HC Deb 22 November 1966 vol 736 cc1150-64

3.33 p.m.

The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart)

With permission, Mr. Speaker, I wish to make a statement.

After consultation with the Confederation of British Industry, the Trades Union Congress, and other interested parties, I am laying a White Paper before Parliament stating the principles which should govern prices and incomes in the first half of 1967. Copies will be available in the Vote Office this afternoon.

The consultation showed a wide measure of agreement that in this period there must be exceptional restraint on prices, charges and all forms of income.

Proposals for price increases must be judged by criteria of severe restraint. The criteria set out in the White Paper on the standstill cannot, therefore, be relaxed, save that there may be exceptional circumstances in which, without some increase in price, the receipts of an enterprise would not be sufficient to enable it to maintain efficiency and undertake necessary investment. It is important that prices should be reduced wherever possible: the removal of the import surcharge will offer some scope for reductions.

Increases in incomes during this period must be exceptional and severely limited. The criteria for this purpose, therefore, are not invitations to increases, but rigorous tests to be applied to any claims. Accordingly, the Paper redefines the original criteria concerning productivity, lowest-paid workers, distribution of manpower and comparability, in much stricter terms. The chief emphasis is on agreements which will genuinely increase productivity and serve the national interest as well as the interests of those immediately concerned; and on agreements whose sole purpose is to help the worst-off in the community.

Commitments for pay increases entered into on or before 20th July will have their operative dates deferred for 6 months or until at least 1st July, 1967, whichever is the earlier. Commitments for pay reviews to take effect after 20th July, where the amount of the increase had not by then been determined, should have their operative dates deferred until at least 1st July, 1967, unless an earlier payment can be justified against the severe restraint criteria. This requirement applies to wage and salary increments in the public and private sectors other than those which are of specified amounts within a predetermined range or scale, or were otherwise exempted under paragraph 18(iv) of Cmnd. 3073.

The Government consider that the police, whose next pay review was originally due to take effect from September, 1966, are in a special position because of their importance in combating crime. My right hon. Friends the Home and Scottish Secretaries are, therefore, prepared to discuss in the Police Council an increase payable in July, 1967, retrospective to March, 1967.

The Government have already stated their policy on dividends and are pledged to use appropriate measures to deal with any excessive growth of aggregate profits.

The Government intend to work closely with the Confederation of British Industry and the Trades Union Congress and look to them to give guidance to their members about the application of these principles. The Government will receive information about individual cases, make the necessary inquiries, and consider whether proposals are consistent with the criteria. We intend to make full use of the National Board for Prices and Incomes.

The Retail Price Index for October was one-quarter of 1 per cent. higher than in June; the wage-rate index was two-thirds of 1 per cent. higher, nearly all this increase having occurred in July. This restraint could not have been achieved without widespread voluntary support. Statutory powers will be used only after consultation and only to ensure that the support of the majority is not undermined by the actions of a few.

The first half of 1967 must indeed be a period of severe restraint. This will mean difficulty and sacrifice, but our economic recovery depends on the strict observance of restraint during this period, and on a permanent recognition of the indissoluble connection between productivity, prices and incomes.

Mr. Macleod

The First Secretary will be aware that we regard this as a most important statement. I would wish only briefly to comment on the statement in the form of questions this afternoon, but perhaps the Leader of the House will take note that we shall wish to debate this matter. No doubt there can be discussions through the usual channels.

I want to put two small points to the First Secretary. First, we believe that the police are in a special position, although, in the debate we should like to consider whether the suggestion that the right hon. Gentleman has made is generous enough in the special circumstances of the police. Secondly, does the right hon. Gentleman agree that the figures that he has given for the Retail Price Index are not uncommon for this time of year, and that in 1962 and 1963 the index actually fell between October and June, and that in 1964 the figure was much the same as that to which he has just referred?

I will confine myself to one question and comment only on each of the main criteria. First, is the First Secretary aware that in our view it is too easy a judgment to assume that productivity increases in a particular industry have any automatic relevance to the wage structure of that industry? The problem seems to us to be vastly more complicated than the right hon. Gentleman has outlined.

Secondly, and much more difficult still, will he say a word about the concept of increases for the lowest-paid workers? Naturally, this is an idea that attracts the sympathy of everybody in the House of Commons, but he will agree that the wage structure does not take into account the normal or primary causes of poverty in this country, for example, the size of family? Is he, therefore, not in danger of doing the job that should more properly be done by the Ministry of Social Security in this field?

