PRICES AND INCOMES (No. 2) BILL

HC Deb 13 June 1967 vol 748 cc328-444

Order for Second Reading read.

Mr. Speaker

Before I call the Minister to move the Second Reading, may I say that I have not selected the Amendment standing in the name of the hon. Member for Bothwell (Mr. James Hamilton).

4.15 p.m.

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

I beg to move, That the Bill be now read a Second time.

Parliament and country are agreed that prices and incomes should be the subject of policy—that is to say, that they should not be left to sort themselves out and that there should be a deliberate attempt by those concerned—employers, employed and the Government—to see that prices and incomes are properly geared to the production of real wealth.

The objects in mind in making productivity, prices and incomes the subject of policy are, first, that we may be able to protect our balance of payments against the danger of inflation and be able to embark on economic growth without fear of its being arrested by a balance of payments crisis; secondly, that we may be able to give some help to those who are the worst sufferers if there is a free-for-all in prices and incomes—that is to say, those who are the lowest paid and those who, by reason of age, are not working and are on small fixed incomes.

But there is a third object of policy, which is emerging with increasing clearness from the events of the last 12 months—that the development of incomes policy itself can point the way to the use of methods in industry which encourage the production of real wealth. So a policy of this kind is not only a safeguard for our balance of payments and a safeguard for the ill-paid and those on small incomes. It can also be an instrument for the positive promotion of economic growth.

This general national agreement that there should be a policy for productivity, prices and incomes found expression in the Statement of Intent. It may be easy to ridicule perhaps the fact that the Statement of Intent was not carried out with the same zeal with which it was signed. But we have to note that the creation of policy rather than a free-for-all in this field is something which every nation which has tried it—and it has been tried with varying degrees of success—has found that it could not be done quickly or immediately or at the first attempt and that a combination of the difficulties of getting people to turn intent into practice and of certain particular difficulties which affected our economy at that time led us from the Statement of Intent to the emergency position we faced last July.

Last July, therefore, the whole concept of productivity, prices and incomes policy had to wear for a time a different face. It could not wear the face of voluntarism embodied in the Statement of Intent—it had to wear the face of stringent powers in the hands of the Government embodied in Part IV of the Prices and Incomes Act, 1966. We moved then from the Statement of Intent to Part IV and this Bill is a stage in moving backwards steadily towards a properly voluntary system.

It is in that context that the Bill should be understood, since Part IV of the Act—and I trust that there is no doubt about this—expires completely, ceases to be part of the law, on 11th August this year. We have now to undertake the task of moving from this situation of stringent legislative powers to a system of prices and incomes policy which shall be both voluntary and effective.

As I have said, it is in this context that we must see the Bill and I want briefly now to run through the provisions of the Measure. It has to be read together with Part II of the Prices and Incomes Act and the House will, in due course, be invited to approve the necessary Order in Council which brings Part II into force. In the first place, Part 11 gives to the Government power to require advance notification of any proposed increase of prices or wages or salaries. Although we shall call Part II into existence and the Government will, therefore, have the power to require those notifications, we both hope and expect to be able to rely very largely, if not wholly, on voluntary notification.

The consultations we have had indicate that it will be Possible for the Government to get the advance notifications they want by voluntary means, but it is desir- able, when one is trying to work a voluntary system, to see that the great majority who will co-operate with one should not be put in a worse position than a minority who will not. If, therefore, there are avoidances it will be possible for the Government to use the power to require notification which is contained in Part II.

Next, Part II gives the Government power—again, power which may or may not be used—in certain circumstances to halt proposed increases either in prices or in wages. The Government can do so in the first instance for a period of not more than 30 days, during which they must decide whether to refer the proposed increase to the National Board for Prices and Incomes and, further, to halt that increase for a period of three months or until the Board reports, whichever period is the shorter. Those briefly are the powers contained in Part II of the Prices and Incomes Act.

Clause 1 proposes to increase those powers in this respect—that the kind of standstill that can be imposed on increases in Part II may be continued for a period of up to six months from the time the proposed increase is referred to the Board. But this can only be done provided that the Board's report supports such action. In all cases—and this is an essential principle of the Bill—the Government will not be able to act in a manner more hostile to a proposed increase than is the report of the Board. They will, if they see fit, be able to adopt a more relaxed attitude than the Board to an increase, but will not be able to go beyond what the Board has recommended. That is the effect of Clause 1. It deals with a situation where the Government have been notified of a proposed increase and if they decide that it is necessary to halt that increase.

