PRICES AND INCOMES POLICY

HC Deb 17 April 1967 vol 745 cc92-104

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

With your permission, Mr. Speaker, I wish to make a statement on prices and incomes policy.

As I explained to the House on 22nd March, the Government are determined to work for an effective policy for productivity, prices and incomes on a voluntary basis, and they attach great importance to the rôle of the Confederation of British Industry and the Trades Union Congress in making such a policy successful.

The wide powers taken in Part IV of the Prices and Incomes Act in support of the standstill and severe restraint will lapse on 11th August, 1967, and will not be renewed. The Government consider, however, that it is necessary to have some more limited powers available during the period of transition in which we are seeking to establish an effective voluntary policy.

As announced in the White Paper published on 22nd March (Cmnd. 3235), we propose to activate Part II of the Prices and Incomes Act, which provides for advance notification of proposed increases in prices or pay and for temporary standstills in appropriate cases during which proposed increases are examined by the National Board for Prices and Incomes.

In addition, the Government propose to introduce a short Bill designed to facilitate a smooth progress from the standstill and Part IV to observance of the principles set out in the White Paper (Cmnd. 3235). This will give the Government powers, exercisable for a further period of 12 months, to lengthen the period of standstill on prices or pay under Part II, in cases iii which this is recommended by the National Board for Prices and Incomes, to a maximum of six months from the date of the reference to the Board, and, in addition, to secure the temporary suspension of price or pay increases which are implemented before it is possible to make a reference to the Board.

Since the Government intend to rely on the voluntary principle, so far as possible, the power to secure temporary suspensions of price or pay increases is needed in order to ensure that those who are co-operating in the voluntary notification and standstill arrangements are not placed at a disadvantage compared with those who refuse to do so. The extension of the maximum period of deferment to six months after a reference has been made will help to ensure that the parties before proceeding to implement any increases in prices or incomes, pay full regard to the Board's findings and recommendations in the national interest.

The new powers which will replace Part IV will, therefore, be strictly limited, of temporary duration, and specifically designed to support and encourage the voluntary principle within a framework of reference to and examination by the National Board for Prices and Incomes.

The Government are confident that they can Look to the nation to support the policy of moderation in prices and incomes which is essential for our future prospects of securing sound economic growth based on full employment and a strong balance of payments.

Mr. Iain Macleod

Is the First Secretary aware that on this side of the House, and indeed on his own, there was strong opposition not only to Part IV, but also to Part and that it follows that we shall do everything that we can to oppose the extended powers and the introduction of Part II, which he has announced this afternoon? Is he further aware that the pledges of the withdrawal of compulsory power are now shown to be a sham, as we always expected would be the case, in the light of the statement which has just been made to the House?

May I ask the right hon. Gentleman, briefly, some purely elucidatory questions? I think that I have them right, but they are very important to the House.

First, does this mean that the new Bill will lapse in one year? If so, from what date? From today? From the introduction of the Bill? Or from the Royal Assent?

Secondly—and this is very important—when it lapses will all the measures in the pipeline lapse, too? If not, he is taking powers for 18 months and not for 12.

Thirdly, am I right in thinking that Part II, which is to be reactivated, provides a maximum delay of four months —that is to say, one month plus three; and that the four months now goes up to seven, or one month plus six?

Lastly, may I ask the right hon. Gentleman whether all the Orders made under the new Bill will be subject to negative Resolution of the House of Commons?

Mr. Stewart

I think that the right hon. Gentleman and his hon. and right hon. Friends must themselves consider what attitude they will take to the proposed legislation, but in doing so they should consider this question. We now have very wide powers, and it is reasonable to ask whether it is right to move immediately from a situation of the powers which now exist to no powers at all. What, in fact, is proposed is an intermediate stage of powers severely limited and of a temporary duration. I think that this needs more consideration than the right hon. Gentleman has so far given it.

It is the case that the Bill will lapse in one year, but an Order made under it could continue in force for the maximum period of one plus six months for which it was made. The reason is that otherwise the incidence of the Order might prove very unequal and unfair in comparing cases where an Order was made early in the 12 months period and cases where an Order was made later.