When the right hon. Gentleman uses the phrase, in his statement, whose sole purpose is to help the worst-off in the community does he believe that wage agreements are negotiated on that basis? I know of few, if any, that are. Would it not be a much better idea if he were to repeal now—and I promise him an easy passage for it—Section 31 of Part IV of the Act which would enable the Minister of Labour to protect, through the wages councils, the worst-off paid people? Perhaps he could deal with some of these points in advance of the debate for which I have asked.

Mr. Stewart

The first point which the right hon. Gentleman raised was not one for answer now, but something that may be raised in debate.

With regard to the Retail Price Index, now and in other years, it is unusual for the increase to be as small as this, particularly when we remember that it takes into account the effect of certain tax increases, which were referred to at the time of the standstill White Paper.

With regard to productivity, there is very much more to it than the mere relationship of productivity to wages, but the White Paper is concerned with that aspect. The question we shall have to ask during the period of severe restraint is one that arises only if a proposal is made for wage increases. If a proposal is made on the ground that the increase is justified in terms of productivity we shall have to look at those two thins together: what is the relationship between the proposed increase in pay and the increase in productivity? But next month we shall be having an interim report—I believe—from the National Board on Prices and Incomes on this question, and this will be a help to us in dealing with this matter.

As for the lowest-paid workers, I accept that the problem of removing poverty amongst those worst-off is not a matter which can be dealt with by looking at wages alone. This is said in the White Paper. But it was very strongly represented to us that if increases were proposed for those who could really be regarded as the worst-off in the community they should be considered. It is right to say "Yes" to that proposition if it is clear that it relates to them and to them alone.

The right hon. Gentleman has suggested that a wage agreement of that kind is very unlikely. This is now a matter for those in industry to consider. But the trade union movement was very anxious that account should be taken of this criterion and if, as a result, we find agreements put before us which help the lowest-paid and those alone it would be possible to say "Yes" to them. If, in the event, no such agreements can be devised this criterion would not come into play.

Mr. Tuck

What does my right hon. Friend mean by appropriate measures in connection with dividends"? Is he prepared to take steps, if so, what, to ensure that increased dividends which were not paid this year are not salted away and paid over at a later stage?

Mr. Stewart

My hon. Friend will find what is required in terms of dividends set out in the White Paper. The requirement is that any proposal about dividends which appears not to be in conformity with the rules laid down in the White Paper should be the subject of an approach to the Treasury.

Dividends in the future must be regarded as part of the whole question of profit in the future, because it is out of profits that dividends are paid. It is open to the Government to take fiscal measures to deal with excessive growth of profits. We must notice, however, that where profits are increased without improper effects on prices—that is to say, by better management—they must then be regarded as a legitimate form of income which should not be discouraged. But where there is an excessive growth of profits it is open to the Government to take fiscal measures to deal with them.

Sir A. V. Harvey

Is the First Secretary aware that a number of firms at this time of the year would normally be considering giving their employees a cost-of-living award covering the last three or four years and that many workers in this category are subject to extreme hardship? What is the effect on the cost-of-living award, to which the right hon. Gentleman has not referred?

Mr. Stewart

If the award, whether based on the cost of living or anything else, is something the amount of which is at the discretion of the employer, that would not be consistent with the criteria. That rule is the one which applies, in effect, in the public services, where there is a commitment to make some increase but the amount is not yet determined. We have had to decide that payments in that respect should not be made until 1st July and, therefore, the same rule must apply to any increases in the private sector where the amount is at the employer's discretion. Regular and predetermined cost-of-living increases, as the House already knows, are dealt with on the basis of a six-months' deferment.

Mr. Barnett

Does my right hon. Friend agree that we require rather more than a purely negative policy? Will he consult his colleagues on the question of investment incentives, in present circumstances? Does not he agree that in the present situation paying grants more than 18 months after the initial ordering of the machinery is not helpful to what we have in mind?

Mr. Stewart

I fully accept my hon. Friend's point that rules about severe restraint of prices and incomes, necessary as they are, are not anything like the whole of an economic policy. It must contain more positive measures. I considered whether the White Paper should form part of a larger statement about economic policy, but I felt that since there are many groups of workers who will want to look specifically at the question of criteria it would be best to restrict this White Paper and this statement to the single question of incomes policy during the next six months. My hon. Friend can be assured that the Government have very much in mind the more positive matters to which he has referred.