But, clearly, a situation could arise in which manufacturers, suppliers or employers and employed put an increase into effect without giving any advance notification. If there were no power to deal with that, it would give exactly the position we want to avoid—that people who refused to co-operate would be in a better position than those who do cooperate by notifying the Government of proposed increases.

Clause 2, therefore, makes it possible, when this situation has arisen, to require an increase to be reversed—for the price or wage to be put back to what it was previously, for those who have acted without notification to be put back in the same position as those who have notified the Government what they propose to do.

A similar situation could arise, dealt with by Clause 3, where, to begin with, possibly the parties have proceeded in a voluntary manner, have notified the increase and it has been referred to the Board, but then, either before or after the Board has reported, the incease has been put into effect despite the fact that it is not supported by the Board's report. In these circumstances, also, the Government will have power under Clause 3 to put the price or wage back to what it previously was. That is the position with regard to Clauses 1, 2 and 3.

These powers are subject to considerable safeguards. When the Prices and Incomes Act was passed, and again when Part IV of it was called into operation last October, a number of apprehensions were expressed that this was giving too great an arbitrary power to the Government. I think that the course of events and the use of the power since then has largely removed those apprehensions. [HON. MEMBERS: "No."] I shall be returning to that point.

None the less, it was thought desirable to surround the powers in the Bill with safeguards. The House should notice, first of all, that the use of them is limited by the fact that they cannot be more hostile to the parties concerned than the report of the Board is. Secondly, they are subject to the control of Parliament. There are certain powers in Part II which are subject to direct Parliamentary check, others that are less directly subject. But wherever there is an increase of power in this Bill over what is in Part II, that will be subject to Parliamentary check.

There is, furthermore, the check that the powers cannot be used without the opportunity for the parties concerned to make representations and for there to be consultations about the use of the powers. Further, Clauses 1, 2 and 3 cease to have effect after 11th August, 1968. Any Orders that have been made under these Clauses and are still in force at that date can run on for the six-months period from the time the reference was made to the Board, but there will be no power to make further Orders after 11th August, 1968. Both in duration and then in the way the powers are to be exercised, they are surrounded with careful safeguards against any arbitrary behaviour by the Government.

Mr. J. J. Mendelson (Penistone)

My right hon. Friend says that there will be no further Orders after that date. When the Prices and Incomes Act was introduced, we were told that when Part IV came to an end there would be no further legislation. Has my right hon. Friend decided that there will be no further similar legislation after August, 1968?

Mr. Stewart

No. I am not going to make that statement. It has been made quite clear that it will be a matter for Parliament to decide at that time.

It is both my hope and my expectation that it will not be necessary to have any powers then, because experience during this period has shown that, although there have been powers, the thing has worked very largely by voluntary co-operation and that the whole spirit and intent of working it voluntarily has been strengthened, as has been apparent in the discussions with the T.U.C. during the past 12 months.

If this desire to work the thing voluntarily continues to grow in that manner during this next 12 months, one can give the answer that both my hon. Friend the Member for Penistone (Mr. Mendelson) and I would want at that time, but I do not think that it would be sensible or prudent to try and give an answer in the definite form that my hon. Friend asks for it now.

Clauses 4 and 5 are rather different in character. Clause 4(1) clears up a matter that is in doubt in the working of the Act. It provides that, where a standstill on either prices or wages by virtue either of Part II or of the Bill during the stage of standstill, there cannot be an increase. For example, it might be said, "There is a standstill at the moment on this particular set of wages". But the employer may say, "I propose to pay an increase and pay it now, not in virtue of work done now but retrospectively for something done earlier". It was not clear previously whether that could legally be done. Subsection (1) makes it clear that a standstill is, in fact, a standstill and that, during a period of standstill, increases may not be paid for the reason I have mentioned or any other other.

Clause 4(2) establishes the principle that, where there was agreement between employers and employed for an increase, and this was halted by virtue of a standstill, at the end of the period of standstill the employer cannot be sued retrospectively for the money he did not pay out during the standstill. It would he legal for him to pay it if he wished, but he could not be legally compelled to pay it. Therefore, whether such payment was made would become not a matter of law, but a matter of industrial bargaining. It has not been the practice in private industry, as distinct from the public service, to have retrospective payments of this kind, and it would be extremely undesirable if it were to become so.

Mr. Terence L. Higgins (Worthing)

Could the hon. Gentleman tell the House whether an employer would be protected or not if he refused to volunteer in this way and the union took strike action against him?

Mr. Stewart

There would be no legal sanction there.

