steps it is taking, but it is making a serious effort in this direction. Nobody can say that the trade union movement is not accepting its full responsibility in our economic problems.

There is, however, something which I should like to see developed a little further. I speak now as a trade unionist of long experience. I should like to see a smaller number of unions and a greater growth of industrial unions in particular industries. Industrial unionism is the logical step forward. It is easy to talk in terms of what has happened in Germany, which already has industrial unions. But Hitler wiped out the trade union movement in Germany and, therefore, in Germany it was possible to plan the type of organisation that trade unionists would build after the war.

Our unions have a long historical development which we cannot wipe out. We can get agreement between the various unions only on the basis of voluntary acceptance of coming together in amalgamation, confederation and ultimately, I hope, in organisational unity in various industries so that we finally arrive at industrial unions for our main industries. I hope that we as unionists work towards this end. It is essential and progressive not only for the trade union movement, but for the country as a whole. I make a call to the trade union movement to work much more progressively towards this goal than it has done in the past.

We must, of course, understand that this cannot be imposed upon the trade union movement. It is no good any Royal Commission on the trade unions, or the Liberal Party, the Labour Party, the Conservative Party or anybody else, coming forward with a set plan and telling the unions that they must accept it. We live in a democratic society in which the movement has built its organisation on the basis of the experience of the movement. Development can be done only by the movement itself agreeing to move in this direction on a voluntary basis. This is something that, I hope, we go along with, but do not let us as politicians say to the trade unions in our political programme that this is the sort of thing that they as a democratic movement must accept.

The hon. Member for Inverness, speaking from the Liberal benches, has undoubtedly begun to get a glimmer of understanding of the difficulties which exist in the trade union movement. At this stage, however, it is only a glimmer. I assure the Liberals that they must learn a great deal more about the trade union movement before they can speak with any authoritative voice concerning the problems of industry.

In a sense, the Conservative Party might speak a little more authoritatively, but for only one reason. Representing, as they do, the big business interests, they have to negotiate with the trade union movement and, therefore, they meet us face to face over the negotiating table. In that sense they certainly understand us as the trade union organisation.

These are real problems. We are talking about an incomes policy and about halting rising prices. Most of the points that I should like to have made concerning the problems of the workers have been made by my hon. Friend the Member for Huddersfield, West (Mr. Lomas), who made an excellent speech. I certainly agree with most of his points. I want, however, to take up two points by the hon. Member for Eastleigh—his suggestions concerning a sales tax and the pay-roll tax—which he regards as essential to overcome some of our problems.

I have always been opposed to the idea of a sales tax. It is the most unfair type of taxation that could be introduced. It is the sort of taxation which hits primarily at those on lower incomes because a sales tax represents the same taxation for somebody who is earning £10 a week as for somebody earning £100 a week. This is a terrible form of taxation. Where we have had taxation of this kind it has been regrettable and I certainly do not want any extension of the sales tax.

The pay-roll tax does not always necessarily lead to a growth of productivity in the development areas.

I was rather interested in the point made by the hon. Member for Eastleigh. He seemed to think that if we had a payroll tax it would lead to a growth in industry in the under-developed parts of the country, and would hold back growth in other areas. The fact is that some of the largest employers in the development areas are the big municipal authorities, and if we had a pay-roll tax it would affect them in the same way as it would affect anyone else. It would have disastrous results on employment in those areas, and it therefore seems to me that it is not the sort of tax that we ought to have to grapple with our problems.

This has been an interesting discussion, because it seems that there is a recognition that we are faced with serious economic problems which have been made worse by thirteen years of unplanned Tory rule.

Mr. Harold Walker (Doncaster)

Two hundred years.

Mr. Heffer

I stand corrected. I am talking about the recent 13 years of Tory misrule. There is no doubt that the economic problems which we inherited forced the Government to take certain action which they had no intention of taking when they took office, because at that time they had not recognised the seriousness of the economic difficulties facing us.

It is interesting to note that when the 15 per cent. import surcharge was introduced the prices of all sorts of goods which were not affected by that surcharge were increased. I did not notice any reduction in prices when the import charge was reduced. Manufacturers put up their prices very quickly, but they never seem to take any serious steps to bring them down. I think that there is a lesson to be learned from this. I do not believe that we can hope for manufacturers voluntarily to reduce their prices merely by pointing out to them that their prices are rising.

If there are any weaknesses at all in the White Paper, one of the most serious is the fact that the teeth provided by it are not sufficiently sharp. I should like them to be much sharper. I should like there to be greater control of prices than exists at the moment. I hope that even now the Government will look at this matter again, in order to stop these unnecessary rises in prices which have taken place and which continue to occur. I should like to see a further strengthening and sharpening of the teeth in the White Paper.

If this policy is ever going to be successful, there must be a much more serious control of the profits that are made in industry so that workers who are asked to accept a 3½ per cent. increase in wages each year can recognise that there is that control. Unless the average worker on the shop floor can see that such a policy is being enforced, we cannot expect him to be enthusiastic about an incomes policy. It has to be shown quite clearly that we are taking positive steps to control prices, and that we are definitely restricting profits. If this is done, the workers of this country will wholeheartedly support the White Paper and the Government's policy.

8.35 p.m.

Mr. Julian Ridsdale (Harwich)

If the hon. Member for Liverpool, Walton (Mr. Heffer) has his way and the Government listen to his advice, their controls will be even greater than the Labour Government faced in 1951. The First Secretary and hon. Members opposite have said that when the Conservatives were in power they did nothing about increased prices. During those 13 years, in fact, incomes, wages and pensions kept ahead of rising prices. Our record in dealing with wages and prices was far better than that of many Continental countries. The reason why we are now anxious about price increases is that they are now becoming far greater here than abroad, while taxation is reducing incomes.

In the 13 years of Conservative rule taxation was reduced by £2,000 million annually. In the first months of the rule of the Labour Government taxes are already up by £1,000 million a year, and it seems that they will be increasing, soon, to the £2,000 million mark—back to 1951 with a vengeance.

On Friday in the Financial Times there was a review of the effect of the price rises, since the 1964 Budget, on a married man with an income of £3,500 a year and two children. I am surprised that this has not been remarked upon by any other hon. Member. It is something which we should mark, learn and digest. This is the type of man who is creating the wealth of this country, and we should be giving him an incentive to continue to do so, whereas since the April 1964 Budget his costs have risen by £206 a year. More than that—taking into consideration the amount of tax that he will have to pay, and his National Insurance contributions, his income has been cut by £253 a year. That is an indication of the impact of the Government's policies on this sort of man.

Mr. Albu

I saw this interesting article. Does not the hon. Member agree that many of the increases are in respect of such things as drink? Is it not quite possible that the sort of man to whom the hon. Member is referring could reduce his expenditure? That is part of the Government's policy.

Mr. Ridsdale

Drink was not a very big item in this. One of the biggest items was this man's mortgage, for which he is having to pay £19 more. He is having to pay £15 more on rates, food prices have gone up by £32 a year, and the price of clothes by £7 a year. Those are the real increases, and the hon. Gentleman cannot dismiss the matter blindly by saying that his costs have increased because he is paying more for his whisky and other drink. The hon. Member had better look at the prices again. In any case, this is not a human way of dealing with a man with two children, who is earning £3,500 a year.

Soon after the Labour Government's first Budget I had a chat with a county council smallholder in my division. He barely makes a living from his land at present, and he told me that the Budget had increased his expenditure by £2 10s. a week, which he had to find in order to pay for his petrol, his Income Tax, his mortgage, his food, clothing, and the rest.

What about the small business? In my division there is a small company which processes hydrocarbon oil. Because of the 15 per cent. surcharge the costs of the company have risen by between £40,000 and £45,000 a year. That is the price of Socialism which the company is having to pay after only a few months of a Labour Government.

Mr. Anthony Grant (Harrow, Central)

And increased taxation.

Mr. Ridsdale

Yes, and increased taxation.

What about the retired person who has had to face the increase in rates this year? Recently when I was making a speech in my constituency I said that if the increased rate of expenditure continued at a figure of 10 per cent. a year—the kind of increase that we now have to face over the next 8 to 10 years—a pensioner in my audience said, "If we have to face that kind of increase each year we have only one alternative, that is to commit suicide." [HON. MEMBERS: "Oh dear."] Hon. Members opposite may not like this. One hon. Gentleman opposite said that we did no talk about human problems on this side of the Committee; I am talking about them and I am being disparaged for doing so, but I have not yet finished. I wish to refer to the boast of occupants of the Government Front Bench that pensioners and widows have received an increase of 12s. 6d. I am told that one widow in London found that the rise in rent in respect of the council house in which she lives was equal to the 12s. 6d. that she had received from the Labour Government. This amount has soon been taken away, although it may have been given quite generously and with good will in the first place.