Sir T. Brinton

Can the right hon. Gentleman be a little clearer about the question of cost-of-living increases? My hon. Friend's question related to a negotiated increase based on the increase in the cost of living over long periods, but there are many types of cost-of-living agreements current in industry which are directly linked to the retail price. These sums are not determined by the employer, but by the actual index itself. In such a case, is the right hon. Gentleman prepared to allow them to go ahead now or only from 1st July and, if they are to go on from 1st July, will the jump from the present situation to 1st July cover all the intervening increases?

Mr. Stewart

Where the cost of living increase is predetermined in amount—that is to say, it follows automatically from the nature of the settlement—it is in every case deferred by six months. Where it is accepted that there is to be a cost-of-living increase, but the amount is open to negotiation and discretion, payment would not occur until 1st July. The same applies to any other increase the amount of which is not determined. The payment must not begin until 1st July.

The reason for that, both in the public and private sector, is that if we were to give people more pay, either in the period of severe restraint or retrospectively in respect of any of those six months, on criteria which were not those of the criteria of severe restraint, we should be treating the people who got an increase more generously than other comparable people.

Mr. R. C. Mitchell

What is the Government's policy on council house rent increases during the period of severe restraint?

Mr. Stewart

In that case, we have to bear in mind that councils have to balance their housing revenue accounts. It is for local councils to decide how to hold the balance most fairly between their council tenants, on the one hand, and the whole body of ratepayers, of whom council tenants are a part, on the other. My hon. Friend will be aware that, during the period of the standstill, although there were no statutory powers on this matter, only 32 out of 1,600 authorities raised rents. Local authorities must be the judge of how to hold the balance fairly between tenants and ratepayers. It will be the easier for them to do that if, as is suggested in the White Paper, they observe the most rigid economy on their general expenditure.

Rear-Admiral Morgan Giles

It is obviously not reasonable to press the right hon. Gentleman on details at this stage, but can he say in principle, in outline, how the Armed Forces will be dealt with under the Grigg formula during the period of which he spoke?

Mr. Stewart

That and other questions about particular cases would be more appropriate either in a debate or in answer to particular Questions in the ordinary way.

Mr. Michael Foot

Despite the content of my right hon. Friend's reply to the last question, since the Government claim that a major purpose of their policy is to assist the lowest-paid workers, how does this standstill apply, say, to the railwaymen, the seamen, or the doctors? Would he say whether his reply to the right hon. Member for Enfield, West (Mr. Iain Macleod) means that the agreements with each of these three sections of workers, and others will have to be renegotiated if they defy his principle? Would he take into account, and do the Government take into account, that some of these agreements were made under threat of strike action and that the Government themselves were a direct party to the bargain?

Mr. Stewart

Without going in detail through the various groups, I think that I can answer my hon. Friend satisfactorily by saying that in every case where an agreement had been entered into with a definite operative date and for a definite amount all that happens is that the operative date is deferred for six months—[An HON. MEMBER: "Another six months?"] No. Anyone who had a substantial deferment already would not have a second deferment, but, for example, an agreement of this kind, where the date and the amount were defined, which was to come into force in September of this year, would come into force in March of next year.

Mr. Eldon Griffiths

In the right hon. Gentleman's statement, there is a conspicuous exception made in the case of the police. May I say, on behalf of the Police Federation—

Hon. Members

No.

Mr. Speaker

Order. We usually have only questions at this stage.

Mr. Griffiths

Is the right hon. Gentleman aware that the police will recognise the efforts of his right hon. Friend the Home Secretary, against considerable difficulties, and that this action may go some way towards halting the wastage from the police service, depending on how the negotiations now continue?

Dr. Summerskill

Would my right hon. Friend, not agree that, as the majority of lower-paid workers are women and only 10 per cent. of those at the moment receive the rate for the job, the Government should give early priority to legislating for equal pay for women?

Mr. Stewart

I think that my hon. Friend will understand what is involved in this is that we were faced, during the period of the standstill, with a situation in which we had to say, with very few exceptions, "No increases at all." We are now approaching a period in which we shall be able to say, "Yes" to a very few exceptions. Progressively, as time goes on and productivity increases, it will be possible to consider increases on a more generous scale. I trust that, in that process, we will be able to get better justice all around for the comparative incomes of different people. The problem to which my hon. Friend refers will, in time, I trust, fall into place.

Mrs. Knight

Does the right hon. Gentleman recognise that what he has said this afternoon will be accepted by many as a permit for the floodgates to open in July, 1967? Does he not see some danger in this?

Mr. Stewart

I do not think so. I think that there were enough references to severe restraint and the very limited reasons why, in any circumstances, any claim for increase might be allowed, for people to realise that this is not the opening of the floodgates.