One defect in our bargaining arrangements about public servants is that the method has provided sometimes for very long periods of retrospection. We should not imagine that civil servants are a privileged class for that reason. It sometimes means that for periods long after their case for an increase has been established, and other people are getting theirs, they stand out for their money. We expect to be able to put that right and reduce the amount of retrospection. It is not a good way of arranging wage and salary bargaining, anyhow. That is one of the things to which our attention has been directed during the last 12 months and we are putting it right.

Clause 5 disposes of certain problems which arose out of the period we have been through since Part IV was put into operation. It disposes of them by establishing that an employer cannot be sued for money which has been withheld as a result of restraints which have been imposed during the last 12 months. There have been a number of instances where agreements have been made and then not put into force because both said sides have agreed that they should not be put into force because of the general tenor of Government policy or because of Orders made under Part IV.

Although that has been done in many instances by agreement between employers and the trade unions, it would still be legally possible at any time during the next six years for any individual employee to sue for the money. This could not be accepted by anyone as a satisfactory situation. The effect, therefore, of Clause 5 is to remove this liability—in fact, to wipe the slate clean of the particular problems that arose during the Part IV period.

It has been necessary, while going through the Clauses of the Bill, to make frequent references to powers.

Mr. Mark Carlisle (Runcorn)

Surely the problems are far greater than that, because under subsection (7), even if a man has already obtained a judgment in the courts that he is entitled to be paid an agreed rate of salary, the Government are now asking Parliament to pass a Bill which would then allow the employer to go back to the courts and have that judgment set aside. This is surely a most monstrous piece of retrospective legislation.

Mr. Stewart

That is true with regard to proceedings that occur in the period mentioned in the Bill. I do not think that it is monstrous for this reason. The general purpose of the Clause is right, but there was a risk that, as soon as the text of the Bill appeared, there might be a number of actions of this kind. That would have been unjust and that is why it was necessary to impose this limitation. Possibly the hon. Gentleman may wish to see this point further pursued in Committee on the Bill.

Mr. Carlisle

This is very important, because in the Court of Appeal today there is the case of Allen v. Thorn Electrical Industries. Do I understand that if the Court of Appeal finds in favour of Allen, Parliament is to pass legislation which says that Thorn can go back and have that judgment set aside?

Mr. Stewart

First, it is not as simple as that. Secondly, we had better wait until that case is decided. I do not want to comment on it while we are still awaiting the decision.

I was saying that in going through the Clauses of the Bill it has been necessary to use the word "powers" frequently, but I have stressed the extent to which these powers are limited in time and safeguarded in their method of action. I do so all the more because, during the last 12 months, the standstill and restraint have been brought about largely by the voluntary co-operation of those concerned. It is of very great importance to remember this and see that in the future we endeavour to promote and encourage the development of voluntary restraint as much as we can.

However, there have been cases during the past 12 months where, without either the present use or presence of powers there would have been some increases of prices and wages which could not have been justified in the light of the way other people were faring or in the light of the general economic situation. If those unjustified increases had occurred it would have become progressively more difficult for all those who were trying to make the thing work voluntarily to continue to do so.

This was particularly drawn to my attention in consultations with the trade union movement at the time of the activation of Part IV. The view of a number of trade unionists—particularly those representing workers who were not so well paid—was that, without Part IV, there would have been a situation in which limited sections—some of them quite well paid—would have obtained increases, and it would have become impossible for the leaders of other sections to have resisted pressure to act likewise. We have had a situation where it has worked very largely voluntarily, but some heart has been put into those who wanted to work it voluntarily by the knowledge that they would not be put in a worse position than those who refused to work the incomes policy and were bent on a free-for-all, whether in prices or incomes, because they felt it might benefit them, whatever the effect might be on the rest of the community.

Mr. J. Bruce-Gardyne (South Angus)

The right hon. Gentleman refers regularly to the system working voluntarily or compulsorily. I am a bit mystified, because surely the increase in hourly wage rates over the corresponding stage of the previous stop between July, 1961, and December, 1962–6.4 per cent.—was precisely the same as that forecast by the right hon. Gentleman for the current period from July, 1966, to December, 1967. I do not see that it has made any difference. Can the right hon. Gentleman explain?

Mr. Stewart

I will be coming to that in a moment.