The Labour Government must accept direct responsibility for the increased costs which the country is having to face. There has been a 15 per cent. surcharge which has cost £140 million; a 7 per cent. Bank Rate; an increase of 6d. a gallon on the price of petrol, Derv and hydrocarbon oil; an increase in National Insurance contributions of 5s. 3d. a week; a 50 per cent. increase in duty on goods vehicles and £2 10s. on private cars; a 33⅓ per cent. increase on postal charges, an increased tax of 6d. on cigarettes; an increase of 1d. on beer and 4s. on whisky—which the Minister of State dismisses so lightly—and an increase of £1 on T.V. licences and 5s. on wireless licences—The Minister of State laughs again, but I can assure him that to have to pay an extra £1 a week means a great deal to old-age pensioners.

Mr. Albu

Does the hon. Gentleman really think that the increases are due to the actions of this Government, or to the delay of the previous Administration in taking decisions?

Mr. Ridsdale

I know that the Minister of State would like to hide behind the so-called crisis which it is said that the Government inherited, but he knows very well the reason why we are in our present position is that some of the economic leaders in the Labour Government could not keep their mouths shut but had to go to Geneva—I am not sure whether the President of the Board of Trade went to Geneva—and talk about a serious economic crisis when they knew in their hearts—and everyone realised—that it was a temporary crisis.

No attempt has been made to check the rise in Government spending. When the previous Conservative Government were in power all the Labour Party could do was to say, "We can spend a lot more than you can." For all his brave words about wishing to reform our tax structure, I find that the "red medicine" of the Chancellor of the Exchequer is much the same as in 1951 and before. The medicine has alas become bitter with age and not sweeter. We have changed back to more intensive Socialism and more taxation, and with the very apparent policy that saving is to be done compulsorily by the State, not voluntarily by the individual. We have had two Budgets which, as I have pointed out, have added more than £1,000 million annually to the taxpayers' bill. With the declared policy of the Labour Government now to nationalise steel, to pay the education bill more from the Exchequer, to give a minimum national income on retirement well above existing pension rates, to reform the whole rating system and other measures, does anyone believe that the taxation bill will stop at £1,000 million? All the indications are of higher taxation still.

There is little sign of the rephasing of the Government's plans for spending. The main reliance in the two Budgets has been on the revenue and not on the expenditure side of the Government account. Revenue is already £1,000 million above that of 1963–64. It will soon be £2,000 million. It will not take us very long to get back to the 1951 levels of socialist taxation. All this is having grave effects on the cost of living. With their policies of moving to more intensive Socialism, the Labour Government have done their best to prevent the proper functioning of a progressive capitalist system.

Competition has been thrown out of the top window. Flexibility grows more difficult every day. Individuals are finding it harder and harder to save. Now it is back to the man in Whitehall who knows best. This has been underlined in many speeches from the Government side of the Committee. Whenever it is a case of accepting fairer or more progressive competition, it is always back to the person who knows best, the judge in Whitehall. I am sure that by far the best judges are the laws of supply and demand, if carried out fairly, and let us see to it that the Government see that these laws are being carried out fairly.

The freedom of the individual investor to choose grows less and less under Socialism. The smaller company, as I have illustrated, is finding it much more difficult to survive. Is it any wonder that we are threatened with severer price rises than at any time since the Socialists were in power in 1951? The First Secretary talks about a 3–3½ per cent. norm and Government spending matching the increase in production of about 4¼ per cent. a year, but in these Socialist times in which we live, surely a growth rate of about 2½ per cent. is about as much as we can afford to plan for.

Why is the Chancellor so sure that a 4¼ per cent. growth rate in Government spending will not over-stretch our economy? Are not increased wage costs—particularly in the public sector—already having a direct effect on the whole competitiveness of our economy? I would refer to three examples. On 23rd December there was a rise of 9.;6 per cent. to 13 per cent. for 77,000 G.P.O. engineers. On 14th January 80,000 British Railway engineers had a 9 per cent. increase; and on 17th April 120,000 postmen had a 20 per cent. increase stretching from January 1964 to 1966.

One always welcomes the fact that people should be able to have more money and more incentives, but when the First Secretary says that the norm should be 3 to 3½ per cent. and it is flagrantly breached ten days later by a Post Office award, is it any wonder that there are rumours of murmurings from the Cabinet—though we do not know what they are exactly—to the effect that that kind of award should not be made so flagrantly ten days after? The people who will be hurt more than anyone—the Minister of Pensions is here and she knows this—are the pensioners and those on fixed incomes if this kind of wage award is flagrantly made against the norm at which the First Secretary is aiming.

Mr. James Tinn (Cleveland)

Would the hon. Gentleman not agree that the workers about whom he has been speaking come within the category of public servants who were grossly neglected during the years of Conservative Governments?

Mr. Ridsdale

I was speaking about the Chief Secretary having set the norm at 3 per cent. to 3½ per cent. and I am sure that he regrets the recent breach of his wages policy. Naturally one can pick certain groups of workers, as the hon. Member for Cleveland (Mr. Tinn) just did, but the remarks I made nevertheless apply.

I assure hon. Gentlemen opposite that I hope that the First Secretary's quest for an incomes policy succeeds. However, for all the Socialist talk about an incomes policy and stopping inflation, the facts show that the Government have had little success in dealing with wage inflation since they came to office. This is because they have relied too much on increasing revenue rather than cutting expenditure. The Budget takes savings from individuals to be spent on Government projects which are running far in advance of increased national production. The pressure which the Government are exerting is preventing the market forces of a 7 per cent. Bank Rate from working.

While I hope that the price review will succeed, justice must appear to be done. We do not want to have a double standard, one for private industry and another for the nationalised industries. If one thing applies to road haulage why should it not apply to rail fares? Certainly the rise in rail fares has been very great indeed, especially for some of the commuters about whom I spoke at the beginning of my speech, including those with incomes of £3,500 a year who, in addition to increased rail fares, face the other increased costs of taxation and impositions which have have been imposed by the Labour Government.

Is exhortation really enough? Surely the pressure from market forces is the basis of economic efficiency. The Budget, by relying on State investment and high taxation is, certainly in the long run, harming initiative, for we must see that value for money is got from investment.

In the last 10 years we have invested more than £6,000 million in public industries, six times the amount of our gold reserves. Despite this, in these public industries during those 10 years, in spite of public investment on such a scale, there have been price increases of about 50 per cent.

I am certain that with the continued high rate of Government spending—the latest example being £600 million for steel, a sum which we will have to find—backed by high taxation and the 7 per cent. Bank Rate, prices are bound to be pushed up still further. Is nothing being done, with all the taxation that is being collected, to pay off the national debt? If not, what is happening to the money?

Sir Harmar Nicholls

Does my hon. Friend really think that we are likely to have to spend £600 million for steel this side of the next General Election?

Mr. Ridsdale

My hon. Friend is probably right. Nevertheless, I am pointing out that the amount of taxation and other measures introduced by the Government shows how the Government are taking money that would be saved in the private sector and are spending it in the public sector. Price rises must result from such action. The Government will not succeed in keeping prices stable.

For this reason the Governor of the Bank of England has had to restrict bank advances. He realises the pressure of Government spending on the economy and since the Government will not do anything about it he has had to put the brake on.

The difficulty is that this practice is putting a brake on productive investment in industry. If we want credit and prices to stop rising then we have got to encourage private investment, investment in productive industry and not the long-term Government spending. It is because of these reasons that I am convinced that the rise in prices is caused by the intensive Socialist policies which the Government is pursuing.

It is preventing productive investment in industry and continuing a high rate of Government spending. I have an idea that the Government are not going to be successful in keeping prices stable. The pensioner, the £3,500 a year man, the technician and the scientist who have not been helped at all by the Government are going to find the future very difficult indeed, as indeed are we all.

9.0 p.m.

Mr. Albert Murray (Gravesend)

The hon. Member for Harwich (Mr. Ridsdale) spoke of 1957. Assuming that it is correct, no doubt we can expect the reappearance, like a crow from the ashes, of the Housewives' League. It has been quite noticeable, during the past six months, during which the Labour Government have been in power, that there has been a reappearance of pressure groups which were prepared to say nothing under 13 years of Conservative rule, but who are prepared to start working after two to three months of Labour Government.

I had lobbying me a group of farmers from my constituency, complaining about the Annual Price Review. They had worst Price Reviews under the Conservative Government and they said, "We have never done this before." I said that it was a pity that they did not come along when the Conservative Government were in office. Why they did not come along is an interesting question.

The hon. Member for Harwich would have us crying our hearts out about certain groups in the community. What about the nurses, four years ago? The Opposition, then in power, kept the House sitting all night to avoid giving the nurses their increase. It was not a great increase, but, unfortunately, the Tories, because of their previous policies and with the 7 per cent. Bank Rate, had decided that public servants were not to get increases. The public servants affected were the nurses and those working in the Health Service.