It is also correct that the nature of the alteration is that whereas, under Part II, to put it briefly, it is one month plus three, it will now be one month plus six. It would be the case that the Order would be subject to the negative Resolution procedure.

Mr. Macleod

May I put this briefly? First, on the third point which he made, the right hon. Gentleman must be aware that in the White Paper which he laid recently before the House he made it clear that both the C.B.I. and the T.U.C. asked him neither to activate Part II nor to take further reserve powers. He is going against the advice, therefore, of both those bodies, and we support the attitude that they take.

Secondly, it is now quite clear that this is an extension not for 12 months, but for 18 months. This was made quite clear in his answer.

Finally, new powers of recommendation of standstill, by this proposal and by the legislation which will be before the House, are to be given to the National Board for Prices and Incomes. Is the First Secretary aware that in the view of the House the Board is simply not able to shoulder the load which will be put upon it by this legislation and that this will be reflected in the attitude which we shall take to the Orders which will come before the House?

Mr. Stewart

When the right hon. Gentleman says 18 months I think that he is adding together two things which are not in the same category. It would not be possible under any Order or under these powers to delay an increase for more than six months at any time. The purpose of the arrangement that the Order can continue after the powers have lapsed is to see that the six months' power of delay does not operate unequally in one case or another.

The right hon. Gentleman mentioned the attitude of the C.B.I. and the T.U.C. I think that it is right in a matter such as this that the Government should consult the interests concerned and, indeed, be prepared to modify their views in the light of what is said during the course of the consultations, but I do not think that any Government would put themselves in the position of saying that they would not legislate except with agreement.

The decision which we have made about the right amount of powers was made after taking into account very carefully what was said to us in our consultations and also taking into account the economic situation and the Government's responsibilities towards it.

Mr. Shinwell

Is my right hon. Friend aware that unless the Government decide to modify their policy towards two particular categories, which I shall name if I may, they are likely to encounter substantial difficulty on this side of the House? May I direct his attention to those two categories—first of all, the deplorable plight of the lower-paid workers, who apparently are to obtain no redress, from the statement which he has just made, and, secondly, some further drastic action with regard to the price level?

Is my right hon. Friend aware that in spite of statements made by some of his colleagues quite recently—including a Minister sitting beside him—about price levels at present, the situation does not appeal to housewives, who have a better understanding of it? Will he, therefore, take into consideration as soon as possible the feeling in the country on these two categories and see that the Government modify their policy?

Mr. Stewart

I have taken those points—the position of the lower-paid workers and the movement of prices—very much into consideration, but I think that my right hon. Friend will agree that the more one wants to take them into consideration the stronger is the case for the Government having some measure of powers after the middle of this year.

Particularly with an eye on prices, I think that if we were to move immediately to a position in which the Government had no statutory powers, the position on prices might become very serious indeed. That is one of the points which has weighed with the Government.

My right hon. Friend will also see that in my earlier statement about criteria there is express mention of the position of the lower-paid workers. It is important that in the working out of the policy we are able to give increasing attention to this point, but here again, a complete free-for-all would be one of the most dangerous conditions for the lower-paid workers.

Mr. Hugh Fraser

What steps is the First Secretary taking to increase the staff available to the Prices and Incomes Board? Quite clearly, by July, an enormous demand will be submitted right across the board.

Mr. Stewart

I am in consultation with the Board about this. If it proves necessary to make increases, we shall make them.

Mr. Crawshaw

Will my right hon. Friend bear in mind that we are not prepared to return to a free-for-all which has left us with the lower-paid worker living below the poverty standard? Many of us appreciate that the Government have the guts to put forward unpopular policies for the benefit of the country. May I, however, plead with my right hon. Friend that while we are keeping wages down it is doubly important that we show that prices are kept down? Despite what the Government say, they are not being kept down. Can my right hon. Friend do something about this?