Mr. Atkinson

Does my right hon. Friend accept the estimates that the cost-of-living increase will rise by well over 1 per cent. during the period of the freeze and that we may also expect prices to rise even faster during the period of severe restraint, and that this means that, during these 12 months of unhappy history, the cost of living will have risen by over 2½ or 3 per cent.? If this is so, is it not time that the Government got down to the job of seriously tackling prices and carrying out the policy which they intended to do a long time ago, of putting a price freeze into effect?

Mr. Stewart

I do not think that it will be sensible to start making prophecies of the figures in the next six months. As to the general policy of price control, we must accept, as I said at the end of my statement, that there is an indissoluble link both ways—between prices and incomes and between both of these and productivity, which is our real problem.

Mr. Dean

Would the right hon. Gentleman say whether the long overdue increase to university clinical teachers will be admissible under his announcement?

Mr. Stewart

There again, I do not want to deal with this in terms of individual groups. I think that I am right, however, in saying that the position of those the hon. Gentleman mentioned is this. If my memory serves me right, this is a group the amount of whose increase has not yet been determined, although the fact that there is to be one is fixed. In that case, it will be governed by the paragraphs in the White Paper on existing commitments, which would mean that no payment would be made before 1st July, 1967, unless, of course, it could be shown that anything proposed fell within the severe restraint criteria.

Mr. Bagier

Is my right hon. Friend taking note of the very responsible attitude of the leader of the National Union of Railwaymen during the freeze period, a group who are surely among the lowest-paid workers in the land? Could he underline, within the White Paper criteria, whether the payment due to them in September will be due to them six months after that date?

Mr. Stewart

I thought that I had answered that in my reply to my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot). For this and any commitment for which both the date and the amount were fixed, the date will be postponed for six months.

Mr. Lubbock

While agreeing with the right hon. Gentleman that the police are in a special position because of their importance in combating crime, does the reference to their case in his statement mean that no other group will be singled out for particular treatment? Does he not think that equal priority should be given to members of the Fire Service, bearing in mind that their earnings have fallen behind those of the police and that they are of equal importance to the community?

Would the right hon. Gentleman define exactly what he means by "the lowest-paid workers" in terms that the trade unions can understand? Does he not think that the measure of greatest benefit to the lowest-paid worker would be an increase of family allowances, using the money at present paid to people with high incomes through the Income Tax allowances system?

Mr. Stewart

I think that I dealt with that point about the family in reply to the right hon. Member for Enfield, West (Mr. Iain Macleod). I recognise that what can be done through the wages field to alleviate the position of those who are really worst-off is limited. One must notice that "lowest paid" does not, of course, mean the lowest paid in each industry or occupation. It means those who are really and recognisably the worst-off in the community.

I think that the other part of the question illustrates the difficulty we are up against in the whole policy of severe restraint. Many persuasive arguments can be advanced for very many groups of people. If we listened to them all we should be left with a result that would allow both prices and incomes to get so out of control that only a lucky few would be the gainers, and probably those who are now worst-off would be the losers.

Mr. Horner

Can my right hon. Friend say whether, in his discussions with the Trades Union Congress, he was able to win its full acquiescence to the terms of the White Paper? Will he not agree, when he is concerned with the plight of the low-paid workers, that the Ministry of Labour wages index shows that the lowest grade of workers is those in local government and public service employ?

Mr. Stewart

My hon. Friend will find in the White Paper the statement that the consultations "have shown a wide measure of agreement about the need for exceptional restraint", although it cannot be said that the criteria have been wholly endorsed. [Laughter.] That passage, at any rate, was an agreed passage, and I think that that was an inevitable result, for during the period of standstill restraint was at least universal. We now approach the much more difficult task of trying to distinguish between those to whom we may say, "Your claim may be allowed", and the larger number to whom we must say, "Your claim cannot be allowed". Once one tries to do that—and it is a task that must be undertaken—it is much harder to reach universal agreement.

Recalling one part of the discussions, I think that some would have held that the Government should have issued no detailed statement, but merely said that they would do their best to do justice during the next six months. I do not think that that would have been regarded as satisfactory by many groups of workers. While a large number of people will have their particular grievances against this White Paper, I believe that the general judgment of people as a whole will be that the restraint was necessary, and that the balance between different claims has been fairly held.

Mr. Peyton

Does the right hon. Gentleman realise how impressed some of us are by the clarity with which he has explained the totally incomprehensible?