We have just given the old-age pensioners the biggest single increase since the last Labour Government. Conservative spokesmen have said that, by their policy, the Labour Government are increasing prices. But the Government are setting an example of how to deal with rising prices and how to make sure that people achieve a better standard of living. I believe that the people will support a Government who give them fairness, if they see that the Government are prepared to attack rising prices and to review particular cases where there have been rises in prices, and also to ensure that those workers in the public service get their fair share of the national cake.

Before I came into the House I worked on the shop floor. I knew that my fellow workers, if they felt that nurses, who were getting poor wages, were to get an increase which would mean an increase in their own tax, would not have minded. In many public services the 3½ per cent. norm will not be a great help. For instance, ambulance drivers are doing a vital job on a basic wage of £11 15s. a week.

If we make sure that the electorate know that we are doing the right thing by that class of person, we shall have a Labour Government for a very long time. The Government are tackling tax concessions on business lunches, of which we have heard much complaint from the Opposition, and we must have actions like that so that trade unions may see that there is fairness all round— —

Sir Harmar Nicholls (Peterborough)

The hon. Gentleman has given a list of people who should have more than the 3½ per cent. norm. Can he tell us of those he thinks should be kept to the 3½ per cent. norm?

Mr. Murray

I am not prepared to do that, because I am not here negotiating on behalf of the trade unions.

The printing industry is often maligned by some hon. Gentlemen opposite, but they should look at the wage agreements in that industry. They will find that the printing unions, in the cause of efficiency and increased production, are prepared to negotiate long-term wage agreements, while keeping to what hon. Members opposite might call reasonable standards.

The hon. Member for Louth (Sir C. Osborne) said that we must discipline the trade unions. He is there saying that we must discipline 8 million male members of the population and their wives and families, but he does not say that any other sections of the community must be disciplined. Our trade unionists are quite responsible people, and do not need Government discipline. What they want is fairness and honesty from the Government of the day, and if they see that the Government are prepared to give them that honesty and fairness they will play the game. For the past 13 years they have known a Government that allowed things in one direction while continually clamping down in another.

They want a Government that will not only tackle the problem of increased production but the odd 1d. or 2d. price rises that affect the lower-paid workers and the old-age pensioners so much. The Government must ensure that the public services get decent wages, and are well supplied with decent hospitals, schools and staffs for all our people. A Government following this line of policy will have the support of every one of our working population.

9.3 p.m.

Sir Keith Joseph (Leeds, North-East)

We have had several wide-ranging speeches, including one from the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn), and speeches of great interest from my hon. Friends the Members for Louth (Sir C. Osborne), Eastleigh (Mr. David Price) and Harwich (Mr. Ridsdale), but I make no apology for bringing the Committee back to the relatively narrow issue on which we shall vote tonight. It is that there has been over the last few months, and is now continuing, a widespread rise in prices at an increasing pace, despite the firm pledge by the party opposite that it could and would stabilise the cost of living.

It is true, I say it at once, that we on this side did not conquer this problem when we were the Government, but we slowed down the pace—[Interruption.] The hon. Member for Gravesend (Mr. Murray) must not immediately cry "Conspiracy" if there is increasing public resentment over the widespread rise in prices following so soon after the cate- goric promises of the party opposite during the election.

There can be no doubt that prices are rising, and rising on a wide front. I remind the Committee of some of the individual items catalogued by hon. Members today. Outside London fares increased by 8 per cent. on 1st February this year. In a large number of regional electricity board areas prices went up by anything between 9 per cent. and 14 per cent. and the price of coke rose by from 9s. 6d. to as much as 18s. 6d. a ton. Postal charges are due to go up in a few days. Rates have gone up on average all over the country by 14 per cent.

The Government cannot escape the charge that they promised early relief to the ratepayer. Let them look at the rather discredited document, "New Britain". On page 13 they will see the pledge in black and white. They won votes by their promises and now they are brazenly breaking them. Of course, they said that a review was necessary. We do not disagree with that. We set the review in hand, but that is not an excuse for inaction by the Government. It was the First Secretary of State who used these words at Peterborough on 30th December last year: While we are waiting for the inquiry, Labour will transfer some of the burden on the local ratepayers to the Government. That was firm enough, but they have not done it. They missed the opportunity of using the General Grant Order to transfer some of the burden from the ratepayer to the taxpayer in brazen breach of their promises given only a few weeks' earlier.

What about interest rates? What gall and wormwood the subject must be to hon. Members opposite, after all their speeches. What a bitter memory they must have of stumping the country about the iniquity of 5 per cent. interest rates. It was the Chancellor of the Exchequer who worked out carefully what the annual cost to industry and commerce would be to the country of a 1 per cent. increase in interest rates—£25 million a year. But the Government have imposed a 2 per cent. increase. Not only is there a £50 million extra burden on industry and commerce, but a huge burden is placed on local authorities, interrupting the mounting momentum of their social programmes initiated under the Tory Government. The difficulties caused by the interest rate burden for individuals are too big for me to emphasise.

Those interest rates have nothing to do with the inheritance the Government received from the Tory Party. The rise in interest rates was needed only in an attempt to restore the confidence which the Government themselves shattered during their first weeks of power. The Government look like keeping interest rates at 7 per cent. for as many months as we once had that rate for weeks. My hon. Friend the Member for Louth was absolutely right to emphasise the importance of the impact of this high interest rate on all activities and initiative in the country. If he was right—and he may be—in regarding our economic position as more serious than the Government have told us it is, the prospect of a cut in interest rates soon seems somewhat remote.

I have gone through some of the rises in prices in the public sector, and I now turn to the private sector. Prices of goods on almost every shelf of almost every shop in every town and village have risen and are rising. That is true in "pubs", in tobacconists, in chemists, both for drugs and cosmetics; it is true for household goods, for confectionary, clothes, shoes, fabrics, furniture, pet foods, and in the garage. All, or nearly all, housebuilding materials have risen. As hon. Members have said again and again, in speeches, price rises in groceries may be numbered in thousands. As the Financial Times says: Slowly, but inexorably, grocery prices are rising. There are some good things, and I must not miss them out. Thanks entirely to the initiative of my right hon. Friends and to their courage in the national interest, during the time of the Tory Government, the beginning of the end of resale price maintenance has brought some price cuts, but that is absolutely no thanks to the Labour Party which, tamely and cravenly, abstained on an issue like this—and then had the nerve to accuse us of tinkering with the problem. Prices have fallen for sewing machines, light fittings, sports goods, nylon clothing and, of course, drinks, where the Chancellor of the Exchequer slapped it back in increased taxes.

I must convey my wry congratulations to the Government on one paradoxical achievement. Despite their pledges, they have reduced the number of houses being built and, by that means, and by that means only, have stabilised temporarily the price in some parts of the country of private houses for sale. But it is a satisfaction that can give them absolutely no pleasure. Their job was not to stabilise the price of houses by ceasing to build them. Their job was to carry out their pledges and at least maintain our programme of house building and, according to their promises, level off the prices.

As for local authority houses, the work of the Government in the surcharge, the petrol tax, and other contributions they have made have put up the price of the average local authority house, so it is said, by about £100. So we have the curious combination of fewer houses at roughly stable prices only because people cannot borrow the money to go into the market to buy them.

I am glad to see the First Secretary of State here. I hope that the President of the Board of Trade will tell us, when he replies later, what will happen to the other great pledge that the Labour Party made at the General Election about prices. What about land prices? One would have thought from all that the Labour Party said during the election that it would swing into prompt action with a Bill to stop the price of land being what it is, but it looks from what one sees in the newspapers as if we shall not even get a Bill. We shall not get the smack of firm government. We shall get another White Paper. We shall see what happens when that comes.

These price rises are causing universal dismay. The hon. Member for Hudders-field, West (Mr. Lomas) must recognise that many of the price increases of which I have been speaking really hit the ordinary wage earner. The hon. Gentleman spoke as if Tory complaints were only about the effect on the middle in-come group and the wealthy. The long catalogue I have given reaches into every home. The index has already risen two points in five months. All this, as my right hon. Friend the Member for Grantham (Mr. Godber) said, is before the rises in National Insurance contributions, vehicle excise duties, postal charges, cigarettes, beer and spirit duties. The effect on producer goods will, before long, work its way through to the shops and the trend looks to be sharply up as the new burdens imposed and allowed by the Government permeate every activity in the economy.

I see the right hon. Lady the Minister of Pensions and National Insurance here. The pension increases given in March will be eaten up by the increase in prices.

The Minister of Pensions and National Insurance (Miss Margaret Herbison)

Rubbish.

Sir K. Joseph

The right hon. Lady says, "Rubbish", but I am quoting from an article in The Guardian of yesterday's date, headed: Labour accused of broken promises. I am quoting a statement made at a trades council conference by Mr. Hendry, whose words are precisely quoted. It is not a Tory saying this. This is the view expressed at a Labour conference.

All this is against the background of self-confident, indeed arrogant, pledges given before the election by the Labour Party. Again, I turn to the rather discredited "New Britain". This contains, on page 12, firm pledges to attack the problems of rising prices at their roots. On the same page there is the promise of new and more relevant policies to check the persistent rise in prices". The same emphasis was given in election addresses and in speeches up and down the country.