I want to review shortly the course of events during the past 12 months. That there has been restraint both on incomes and prices during that period is undoubted. The point I was making—and I am supported in this by the consultations I have had—was that we could not have achieved this if limited sections had been allowed to please themselves. During that time, therefore, the whole concept of making the thing work voluntarily has been strengthened. This was particularly brought out at the conference of trade union executives in March of this year, when there was almost universal acceptance of the view that it was of great importance to make the incomes policy work and to make it work voluntarily. But the question which we have to ask is whether, at this time, when the voluntary system is growing, it would be prudent to jump immediately from a situation in which we have the stringent powers of Part IV to a situation where there are no legislative powers. In the Government's view it must be a more gradual process than that.

Mr. Stanley Orme (Salford, West)

This is a very important matter. I think that my right hon. Friend will agree that this is the point where he and some of his hon. Friends come into sharp disagreement. He has referred to the T.U.C. Was it not also a part of that decision to request that Part II be not activated and no legislation implemented?

Mr. Stewart

Both of those things were asked, but my hon. Friend is wrong to say that it was part of the decision. It was made very clear at that conference that the T.U.C. was resolved to go through with its own voluntary machinery whether the Government acted, in its view, wisely or unwisely on this point. It would be a misrepresentation to suggest that the trade union movement has taken the view that, because it disagrees with the Government about legislation, it will, therefore, not work the voluntary system. It is to do so, and everyone will wish it well.

The reason why it is not prudent to jump immediately I shall now explain. We are asking the trade union movement to undertake the great task of a systematic survey and consideration of wage claims with a view to the interests of all workers and the community as a whole. It will be very difficult for it to do that if, at a time when we still have to consider the movements of prices and wages and the balance of payments very carefully, some inside the T.U.C. itself behave as though these considerations of policy do not matter to them.

Secondly, there is the position of groups of workers in organisations not affiliated to the T.U.C. I am a little surprised that the trade union movement has not taken this point more fully. It would be a rather curious situation if, at a time when, as I say, we still have to watch the movement of wages and prices very carefully, while unions affiliated to the T.U.C. were seriously and determinedly trying to exercise a voluntary policy, groups of workers outside were subject neither to that degree of discipline nor to anything which the Government might propose.

Thirdly, without the Bill there would be no power to take any action about prices, and, again, it would be difficult to expect the voluntary working of a wages policy to develop if at this stage the Government moved into a position in which they had no power over prices.

Mr. Norman Atkinson (Tottenham)

To demonstrate his argument, can my right hon. Friend give an illustration of action taken against non-trade union workers during the last 12 months, anyone outside the trade union movement who has received a wage increase and against whom the Government decided to take action?

Mr. Stewart

I sometimes wish that my hon. Friends would wait a little. I am coming to these points. Those are the reasons why the Government believe that it is necessary to legislate on these lines.

But, as is apparent from the question which I have just been asked, the judgment of the House on this matter will be conditioned by the use of powers during these 12 months. I take, for example, the matter raised by my hon. Friend the Member for Tottenham (Mr. Atkinson). There was the question of salary increases not automatic, as in some professions and occupations, but paid at the discretion of the employer. During the period of standstill and of severe restraint, those increases did not, in fact, occur. That was both the intent and the result of Government policy. In some quarters this was one of the criticisms of policy. It was argued that these people were in an unfavourable position compared with those who got automatic salary increases and that this was a large and important example of restraint exercised outside the range covered by the Trades Union Congress.

Mr. Atkinson

What action was taken?

Mr. Stewart

There was no need to make an Order, because we got the result without it, and that happened in many cases.

When reviewing the use of powers in the past, we should remember the situation in which the powers began to be used, the situation leading up to the announcement of last July. In the preceding period, there had been increases of wages and of prices, with the increase in wages considerably outstripping the increase of prices and both of them regrettably outstripping the increase in the growth of real wealth. This produced a situation in which the pressure of increasing costs was liable to result in a very rapid rise in prices.

Mr. Bruce-Gardyne

Whose fault was that?

Mr. Stewart

Further, there were certain items of taxation, such as S.E.T. and Purchase Tax, which also tended in that direction. That was the situation with which we had to deal from last July on, and that was why it was made clear last July that, although there must be for six months a standstill on wages, some prices would rise.

The amount of the rise, the increase in the retail price index in that period, is well known to have been 2½ per cent. That is not a light matter. In a family normally spending about £20, it means another 10s. on the weekly bills, but it is not the runaway increase which has sometimes been depicted. It is not what might have been expected in view of the pressure of costs if we had not taken the action which we took.

We must also notice that the complete standstill on wages lasted for six months. During the period of severe restraint, some wage increases have already begun to occur. What would have been the position if there had been no powers? We were urged by arguments from those who said that even under the terms of the July White Paper they would have been entitled to raise prices in the summer or late autumn of last year. Because the powers were there, it was possible to hold back those increases by four, or five, or six months. This applied to bread, flour, milk, chocolate—a range of important items. There were also, as, for example, in detergents and a wide range of household goods, petrol and a number of other articles, some reductions in prices.