Mr. Stewart

I think that the question is, "Incomprehensible to whom?". The hon. Member should read the White Paper before deciding that it is incomprehensible. I know that there are complexities in this. As to the hon. Member's compliment to me, after my experience during the last few weeks I should be able to understand the White Paper.

Mr. Shinwell

Does my right hon. Friend appreciate that it is quite impossible to elucidate what is involved in his statement without first reading the White Paper and having an opportunity of consideration and real debate? Is he aware that, having listened to the questions and the answers, I find myself, speaking for myself alone, completely confused as to what it is all about? Would he therefore arrange with his right hon. Friend the Leader of the House for a debate, very shortly—[Interruption.] I am doing this on behalf of the whole House—which should last at least two days?

Mr. Stewart

The question of a debate is a matter for my right hon. Friend the Leader of the House. I had considered whether there would be an advantage in not saying anything to the House until hon. Members had had the White Paper and been able to read it, but I felt, in view of the general interest, that it was right to make that statement.

My right hon. Friend says that he is confused as to what it is all about. Briefly, it is about this: that there must be severe restraint during the next six months. That severe restraint means that the word "Yes" can be said on a very limited number of occasions. The White Paper sets out the circumstances in which it might be used and it also describes the position of people who have existing commitments to either definite increases or reviews. I agree that when dealing with that part in question and answer it is difficult to follow, but I think that my right hon. Friend and hon. Members generally will find it clear in the White Paper.

Sir E. Boyle

Can the right hon. Gentleman say something about teachers' pay generally, bearing in mind that this matter is governed by specific legislation which the right hon. Gentleman introduced into the House?

Mr. Stewart

The teachers are a group of people who have a commitment though to an amount that is still to be determined, and with an operative date occurring in the first six months of next year. Therefore, they will not receive any increase until 1st July and it will be operative from that date, or at any rate, not before 1st July. That is all that can be said pending the actual negotiations.

Mr. Alfred Morris

Can my right hon. Friend say what he has in mind to ensure that his proposals do not permanently harm the interests of people who retire and go on superannuation pensions during the period covered by the White Paper?

Mr. Stewart

I do not think that they will do that. I do not think that one can set out, without defeating the object of the whole policy, any specific measures to deal with that.

Mr. Biffen

Can the right hon. Gentleman confirm that the Government are now embarking on the most difficult period, where they have to say "Nay" to some and "Yea" to others? Are we to assume that the Government wish to be informed of every single proposed income increase in the country. How do they plan to know of those incomes covering the 50 per cent. of workers who are not members of trade unions and those sections of industry and commerce who are excluded from membership of the C.B.I.?

Mr. Stewart

I have discussed this. Clearly, it would be impossible to be informed of every single proposed increase. However, I am satisfied that we can be informed of all increases except those which are either for the small number of people they affect or those which will not have repercussions elsewhere. Setting those aside, I think that we can be sure of being informed of the rest.

Mr. Heath

The First Secretary has enunciated the doctrine that agreements for the lowest-paid workers are to be exempted in the interests of social justice and in a supplementary answer he said that as productivity increases this process will be carried further in the interests of social justice. Is he therefore saying that the Government propose in the future to use their powers to impose a wage structure on the economy on the criterion of social justice and not economic requirements? If so, that is a most important principle to have enunciated in this way.

Secondly, when the First Secretary is considering a debate will he bear in mind that we shall wish to discuss not only the very narrow subject he has covered, but also much wider economic questions of falling production, falling investment, heavily rising unemployment and the rest of the economic situation? It will not be enough to discuss either the period of the freeze or of wage restraint, but, above all, we wish to discuss the Government's proposals for the long-term future after 1st July, 1967.

Mr. Stewart

It is going further than I said, and the White Paper says that agreements affecting the lowest-paid are exempt. That is looking at the whole thing the wrong way round. The point is that, if agreements are proposed of which it can be said that they help the lowest-paid in the community, and them only, then it would be reasonable to regard them as in line with the criteria. The way the right hon. Gentleman put it suggested a much more blanket approval than we have in mind.

As to his further point on that, I believe that, if we look at the position from the standstill through the period of severe restraint and thereafter, what we have got to work to is a structure of incomes in which, I accept, there must be some regard to economic efficiency, but there must be some regard, also, to social justice. I think that in a great many respects today our system of distribution of wealth is out of line with both these principles, whereas in the end we have got to secure some sort of balancing of those two principles in our distribution of wealth.

Although the subject of the debate is not entirely a matter for me, I would, for my part, welcome the idea that the incomes policy ought to be considered in a wider context.

Several Hon. Members rose—

Mr. Speaker

Order. We must move on.

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