The right hon. Gentleman the First Secretary said at Swadlincote, on 27th September last year, a place where I believe he refused to say anything on some subject or other last Sunday: Continued rises in the cost of living can, must and will be halted. It is deeply sworn. Here we have a Government who are pledged to stabilise prices, but who, by their own policies, have kicked prices up. Let me remind the Committee what the Government have done. Income Tax has been increased by 6d. The tax on beer, spirits and tobacco has been increased. The petrol tax has been increased, which has given a jolt to all road transport costs. The commercial vehicle duty has been increased. Postal charges are just about to be increased. The Bank Rate and all interest rates following it have been increased savagely and held at a high panic level month after month. Rates have gone up by 14 per cent. on average, and on top of all this we had the import surcharge, which the Government imposed in a panic and which they have now partially taken off, prematurely, according to their original judgment, under pressure.

Far from stabilising prices, the Government have not controlled their own costs. They have allowed the nationalised industries to increase their charges. Rail, gas, electricity, coal, posts—all have gone up, and when the First Secretary gave us his lecture on how the nationalised industries are put through the hoops by some ruthless Ministers before they are allowed to increase their charges, it was as frightening a demonstration of the unreality in which the present Government live as one can imagine.

It is extremely difficult for nationalised industry management to adopt new policies or to increase productivity. All credit to them in so far as they achieve it. This difficulty is not because of the inherent wickedness of anybody. It is because of the history, nature and structure of nationalised industry, and it is because that structure imposes such obstacles to efficiency that we on this side so passionately oppose steel nationalisation. When the First Secretary spoke of the sanctions against nationalised industry prices rising, all he spoke of were paper work, committees and meetings. He even prayed in aid consultative councils. Private enterprise, I would remind the Government, has to raise its money and earn its profits in a competitive market, that is, if the Government are doing their job properly. The sanction on private enterprise is bankruptcy. That is a sanction which does not discipline the nationalised industries.

The fact is that the Government are permitting earnings to jump far more than productivity. They are not insisting that wherever possible there shall be a productivity bargain, and one that is kept. It is the Government's job to keep earnings and productivity in relation within their own sector and to see by their control of the economy that private enterprise cannot put up the prices and keep its volume of profitable business.

The nationalised industries, said the Labour Government in the pamphlet "The Truth about Prices", a few months ago deserve full credit for the way they try to keep prices steady. In the light of the evidence, that is pretty improbable. We know the real explanation. The trade unions created the Labour Party and still finance and control it. That is another Labour quotation. And no doubt is why the Government are so timid in handling wage increases.

Mr. George Brown

And Bovis finances the right hon. Gentleman.

The Chairman

Order. I have said before that I hope that if occupants of the Front Bench want to intervene they will do so in the conventional manner. I hope that if the First Secretary wants to intervene he will do so in that way.

Sir K. Joseph

This time the Government cannot pray in aid the excuse which had some validity in 1951, the last year of their period in power. It is true that in that year the terms of trade, because of the Korean war, went sharply against this country. But now the terms of trade have been stable over the past six months.

The Government, or the Labour Party before they became the Government, promised new and relevant initiatives to stabilise prices. We must assume that the new and relevant initiative is their National Board for Prices and Incomes. The First Secretary of State poured scorn on my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) for setting up the National Incomes Commission, which was instituted, of course, for the same purpose. The main difference appears to me and to many of my hon. Friends to be that, while the Government are concentrating on private industry prices, which they do not control—though I note the wish of the hon. Member for Liverpool, Walton (Mr. Heffer) that they should control them—they are neglecting public industry prices which they can control, and they are timidly letting wage claims in all sectors, apparently grossly violating the First Secretary of State's norm, go unchecked.

They even have a philosophy to justify this— Successful work on prices will provide a firm basis for proceeding to deal with incomes. There is no successful work yet, but these higher incomes which are allowed to go unchecked by the Government will in many cases involve increases in costs and, in turn, lead to higher prices, and all will be worse than ever. Prices and earnings interact on each other. Each increase in one produces increases in others. This is why, if they are to carry out their pledges, the Government must evolve policies which bite on both prices and earnings and incomes. I mean competition.

In his very complacent speech, the First Secretary of State talked about his prices and incomes policy. My hon. Friend the Member for Eastleigh made some very shrewd comments on what he said. More and more, the right hon. Gentleman seems to exaggerate the rôle which a prices and incomes policy can play on its own. But this sort of policy, notwithstanding the energy of the right hon. Gentleman, cannot be a substitute for competition and for getting the balance of supply and demand in the economy right. As my right hon. Friend the Member for Bexley (Mr. Heath) has said, the incomes policy does not exonerate the Government from following proper economic policies which will lead to the stabilisation of the economy.

It is no good the Government saying that they have had only six months. They may say how hard it all is now, but they gave the country a very different impression during the election campaign. My hon. Friend the Member for Howden (Mr. Bryan) made a speech which was like a breath of fresh air after the First Secretary of State's lecture. He turned the trousers which his firm makes into the theme of a sensible discussion of economics, as John Stuart Mill did with his buttons.

The Government must realise that the prices battle calls for action, often unpopular action, not just for words, statements and White Papers. Each wage claim, each increase in Government-controlled costs, brings more, more increases in prices and more claims for increases in earnings to compensate for them. In his long speech, the right hon. Gentleman never even referred to the balance of supply and demand, and scarcely enthused about competition. Yet without getting these things right, he is living in a fantasy world.

I point out to hon. and right hon. Members opposite the grave danger of their present approach of concentrating on prices even if it were to be successful. If the Government were to succeed temporarily in restraining some prices below market level, that is, the level resulting from demand and supply, and failed at the same time to restrain incomes, the only result would be to suck in more imports. This cannot be what the right hon. Gentleman and the Government wish, but that would be the logical, inevitable, inexorable result of success on the prices front and failure on the earnings front—not, I fear, that they will have all that success on the prices front.

The right hon. Gentleman has referred to the National Board for Prices and Incomes soap, including detergents, and bread and road haulage. I would only comment that we on this side of the Committee would have listened with more interest to the hon. Member for Eccles (Mr. Carter-Jones) if he had enlarged his researches into the soap and detergent industry beyond Unilever and Procter and Gamble to the other great supplier, the Co-operative movement, which is also a major supplier of bread.

It is not only in the nationalised industries that the Government have lost control. I will give a small example to show how much they have lost it in their own Departments. In the same week that the First Secretary of State issued his Declaration of Intent the Minister of Labour sanctioned an increase of no less than 40 per cent. in the price of the Ministry of Labour Gazette. Prices are set by a delicate balance of bargaining power—not always at the maximum that the market will permit because of the risk of losing valuable contracts and goodwill. It is competition that equips the buyer with bargaining power.

Far from increasing competition, the Government have done just the reverse. In opposition, the Chancellor of the Ex- chequer was very bold. He advocated tariff cuts to increase competition. But when he gets into power he does precisely the opposite. He slaps on a surcharge to protect domestic industry against world competition.

Mr. George Brown

No, no.

Sir K. Joseph

The Government have not only done that. They have given further protection to the coal industry. They delayed the Monopolies and Mergers Bill. They have shown no signs of tackling restrictive practices.

Mr. George Brown

What the right hon. Gentleman said a little earlier was surely not part of the party political battle. We did not put the surcharge on to protect domestic industry. If it went out from the House of Commons that either side thought that to be so, it would cause considerable damage, and I ask the right hon. Gentleman to withdraw that remark.

Sir K. Joseph

I gladly withdraw it. I will say that the surcharge was put on with that result, but I certainly acquit the Government of trying to achieve that result.

It is on the removal of restrictive practices that the Government should concentrate if they want to fulfil their pledges. Efficiency and competition are allies of the housewife. We believe in a high earnings, low cost economy, efficient and competitive. We promised that a new Monopolies Bill would be our first item of legislation. As a Government, we carried through the Resale Prices Act, from which the Labour Party cravenly abstained.

We urge the Government to get their priorities right. Let them advocate competition and promote efficiency. They have done just the opposite. They distract businessmen with complex and often dangerous tax proposals. They fool around with the steel industry. They devalue investment allowances and cloud the future with uncertainty—and they sack Dr. Beeching. They ignore the wage claims of those sweeping past the First Secretary of State's norm—and without any productivity bargains attached.

The Government must realise that what they are allowing to go unchecked is part of a cumulative process. The country is not witnessing the smack of firm government, but the smack of rising prices. Hour by hour and day by day the Government are being judged not by headlines or even by legislation, but by prices—and the Government, by their own pledges, repeated so arrogantly and often up and down the country, invited the country to judge them by this yardstick.