Mr. Stewart

I draw my hon. Friend's attention to the fact that before we began the operation of Part IV we had gone through a period when the rise in wage rates had been very considerable and the rise in productivity very small. There was, consequently, very great pressure on costs, a pressure tending to drive up prices, but during that period the percentage rise in prices was only half the percentage rise in wages. We started this period, therefore, with a great pressure on prices.

We have been able, partly by voluntary agreement and partly by the fact of the existence of the powers under Part IV, to hold that situation. It would not, however, be possible to hold it, I believe, if we moved over in the middle of this year to a position in which we had no powers at all.

Mr. Emery

Will the right hon. Gentleman say what advice he gives to firms, particularly in commerce, which find that their staff are leaving to take up other jobs because there are no wage increases and which are having to increase the salaries for those jobs to attract people to do the work, often involving an increase which is greater than would have been necessary to keep the original staff?

Mr. Stewart

The hon. Member's question illustrates that one cannot operate a prices and incomes policy on the basis that one will never say "Yes" to any proposal for increase of wage or salary or price. The hon. Member may remember that the point about salaries was dealt with in the White Paper which was issued a little while ago.

One must, I think, accept that there are circumstances in which a claim for an increased price may be justifiable, but we believe that it is necessary that those claims should come under the review of the Board and that there should be, in the last resort, certain statutory powers about them.

Mr. Spriggs

Will my right hon. Friend consider submitting instances of increased rent and rates to the Prices and Incomes Board with reference to the activation of Part II? If not, why not?

Mr. Stewart

We have considered this suggestion and if my hon. Friend wishes I will look at it again. He will, however, see that it propounds a number of difficulties. If we had simply attempted to hold down the rents of council houses, the result would have been to add an additional burden to the rates. If we had endeavoured to deal with both those situations by greater subvention from the Exchequer, that would have caused a problem of taxation as well. I will look at the suggestion again, but I draw my hon. Friend's attention to the fact that there are great difficulties.

Mr. Richard Wainwright

Will the First Secretary tell the House whether, at the expiry of the now proposed 12 months' special standstill, the original Part II will revert to full force? Will he also confirm that the authorities, by invoking one part of the prices and incomes legislation after another, could, going back to July last, secure a deferment of two and a half years of any particular increase?

Mr. Stewart

The second result is not one which we should want to achieve, or, I think, would be achieved. The position at the end of 12 months from the middle of this year is hypothetical. The nation would have to make its judgment in the light of our experience during that 12 months. My own hope is that the voluntary arrangements—for example, those made by the T.U.C.—will play a very large part and will demonstrate, during those 12 months, that we are achieving the position where we can get a policy of productivity, prices and incomes based on voluntary agreement.

Mr. Molloy

While acknowledging that the principle of a prices and incomes policy was necessary to save the nation from the disaster for which it was heading after the last Tory Administration, may I ask my right hon. Friend whether he will, nevertheless, acknowledge that there is grave bitterness throughout the country because ordinary working people feel that this policy is one-sided? It is efficient in holding down wages, but absolutely inefficient in controlling prices.

Mr. Stewart

The record does not bear out the contention—[HON. MEMBERS: "Nonsense."] The record does not bear out the contention that it is wholly inefficient in holding down prices. If my hon. Friend looks at the movement of costs before we began the standstill and the movement of prices thereafter, he will see that it is not correct to say that it is wholly inefficient.

My hon. Friend will also notice that during the period of severe restraint increasingly previously deferred commitments about wages are coming into operation, and this will be increasingly so after the middle of this year. Nobody, I think, would dispute—I, certainly not—that the operation of policy since last July has been a difficult and unpopular process. [An HON. MEMBER: "And unfair."] I do not think that it would achieve complete fairness, but I believe that it has been operated with as little unfairness as the extremely difficult circumstances made possible.

Our task now is to proceed, unravelling those injustices and anomalies which inevitably occur from an arbitrary standstill in July, and that, I think, with the help of voluntary co-operation and reserve powers by the Government, we shall be able to do.