The outcome of the Government's policies will be seen inescapably in the cost-of-living index. With all the knowledge which they should have gathered from 13 years' observation of the difficulties of reconciling growth, full employment and stable prices, the Labour Party deliberately pledged that it would end the rise in prices. New and relevant weapons, the Labour Party said they had. The Government have chosen their combination of weapons. They have made their pledges. Prices are rising and rising fast and the country is judging them.

9.30 p.m.

The President of the Board of Trade (Mr. Douglas Jay)

The hon. Member for Louth (Sir C. Osborne) earlier this afternoon congratulated my right hon. Friend on his incomes and prices policy and wished him all success. The right hon. Member for Leeds, North-East (Sir K. Joseph) seems to be taking the problem rather less seriously. During the last half hour he has been trying to persuade the Committee that it is all the fault of the present Government if prices have been rising in the last six months. How, then, does he explain the fact that prices have been rising for the last six years, and, indeed, for the last ten years?

If the right hon. Gentleman is interested only in the last six months, since 13th October last year, the Retail Price Index has risen from 107.9 to 109.9, by two points, or rather less than 2 per cent. But in the 12 months before 13th October last it rose from 103.7 to 107.9, or by 4.2 points, which is almost exactly the same rate of increase. The only difference is that we have had rising production combined with rising prices in the last six months whereas previously we had the same rising prices combined with stagnating production and a widening balance of payments deficit.

The right hon. Member for Grantham (Mr. Godber) made great play with the fact that, as he said, our policy had been unsuccessful because the cost of living in this country had risen twice as fast as in France in the last few months. According to the United Nations figures, which I have looked up since, between October and January, the latest month for which we have figures, the French cost of living rose by 1 point, from 109 to 110, while in the United Kingdom the cost of living rose by 2 points, from 116 to 118. That, I suppose, is what he means by saying that it is rising twice as fast as in France. I do not regard that as a catastrophic defeat for the Government's policy. I am sure that the right hon. Gentleman will be glad to know that in the same period living costs also rose by two points and about the same percentage in Italy, Sweden, Denmark and Germany. I do not think that he has established any great charge against the Government in this respect.

Mr. Godber

I emphasised the position in France because I was taking the right hon. Gentleman's own words. He had quoted France for previous years and I was showing how exactly the opposite had occurred since right hon. Gentlemen opposite had been in office.

Mr. Jay

If the right hon. Gentleman wants to prove that twice one is two, he is perfectly welcome to that point.

Over the last ten years, during most of which the party opposite was in power, the Retail Price Index has risen on average by 3 per cent. a year, and yet those 10 years include two prolonged deflations, after 1956 and 1961, which cost the country so much in employment, economic growth and investment. The country's memory of that is too vivid and too deep for the party opposite to get anywhere making easy party capital out of the problem of prices. I am sure that the public would prefer to see the House of Commons asking itself seriously why prices have risen over these recent years and how in future we can get the upward thrust under control.

In the first seven years after the war, it was possible to blame part of the cost-push pressure upon rising import prices, but from 1957 to 1962 at least our import prices were falling. The index fell from 111 to 99 in those five years on the basis of 1961=100. It is a remarkable part of the story that with the party opposite in power and with this sharp drop in import prices, the Retail Price Index continued to rise throughout even those five years.

The one period when the country might fairly easily have enjoyed stable prices was thrown away in those years by mistakes of policy, and mainly by the Rent Act, 1957. [HON. MEMBERS: "Nonsense."] I am coming to the figures on that, so hon. Members opposite had better wait and not laugh. I must, however, warn the Committee that import prices have again been rising since 1962, and this has benefited the less developed countries, which are still great exporters of primary products. Even though that rise has flattened out in recent months, I doubt whether we can look for much relief from import prices in the future.

Perhaps one of the most important economic changes in the world in the last five years has been the intervention of Russia and China as purchasers of wheat in the world market. We would not be wise to assume that that is a purely temporary phenomenon. The price that the United Kingdom has to pay for its imported food has risen by 14 per cent. since 1961.

But the greatest single cause of the rise in the cost of living since 1956, if one looks at the figures in the index, has been the rise in rents, the direct result of the Rent Act, 1957. The figures are as follows. Between January, 1956, and January, 1962, the official Index of Retail Prices, as calculated by the Tory Government then in power, rose by 17.5 per cent., but the housing component of the index, the largest item in which is rents, rose by 40.6 per cent. Since January, 1962, when the index was recalculated, the housing element has again risen as a percentage more rapidly than any other component of the index. Altogether, the rise in the housing cost of living since the Rent Act has been more than 50 per cent. On top of this, in the Greater London area the London Government Act, which now can be seen to be one of the most damaging Measures other than the Rent Act passed in the House of Commons since the war, has provoked, and is provoking, a sharp rise in rates in addition to rents.

It is deplorable that all these mistakes of policy by the party opposite should have generated a prolonged and unnecessary rise in prices and diverted attention from the real problem of incomes and prices which faces us. There is a real problem which we should neglect at our peril and we shall not solve it successfully unless the Government direct their policy tirelessly to that end and the public wholeheartedly co-operate.

Sir C. Osborne

Would not the right hon. Gentleman admit that the 7 per cent. Bank Rate will push up rents still further?

Mr. Jay

No. The 7 per cent. Bank Rate is a temporary measure—[HON. MEMBERS: "We have had it for six months."]—and the rent control Bill that the Government are introducing will be a permanent measure.

However, whatever policies are pursued and whatever happens to import prices, it remains true that if money incomes are allowed to rise persistently faster than production, prices must rise. This is just remorseless arithmetic, and it is always worth reminding ourselves that prices are simply the arithmetical effect of the impact of demand on output. The rate of growth of money incomes is by far the biggest influence affecting prices. Actually the selling price of goods and services making up final output in this country is determined as to 73 per cent. by money incomes at home, 17 per cent. by imports, and the remaining 10 per cent. by taxes on spending. So there is clearly no hope of getting prices under control if incomes are totally out of hand..

Over the past 10 years the story in the United Kingdom is really pretty plain to read. Total output rose on average in those 10 years by 3 per cent. a year. Total money incomes rose by 6 per cent. So the general price level rose by about 3 per cent. a year, and in those years our export prices were rising by about 2 per cent. a year, and our share of world exports of manufactures fell from 20 per cent. to 14 per cent. I think that those are figures which we should always keep before us.

The United States has been more successful—indeed remarkably successful—in the last five years in increasing output with scarcely any rise in prices, but it has done it at the cost of 5 or 6 per cent. unemployment. I do not think that anybody here, with the possible exception of the right hon. Member for Wolverhampton, South-West (Mr. Powell), who has not given us the benefit of his advice today, would wish to pay that price in unemployment.

Therefore, if we mean to employ our resources fully and achieve growth, there is an inescapable choice before us. Either the Government grasp the nettle—and heaven knows that it is a prickly one—of an incomes and prices policy resolutely, or we face chronically rising prices. It would, of course, be perfectly possible to adopt the second alternative. It is often conventionally said that if we did, and just let prices rip with rising demand, we would face some sort of economic breakdown or heavy unemployment. That is not really true. What we would face is great injustice to many old people and to many weaker members of the community, together with repeated balance of payments crises, and periodic changes in the exchange value of the currency. Anyone who does not like an incomes policy should take a hard look at the stark realities of that perfectly possible alternative. That alternative seems to be incompatible with any sort of social justice, or indeed with the survival of this country's influence in the world.

We might, of course, follow such a policy and avoid trouble if other major industrial countries were doing the same, but they are not. They are almost all striving to keep their price levels under control. They have adopted the same policy, with variants, as the present Government in this country. Sweden and Holland have been experimenting in doing so for many years, not always with success, but they are still trying. The President of the United States, in his economic report to Congress this year, laid it down that budgetary and monetary policies must not permit excessive demand to pull up prices, or private price and wage decisions to push them up, and he called on the public responsibility of labour and industrial leaders to do their part in preventing this. It seems that almost everyone is in step, except, of course, the right hon. Member for Wolverhampton, South-West, and it is still not very clear to me whether the alternative which he prefers is that of letting prices rise uncontrollably, or of heavy unemployment and deflation.

At any rate, the Government have made up their mind to try to seek to influence prices and to plan the advance in money incomes as well as the rest of the economy. Certainly this will be made harder than, for instance, in the United States by our determination to keep unemployment down to its present extremely low level. But it will also be made easier by our equal determination to steer industrial expansion into under-employed areas and to even out the rate of unemployment over the country as a whole. It is inflation in the over-heated areas which most quickly forces up rents, incomes and prices.

One central part of any policy of restraining price increases must be the control of demand through the Budget and credit policies. Nobody can say that the present Government have been slow to impose the disinflation that was necessary over the last six months. My right hon. Friend the Chancellor of the Exchequer has introduced in six months two courageously disinflationary Budgets. [Interruption.] It would be very interesting to know what hon. Members opposite would have done in the same situation. Any attempt to restrain purchasing power through the Budget always involves this inevitable dilemma. I am giving right hon. Members opposite this point.

If we restrain purchasing power by raising indirect taxes we risk pushing up costs as well as restricting demand. If we do it by raising direct taxation we can be charged with depressing incentive or industrial investment. There is no easy way out of that dilemma. I believe that the most practical solution is, first, to rely mainly on direct taxes and, secondly, to select those indirect taxes which least affect the prices of really basic elements in the cost of living—like food, rents, and clothes. Indeed, it was one of the prime blunders of the party opposite over the last 13 years that its disinflationary Budgets leant almost exclusively on rises in indirect taxes, which pushed up the price of necessities and the cost of living.

Hon. Members who have been in the House for some years will remember the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) explaining what was called "Boyle's Law", according to which rises in the price of necessities were supposed to restrain people from buying other things. That was part of the same argument.

I also agree that a second inescapable dilemma faces us when we are trying to restrain inflationary forces generally, and have to decide the pricing policy of public enterprises. Hon. Members opposite who have merely grumbled today about price rises in the public services did not always sound as if they were even aware of the existence of this dilemma. It is this: if we allow public services—like the Post Office, for instance—to raise prices when costs are rising we may contribute to a further rise in the cost of living. But if we hold down the prices of such services to uneconomic levels we drive public enterprises into deficit, we demoralise the staff, we underpay public servants in comparison with others, and in the end the quality of the service suffers.

If we have erred in either direction in the last twenty years it has been on the side of holding down to too great an extent prices in these enterprises. Hon. Members opposite today seem to have forgotten that their own Government, in April 1961, introduced a White Paper on the Financial Obligations of the Nationalised Industries, which laid it down that these industries should make ends meet and should earn a specific return year by year on the capital invested. That White Paper said that surpluses on revenue account for these industries should be at least sufficient to cover deficits over a five-year period and that interest and depreciation should be charged against revenue in arriving at such surpluses and deficits. Later a target figure was agreed on the basis of this proposal for each undertaking.

I agree in general with the objectives of that policy, formulated by the previous Government, but if that is the policy of the party opposite it is no good their grumbling when the Post Office or any other public enterprise has to alter its prices in order to conform with that same policy. The right policy for a public enterprise—subject to any special obligations it may have—is the same as for a private firm. First, there is an obligation on both—reaffirmed in the statement of intent on prices and incomes last December—to promote the greatest possible efficiency and productivity, and absorb unavoidable rising costs in this way so far as it can.

Secondly, if such costs cannot be thus absorbed, the enterprise, public or private, is entitled to make such increases in price as will earn it a reasonable return from the capital invested. Thirdly, neither a public nor a private enterprise is entitled to a steeper rise in prices than those two principles would permit.

I believe that those are the right "guide posts" as the Americans now call them, and it is to translate these into practice that the Government have set up the new Prices and Incomes Board. Unlike the last Government, therefore, we have not merely decided on a considered policy, but we have already—and by agreement with those most concerned—set up a machine capable of carrying it out. We have done more than this. We have shown by our other policies that any direct restraint on money incomes will be part of a general programme which, so far as is humanly possible, will be fair to all.

First and foremost, we shall reverse the damage done by the 1957 Rent Act and re-establish rent controls. That will be a powerful blow on the side of restraint in both income and living costs. Secondly, the Prices and Incomes Board will be concerned as much with prices as with incomes and the first references to the new Board have, as the Committee knows, affected prices, and prices of basic necessities. If prices are kept down, profits are automatically kept under control. We believe that this is one effective way of ensuring that profits do not rise excessively any more than rents, salaries or wages.

Thirdly, we have introduced a real capital gains tax at last, which will end the scandal in this country of tax-free capital gains running side by side with taxed earned income. Fourth, my right hon. Friend the Chancellor, is attacking expense account extravagance which everyone knows has been a major psychological obstacle in recent years to an agreed incomes policy. [Laughter.] So long as hon. Members opposite laugh at that they will never achieve an incomes policy in this country.

In addition, we have abolished prescription charges which in itself means a fall in living costs for those who need it most. On top of all this we have introduced a new Monopolies Bill which will attack more vigorously the abuse of monopoly power and the excessive profits and prices which may spring from it. The right hon. Gentleman made an odd remark that we were delaying the Monopolies Bill. No one is delaying it, so far as I know, except the Opposition. There is nothing else to prevent it from going straight through the House. In this Bill we are seeking power to establish direct price control where that is proved to be necessary in the public interest.

Clearly, and I agree, an attack on monopoly and restrictive practices must be one part of a policy designed to promote both greater efficiency and price stability. But we, as a Government, are not afraid of resisting unjustifiable practices which stand in the way of efficiency just because labour and not management is concerned. The present Government proved this recently when my right hon. Friend the Minister of Transport announced that he had given the Railways Board approval to invest £6 million in liner train equipment and given the go-ahead to the liner train programme. We did this because we believe that this system offers hope of greater productivity and a better service to the consumer.

For all those reasons, it does not seem to me that any case has been made out by the party opposite tonight or that the public has the slightest idea what the alternative policy is which they are proposing.

The right hon. Member for Leeds, North-East, in an intervention, tried to bolster up his case by saying that the Opposition did not vote last autumn against the rises in taxation needed to pay for the higher social benefits. It is no good his saying that he only meant the increased insurance contributions, because a large part of those higher social

benefits was paid for by general tax revenue and not by the contributions. The plain fact is, if he wants to be reminded, that the Opposition voted against both the increase in petrol tax and the increase in Income Tax after the Budget Statement of 11th November last——

Sir K. Joseph

Extra contributions, against which we did not vote, will yield £270 million—I am speaking from memory—this financial year, against extra outgo of about the same figure.

Mr. Jay

The increase paid from the tax revenue was £135 million, and this was paid from the tax revenue and not from increased insurance contributions. Hon. Members opposite agree that a Government nowadays should aim at price stability, but they are not prepared to follow the policies of social justice which alone can make it possible.

They all agree—with a few lurid exceptions—that we cannot have price stability without an incomes policy, yet for 13 years they failed to persuade the rest of the community to accept one or to set up any institutions which could carry it out. They agree that private industry ought not to charge too much, but they did nothing to prevent it. They maintain that nationalised industries should be allowed to earn a fair rate of return on capital, but they grumble when any such industry charges the prices necessary to do so. They support the improvements which this Government have made in social benefits, but they vote against the tax revenue necessary to pay for them. I believe that it is just this miserable record of inconsistency and vacillation which lost the party opposite the last election and will lose it the Division tonight.

Question put, That a sum not exceeding £768,000 be granted for the said Service:—

The Committee divided: Ayes 291, Noes 296.