Mr. Boyd-Carpenter

How does the right hon. Gentleman reconcile his statement this afternoon that he proposes to take powers to interfere with agreements made between employers and employees with his assurance to me a fortnight ago that he had no such intention? Secondly, can the right hon. Gentleman say definitely that it is the firm intention of the Government, when this proposed legislation lapses, to take no further compulsory powers of any sort or kind?

Mr. Stewart

I have already said, in reply to the hon. Member for Colne Valley (Mr. Richard Wainwright), that the question of 12 months from the middle of this year is hypothetical and that the Government and nation will have to judge what the situation then requires.

In reply to the right hon. Gentleman's first point, I do not understand him. It may be that I unwittingly misunderstood his earlier question. He will, however, remember that at the time of the standstill last July it was necessary to call on employers to break contracts; and it was to that that I understood him to refer. We should not be doing that on this occasion.

Mr. Atkinson

Will my right hon. Friend recognise that we on this side do not accept his statement on prices? He has said that the Government will legislate on wages only with the agreement of the T.U.C. Is he aware that every major trade union, with the exception of his own union, the National Union of Teachers, and the National Union of General and Municipal Workers, is now on record as being opposed to the introduction of any further legislation in regard to wages?

Mr. Stewart

On the question of prices, I must again ask my hon. Friend to look at the movement of costs before the standstill began and the movement of prices thereafter. If he does that, he will judge the matter rather differently. I did not say that the Government would not legislate without the consent of the trade union movement. I do not think that any Government could say that about any outside body. But we have endeavoured, in deciding what legislative proposals to put before the House, to take as much account as we could of the views of both the T.U.C. and the C.B.I.

Mr. Frederic Harris

When will the Government understand that the continuance of this negative policy is just not acceptable to the working population—[Laughter.] The ignorance of that laughter only shows that right hon. and hon. Gentlemen opposite do not know what is going on in their own factories. The only answer to the problem is to cut Government expenditure, reduce taxation, and restore incentives.

Mr. Stewart

If, when the hon. Gentleman talks of cutting taxation, he has in mind substantial reductions in the social services as well, that will not be welcome to the people for whom he claims to speak, either, and would also affect considerably the nature and volume of wage claims.

As to this being a negative policy, it is true that, during the period since July, we have had to operate the prices and incomes policy in terms of standstill and restraint. But these are not the permanent characteristics of the prices and incomes policy. I believe that the permanent principle, that the growth in money incomes and in prices ought to be geared to the growth of real wealth, is increasingly understood and accepted.

Mrs. Lena Jeger

Is my right hon. Friend aware that this question of price levels is very unconvincing, especially to the ordinary housewife, because the cost-of-living index is based on a wide range of goods, the purchase of many of which plays no part in the budgets of the lowest-paid workers? When, for instance, the price of milk goes up, or when council house rents go up, there is a disproportionate increase in the cost of living of the poorest worker, whatever his average is stated to be.

Mr. Stewart

I know that the index number of retail prices can only be an average figure and that movements in it affect different groups of people differently. My hon. Friend refers, for example, to the price of milk. If we had had no statutory powers during this period, that rise would have been earlier and larger.

Mr. R. Carr

Will the First Secretary now answer the question put to him by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), about exactly when this new 12-month period begins and ends? Will he give us some idea when the Bill is to be introduced and give us an absolute assurance that this year, unlike last year, the House will be given a reasonable opportunity to debate it?

Mr. Stewart

It will be introduced in a few weeks, I should have thought. It will be a short Bill, and there should be no difficulty about giving the House a reasonable time to debate it. I cannot state an exact date for its coming into force. That has to be linked with the timing of the expiry of Part IV, which could either expire on 11th August, which is the latest date, or could be revoked earlier. If we think in terms of the middle of this year, I think that we shall be about right.

Mr. Manuel

As one who has supported the prices and incomes policy, may I ask my right hon. Friend whether he is fully aware of the intense feeling about prices in the country? Is he further aware that although he and his right hon. Friends may secure agreement with a manufacturers' organisation, that agreement is not being carried down to shop floor level? Adequate proof can be given in Scotland, at any rate, of a vast divergence in prices for the same commodities.