Division No. 105.]	AYES	[10.0 p.m.
Agnew, Commander Sir Peter	Awdry, Daniel	Bennett, Sir Frederic (Torquay)
Alison, Michael (Barkston Ash)	Baker, W. H. K.	Bennett, Dr. Reginald (Gos & Fhm)
Allan, Robert (Paddington, S.)	Balniel, Lord	Berkeley, Humphry
Allason, James (Hemel Hempstead)	Barber, Rt. Hn. Anthony	Berry, Hn. Anthony
Amery, Rt. Hn. Julian	Barlow, Sir John	Biggs-Davison, John
Anstruther-Gray, Rt. Hn. Sir W.	Batsford, Brian	Bingham, R. M.
Astor, John	Beamish, Col. Sir Tufton	Birch, Rt. Hn. Nigel
Atkins, Humphrey	Bell, Ronald	Black, Sir Cyril
Blaker, Peter	Griffiths, Peter (Smethwick)	Mills, Stratton (Belfast, N.)
Bossom, Hn. Clive	Grimond, Rt. Hon. J.	Miscampbell, Norman
Bowen, Roderic (Cardigan)	Gurden, Harold	Mitchell, David
Box, Donald	Hall, John (Wycombe)	Monro, Hector
Boyd-Carpenter, Rt. Hn. J.	Hall-Davis, A. G. F.	More, Jasper
Braine, Bernard	Hamilton, Marquess of (Fermanagh)	Morgan, W. G.
Brewis, John	Hamilton, M. (Salisbury)	Morrison, Charles (Devizes)
Brinton, Sir Tatton	Harris, Frederic (Croydon, N.W.)	Mott-Radclyffe, Sir Charles
Bromley-Davenport,Lt.-Col.Sir Walter	Harris, Reader (Heston)	Munro-Lucas-Tooth, Sir Hugh
Brooke, Rt. Hn. Henry	Harrison, Brian (Maldon)	Murton, Oscar
Brown, Sir Edward (Bath)	Harrison, Col. Sir Harwood (Eye)	Neave, Airey
Bruce-Gardyne, J.	Harvey, Sir Arthur Vere (Maccles'd)	Nicholls, Sir Harmar
Bryan, Paul	Harvey, John (Walthamstow, E.)	Nicholson, Sir Godfrey
Buchanan-Smith, Alick	Harvie Anderson, Miss	Noble, Rt. Hn. Michael
Buck, Antony	Hastings, Stephen	Nugent, Rt. Hn. Sir Richard
Bullus, Sir Eric	Hawkins, Paul	Onslow, Cranley
Burden, F. A.	Hay, John	Orr, Capt. L. P. S.
Butcher, Sir Herbert	Heald, Rt. Hn. Sir Lionel	Orr-Ewing, Sir Ian
Buxton, R. C.	Heath, Rt. Hn. Edward	Osborn, John (Hallam)
Campbell, Gordon	Hendry, Forbes	Osborne, Sir Cyril (Louth)
Carlisle, Mark	Higgins, Terence L.	Page, John (Harrow, W.)
Carr, Rt. Hn. Robert	Hiley, Joseph	Page, R. Graham (Crosby)
Cary, Sir Robert	Hill, J. E. B. (S. Norfolk)	Pearson, Sir Frank (Clitheroe)
Channon, H. P. G.	Hirst, Geoffrey	Peel, John
Chichester-Clark, R.	Hobson, Rt. Hn. Sir John	Percival, Ian
Clark, Henry (Antrim, N.)	Hogg, Rt. Hn. Quintin	Peyton, John
Clark, William (Nottingham, S.)	Hooson, H. E.	Pickthorn, Rt. Hn. Sir Kenneth
Clarke, Brig. Terence (Portsmth, W.)	Hopkins, Alan	Pike, Miss Mervyn
Cole, Norman	Hordern, Peter	Pitt, Dame Edith
Cooke, Robert	Hornby, Richard	Pounder, Rafton
Cooper-Key, Sir Neill	Hornsby-Smith, Rt. Hn. Dame P.	Powell, Rt. Hn. J. Enoch
Cordle, John	Howard, Hn. G. R. (St. Ives)	Price, David (Eastleigh)
Corfield, F. V.	Howe, Geoffrey (Bebington)	Prior, J. M. L.
Costain, A. P.	Hunt, John (Bromley)	Pym, Francis
Courtney, Cdr. Anthony	Hutchison, Michael Clark	Quennell, Miss J. M.
Craddock, Sir Beresford (Spelthorne)	Iremonger, T. L.	Ramsden, Rt. Hn. James
Crawley, Aidan	Irvine, Bryant Godman (Rye)	Rawlinson, Rt. Hn. Sir Peter
Crosthwaite-Eyre, Col. Sir Oliver	Jenkin, Patrick (Woodford)	Redmayne, Rt. Hn. Sir Martin
Cunningham, Sir Knox	Jennings, J. C.	Rees-Davies, W. R.
Curran, Charles	Johnson Smith, G. (East Grinstead)	Renton, Rt. Hn. Sir David
Currie, G. B. H.	Johnston, Russell (Inverness)	Ridley, Hn. Nicholas
Dalkeith, Earl of	Jones, Arthur (Northants, S.)	Ridsdale, Julian
Dance, James	Jopling, Michael	Roberts, Sir Peter (Heeley)
Davies, Dr. Wyndham (Perry Barr)	Joseph, Rt. Hn. Sir Keith	Robson Brown, Sir William
d'Avigdor-Goldsmid, Sir Henry	Kaberry, Sir Donald	Rodgers, Sir John (Sevenoaks)
Dean, Paul	Kerr, Sir Hamilton (Cambridge)	Roots, William
Deedes, Rt. Hn. W. F.	Kershaw, Anthony	Russell, Sir Ronald
Digby, Simon Wingfield	Kilfedder, James A.	St. John-Stevas, Norman
Dodds-Parker, Douglas	Kimball, Marcus	Sandys, Rt. Hn. D.
Doughty, Charles	King, Evelyn (Dorset, S.)	Scott-Hopkins, James
Douglas-Home, Rt. Hn. Sir Alec	Kirk, Peter	Sharples, Richard
Drayson, G. B.	Kitson, Timothy	Shepherd, William
		Sinclair, Sir George
du Cann, Rt. Hn. Edward	Lagden, Godfrey	Smith, Dudley (Br'ntf'd & Chiswick)
Eden, Sir John	Lambton, Viscount	Smyth, Rt. Hn. Brig. Sir John
Elliot, Capt. Walter (Carshalton)	Lancaster, Col. C. G.	Spearman, Sir Alexander
Emery, Peter	Langford-Holt, Sir John	Speir, Sir Rupert
Errington, Sir Eric	Legge-Bourke, Sir Harry	Stainton, Keith
Eyre, Reginald	Lewis, Kenneth (Rutland)	Stanley, Hn. Richard
Farr, John	Litchfield, Capt. John	Steel, David (Roxburgh)
Fell, Anthony	Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)	Stodart, Anthony
Fisher, Nigel	Lloyd, Ian (P'tsm'th, Langstone)	Stoddart-Scott, Col. Sir Malcolm
Fletcher-Cooke, Charles (Darwen)	Lloyd, Rt. Hn. Selwyn (Wirral)	Studholme, Sir Henry
Fletcher-Cooke, Sir John (S'pton)	Longbottom, Charles	Summers, Sir Spencer
Foster, Sir John	Longden, Gilbert	Talbot, John E.
Fraser,Rt.Hn.Hugh(St'fford & Stone)	Loveys, Walter H.	Taylor, Sir Charles (Eastbourne)
Fraser, Ian (Plymouth, Sutton)	Lubbock, Eric	Taylor, Edward M. (G'gow,Cathcart)
Galbraith, Hn. T. G. D.	Lucas, Sir Jocelyn	Taylor, Frank (Moss Side)
Gammans, Lady	McAdden, Sir Stephen	Temple, John M.
Gardner, Edward	Mackenzie, Alasdair(Ross&Crom'ty)	Thatcher, Mrs. Margaret
Gibson-Watt, David	Maclean, Sir Fitzroy	Thomas, Rt. Hn. Peter (Conway)
Giles, Rear-Admiral Morgn	McMaster, Stanley	Thompson, Sir Richard (Croydon,S.)
Gilmour, Ian (Norfolk, Central)	McNair-Wilson, Patrick	Thorneycroft, Rt. Hn. Peter
Gilmour, Sir John (East Fife)	Maitland, Sir John	Thorpe, Jeremy
Glover, Sir Douglas	Marples, Rt. Hn. Ernest	Tiley, Arthur (Bradford, W.)
Godber, Rt. Hn. J. B.	Marten, Neil	Tilney, John (Wavertree)
Goodhart, Philip	Mathew, Robert	Turton, Rt. Hn. R. H.
Goodhew, Victor	Maude, Angus	Tweedsmuir, Lady
Gower, Raymond	Maudling, Rt. Hn. Reginald	van Straubenzee, W. R.
Grant, Anthony	Mawby, Ray	Vaughan-Morgan, Rt. Hn. Sir John
Grant-Ferris, R.	Maxwell-Hyslop, R. J.	Vickers, Dame Joan
Gresham-Cooke, R.	Maydon, Lt.-Cmdr. S. L. C.	Walder, David (High Peak)
Grieve, Percy	Meyer, Sir Anthony	Walker, Peter (Worcester)
Griffiths, Eldon (Bury St. Edmunds)	Mills, Peter (Torrington)	Walker-Smith, Rt. Hn. Sir Derek

Walters, Dennis	Wills, Sir Gerald (Bridgwater)	Wylie, N. R.
Ward, Dame Irene	Wilson, Geoffrey (Truro)	Yates, William (The Wrekin)
Weatherill, Bernard	Wise, A. R.	Younger, Hn. George
Webster, David	Wolrige-Gordon, Patrick
Wells, John (Maidstone)	Wood, Rt. Hn. Richard	TELLERS FOR THE AYES:
Whitelaw, William	Woodhouse, Hon. Christopher	Mr. McLaren and
Williams, Sir Rolf Dudley (Exeter)	Woodnutt, Mark	Mr. MacArthur.
NOES
Abse, Leo	Evans, Ioan (Birmingham, Yardley)	Kerr, Dr. David (W'worth, Central)
Albu, Austen	Fernyhough, E.	Lawson, George
Allaun, Frank (Salford, E.)	Finch, Harold (Bedwellty)	Leadbitter, Ted
Aldritt, Walter	Fitch, Alan (Wigan)	Ledger, Ron
Allen, Scholefield (Crewe)	Fletcher, Sir Eric (Islington, E.)	Lee, Rt. Hn. Frederick (Newton)
Armstrong, Ernest	Fletcher, Ted (Darlington)	Lee, Miss Jennie (Cannock)
Atkinson, Norman	Fletcher, Raymond (Ilkeston)	Lever, Harold (Cheetham)
Bacon, Miss Alice	Floud, Bernard	Lever, L. M. (Ardwick)
Barnett, Joel	Foley, Maurice	Lewis, Arthur (West Ham, N.)
Baxter, William	Foot, Sir Dingle (Ipswich)	Lewis, Ron (Carlisle)
Beaney, Alan	Foot, Michael (Ebbw Vale)	Lipton, Marcus
Bellenger, Rt. Hn. F. J.	Ford, Ben	Lomas, Kenneth
Bence, Cyril	Fraser, Rt. Hn. Tom (Hamilton)	Loughlin, Charles
Benn, Rt. Hn. Anthony Wedgwood	Freeson, Reginald	Mabon, Dr. J. Dickson
Bennett, J. (Glasgow, Bridgeton)	Galpern, Sir Myer	McBride, Neil
Binns, John	Garrett, W. E.	McCann, J.
Bishop, E. S.	Garrow, A.	MacColl, James
Blackburn, F.	Ginsburg, David	McGuire, Michael
Blenkinsop, Arthur	Gourlay, Harry	McInnes, James
Boardman, H.	Greenwood, Rt. Hn. Anthony	McKay, Mrs. Margaret
Boston, T. G.	Gregory, Arnold	Mackenzie, Gregor (Rutherglen)
Bottomley, Rt. Hn. Arthur	Grey, Charles	Mackie, John (Enfield, E.)
Bowden, Rt. Hn. H. W. (Leics S.W.)	Griffiths, David (Rother Valley)	McLeavy, Frank
Boyden, James	Griffiths, Rt. Hn. James (Llanelly)	MacMillan, Malcolm
Braddock, Mrs. E. M.	Griffiths, Will (M'chester, Exchange)	MacPherson, Malcolm
Bradley, Tom	Gunter, Rt. Hn. R. J.	Mahon, Peter (Preston, S.)
Bray, Dr. Jeremy	Hale, Leslie	Mahon, Simon (Bootle)
Broughton, Dr. A. D. D.	Hamilton, James (Bothwell)	Mallalieu, E. L. (Brigg)
Brown, Rt. Hn. George (Belper)	Hamilton, William (West Fife)	Mallalieu,J.P.W.(Huddersfield,E.)
Brown, Hugh D. (Glasgow, Provan)	Hamling, William (Woolwich, W.)	Manuel, Archie
Brown, R. W. (Shoreditch & Fbury)	Hannan, William	Mapp, Charles
Buchan, Norman (Renfrewshire, W.)	Harper, Joseph	Marsh, Richard
Buchanan, Richard	Harrison, Walter (Wakefield)	Mason, Roy
Butler, Herbert (Hackney, C.)	Hart, Mrs. Judith	Maxwell, Robert
Butler, Mrs. Joyce (Wood Green)	Hattersley, Roy	Mayhew, Christopher
Callaghan, Rt. Hn. James	Hazell, Bert	Mellish, Robrt
Carmichael, Neil	Heffer, Eric S.	Mendelson, J. J.
Carter-Jones, Lewis	Henderson, Rt. Hn. Arthur	Mikardo, Ian
Castle, Rt. Hn. Barbara	Herbison, Rt. Hn. Margaret	Millan, Bruce
Chapman, Donald	Hill, J. (Midlothian)	Miller, Dr. M. S.
Coleman, Donald	Hobden, Dennis (Brighton, K'town)	Milne, Edward (Blyth)
Conlan, Bernard	Holman, Percy	Molloy, William
Corbet, Mrs. Freda	Horner, John	Morris, Charles (Openshaw)
Cousins, Rt. Hn. Frank	Houghton, Rt. Hn. Douglas	Morris, John (Aberavon)
Craddock, George (Bradford, S.)	Howarth, Harry (Wellingborough)	Mulley,Rt.Hn.Frederick(SheffieldPk)
Crawshaw, Richard	Howarth, Robert L. (Bolton, E.)	Murray, Albert
Cronin, John	Howell, Denis (Small Heath)	Neal, Harold
Crosland, Anthony	Howie, W.	Newens, Stan
Cullen, Mrs. Alice	Hoy, James	Noel-Baker,Rt.Hn.Philip(Derby,S.)
Dalyell, Tam	Hughes, Cledwyn (Anglesey)	Norwood, Christopher
Darling, George	Hughes, Emrys (S. Ayrshire)	Oakes, Gordon
Davies, G. Elfed (Rhondda, E.)	Hughes, Hector (Aberdeen, N.)	Ogden, Eric
Davies, Harold (Leek)	Hunter, Adam (Dunfermline)	O'Malley, Brian
Davies, Ifor (Gower)	Hunter, A. E. (Feltham)	Oram, Albert E. (E. Ham, S.)
Davies, S. O. (Merthyr)	Hynd, H. (Accrington)	Orbach, Maurice
de Freitas, Sir Geoffrey	Hynd, John (Attercliffe)	Orme, Stanley
Delargy, Hugh	Irvine, A. J. (Edge Hill)	Oswald, Thomas
Dell, Edmund	Jackson, Colin	Padley, Walter
Dempsey, James	Janner, Sir Barnett	Page, Derek (King's Lynn)
Diamond, John	Jay, Rt. Hn. Douglas	Paget, R. T.
Dodds, Norman	Jeger, George (Goole)	Palmer, Arthur
Doig, Peter	Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)	Pannell, Rt. Hn. Charles
Donnelly, Desmond	Jenkins, Hugh (Putney)	Pargiter, G. A.
Driberg, Tom	Jenkins, Rt. Hn. Roy (Stechford)	Park, Trevor (Derbyshire, S.E.)
Duffy, Dr. A. E. P.	Johnson, Carol (Lewisham, S.)	Parker, John
Dunn, James A.	Johnson,James(K'ston-on-Hull, W.)	Parkin, B. T.
Dunnett, Jack	Jones, Dan (Burnley)	Pavitt, Laurence
Edelman, Maurice	Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)	Pearson, Arthur (Pontypridd)
Edwards, Rt. Hn. Ness (Caerphilly)	Jones, J. Idwal (Wrexham)	Peart, Rt. Hn. Fred
English, Michael	Jones, T. W. (Merioneth)	Pentland, Norman
Ennals, David	Kelley, Richard	Perry, Ernest G.
Ensor, David	Kenyon, Clifford	Popplewell, Ernest
Evans, Albert (Islington, S.W.)	Kerr, Mrs. Anne (R'ter & Chatham)	Prentice, R. E.

Price, J. T. (Westhoughton)	Slater, Mrs. Harriet (Stoke, N.)	Walker, Harold (Doncaster)
Probert, Arthur	Slater, Joseph (Sedgefield)	Wallace, George
Pursey, Cmdr. Harry	Small, William	Warbey, William
Rankin, John	Smith, Ellis (Stoke, S.)	Watkins, Tudor
Redhead, Edward	Snow, Julian	Weitzman, David
Rees, Merlyn	Solomons, Henry	Wells, William (Walsall, N.)
Reynolds, G. W.	Soskice, Rt. Hn. Sir Frank	White, Mrs. Eirene
Rhodes, Geoffrey	Steele, Thomas (Dunbartonshire, W.)	Whitlock, William
Richard, Ivor	Stonehouse, John	Wigg, Rt. Hn. George
Roberts, Albert (Normanton)	Stones, William	Wilkins, W. A.
Roberts, Goronwy (Caernarvon)	Strauss, Rt. Hn. G. R. (Vauxhall)	Willey, Rt. Hn. Frederick
Robertson, John (Paisley)	Summerskill, Dr. Shirley	Williams, Alan (Swansea, W.)
Robinson,Rt.Hn.K.(St.Pancras,N.)	Swain, Thomas	Williams, Albert (Abertillery)
Rodgers, William (Stockton)	Swingler, Stephen	Williams, Mrs. Shirley (Hitchin)
Rose, Paul B.	Symonds, J. B.	Williams, W. T. (Warrington)
Ross, Rt. Hn. William	Taverne, Dick	Willis, George (Edinburgh, E.)
Rowland, Christopher	Taylor, Bernard (Mansfield)	Wilson, Rt. Hn. Harold (Huyton)
Sheldon, Robert	Thomas, George (Cardiff, W.)	Wilson, William (Coventry, S.)
Shinwell, Rt. Hn. E.	Thomas, Iorwerth (Rhondda, W.)	Winterbottom, R. E.
Shore, Peter (Stepney)	Thornton, Ernest	Woodburn, Rt. Hn. A.
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)	Tinn, James	Wyatt, Woodrow
Short, Mrs. Renée (W'hampton,N.E.)	Tomney, Frank	Yates, Victor (Ladywood)
Silkin, John (Deptford)	Tuck, Raphael	Zilliacus, K.
Silkin, S. C. (Camberwell, Dulwich)	Urwin, T. W.
Silverman, Julius (Aston)	Varley, Eric G.	TELLERS FOR THE NOES:
Silverman, Sydney (Nelson)	Wainwright, Edwin	Mr. Sydney Irving and
Skeffington, Arthur	Walden, Brian (All Saints)	Mr. George Rogers.

Original Question again proposed.

Mr. Neil McBride (Swansea, East) rose——

It being after Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Committee report Progress; to sit again Tomorrow.