Mr. Stewart

I am very much aware of the sheer fact that a period when wages rise faster than prices is an agreeable period, and one when the reverse happens is a disagreeable period. During this time, although the rise in prices has not been large, it has been larger than the increase in wages. That has been one of the difficulties of the period. The situation would have been very much worse if there had not been the existence of statutory powers. This is one of the main considerations in the Government's minds in making their present proposals.

Mr. Edward M. Taylor

How can the Minister justify the continuance of a policy which, in Scotland, has resulted in coal, gas, electricity and other essentials going up in price more than in the rest of the country, while electricians, local government officers and others have been deprived of wage increases which have been paid in England? How does this make sense, and how will the new policy sort it out?

Mr. Stewart

I would draw the hon. Gentleman's attention to the fact that, although we have had first a period of standstill and then a period of severe restraint about wages, we are now moving to the period where deferred commitments about wages are coming into operation. When I made the earlier statement, I drew the attention of the House to the extent of probable wage increases in the latter part of this year. This is a welcome thing if it does not outstrip the growth of real wealth. We have to keep these things in proportion.

Mr. Wellbeloved

Will my right hon. Friend make it clear that the activation of Part II of the Act and the moderate extension of compulsory powers will be used vigorously to deal with the scandalous increases taking place in prices at the retail shop level? Will he also take note of the fact that the massive abstention of labour supporters during the recent elections is a clearer indication of what is happening about prices than the figures which his Ministry has?

Mr. Stewart

We have to look at facts and at economic reality in these matters. In the first part of his question, my hon. Friend was asking for very much wider and more sweeping powers than the Government are prepared to take or believe that it would be wise to take. Without at least the kind of powers here proposed, it would be impossible to produce anything like the result which he has in mind.

Mr. Mawby

Is the right hon. Gentleman aware that his interpretation of "voluntary basis" is the language of a sergeant-major in terms of the statement which he has just made? Secondly, when he points out that we cannot suddenly move from restraint to complete freedom, surely that was known in July last year, when we went through the original Bill. This provision could have been put into the original Bill. Does that not show that the Government are certainly not now, if ever they were, masters of events, but are rather tending to deal with events as they meet them?

Mr. Stewart

No. On so important a question, with all its constitutional implications of the use of powers in this field, it was right last July not to take powers for longer than 12 months. This is something about which one needs successive judgments and does not attempt to foretell the future more than is reasonably possible to be able to do.

I do not accept, either, what the hon. Gentleman says about the concept of the voluntary principle. Even during the period when Part IV has been in operation, the whole thing has worked far more by voluntary arrangement on both sides than by the existence of Part IV.

The point which we are making, however, is that when there are a great many people, both trade unionists and manufacturers, who are prepared to work the voluntary principle, they ought not to be put at a disadvantage by the minority who are not. That is the only function of the powers.

Mr. Maudling

The right hon. Gentleman referred to his recent estimate of the upward movement of incomes in the latter half of this year. Has this estimate been affected by the measures which he has announced today? What is his current estimate of the increase in money incomes during the course of the current financial year?

Mr. Stewart

I do not at this stage want to go further on that than I said previously because it would take me rather outside the scope of this statement. What I said then was that mainly, though not wholly, as a result of already known commitments which had not been brought into operation we could expect a 6 per cent. increase or thereabouts in wage rates in the latter part of this year.

Mr. Heffer

Would not my right hon. Friend agree that there are much deeper implications to the proposals that he made this afternoon? The Trades Union Congress has made it clear that it does not want to see the activation of Part II of the Act. Is my right hon. Friend not aware that this is likely to lead to a growth of industrial conflict which can do far more harm to the economy than the abandoning of the policy which he has outlined today.

Mr. Stewart

No, I do not believe that that is so. If my hon. Friend looks at what was said at the T.U.C. conference of executives he will see that it is clear that although they were not in agreement with the Government on the question of powers they were resolved, none the less, to carry out to the full their own part in securing voluntary arrangements about wage increases.

Several Hon. Members

rose—

Mr. Speaker

Order. We must proceed.