In the light of what has happened, it cannot be maintained that the Government have permitted a runaway increase in prices or have operated this policy unfairly between incomes and prices. Further, the powers have not been used recklessly. The total number of workers whose wages have been affected by Orders made under these powers has been 35,000. Before using these powers, we were required to consult the trade union movement and to receive representations from the parties concerned. In no instance did the trade union movement as a whole object to any particular use of the powers which we made. The powers have been used not only carefully, but constructively, because their use involved setting out criteria under which increases would be permitted.

One was the criterion of productivity, which had the effect of stimulating the growth of productivity agreements and moving thought in industry increasingly in the direction of organising work towards greater productivity. About 200 such agreements were approved during that period, and the Prices and Incomes Board has brought out an extremely useful report on the nature of those agree- ments which will help the development of this in future.

Another criterion was that people should have a special claim if they were exceptionally ill-paid. Not far short of 2 million workers have received increases during the past 12 months under that criterion. They include agricultural workers, people in drapery and footwear and many sections of the distributive trades.

What would have been the situation without powers, when there would not have been this special incentive to the development of productivity agreements and when probably all money wages would have risen and prices would have risen much faster—[An HON. MEMBER: "Why?"] As I was explaining earlier; because of the pressure of costs which we faced at the beginning of this period, which would have meant that the increases which were secured by the lowest paid lost a great deal of their value.

The effect of the working of the policy has been both to improve the prospects and increase the number of productivity agreements and to protect the lowest paid. This points towards the future development of prices and incomes policy. We have had to operate—

Mr. David Howell (Guildford)

The right hon. Gentleman mentioned the acceleration of productivity agreements which may have been brought about by this policy, but would he not also agree that there are many instances in which productivity agreements and incentive payment schemes have been held back or stopped by this policy? Does not that far outweigh the gains he mentioned?

Mr. Stewart

That is not so. We had to consider this early in the working of the powers with regard to agreements on the Clydeside and it was decided—I think rightly—even at that time, in the middle of the absolute standstill, that that agreement should go through. But one cannot accept everything called a productivity agreement as such merely on face value. That is the importance of the Board's report on this matter.

These trends in the past point to the future development of prices and incomes policy and we must remember that this policy is concerned with productivity as well as with incomes and prices. The face which it has had to wear recently is the face either of standstill or severe restraint and for the coming period it will be one of cautious moderation, but the permanent nature of incomes policy must be something like this, that we must seek in its operation first to get as near as we can to an agreed estimate of what the growth of real wealth will be over a coming period.

Having established that, we can then say, "There is a certain minimum increase in income to which everyone who works ought to be entitled." That may be called a norm, but we had better be clear that people will treat it as a minimum and, in determining what it ought to be, should recognise that it will be so treated. Then one must say, "But there are certain groups who have certain claims to get more than that." Some are those who pioneer the way to greater productivity. Some are those who have fared particularly badly in the past and deserve to be helped forward. Then there are further criteria, about the operation of which we have still a good deal to learn, to prevent certain occupations falling seriously behind in the general movement of prices and incomes.

Therefore, looking back over the last 12 months, it can be claimed that the powers have been used prudently. The account which I have given, which is correct, is very different from some of the predictions of disaster, unrest and imprisonment to which we were treated at the beginning—that they have been used prudently and constructively, that the experience gained will help us in the future forging of the policy.

I commend the Bill to the House by virtue partly of our past experience, which has shown that the Government have used their powers sensibly, by virtue partly of the present situation, in which the economic position is still difficult and in which it would not be prudent to jump immediately from Part IV to no powers at all and I commend it also in view of the possibilities which the job of working our way through our present difficulties holds for the promoting of fully effective and permanent prices and incomes policy.

4.56 p.m.

Mr. Robert Carr (Mitcham)

It all sounds very neat and tidy, so long as one plays the game on paper, but in real life it has not worked and will not work, and, so far as it does work, it is utterly illusory to imagine that it promotes fairness or economic efficiency. The hon. Member for Tottenham (Mr. Atkinson) had it right, because the motto for action to be drawn from this policy is, "Don't be a trade unionist." What a rallying cry for a nation. What a banner to go forward under to the great adventures to which the Prime Minister called us, a banner with these devices of standstill, severe restraint, cautious moderation—what a wonderful rallying cry for the future they are.

Mr. Mendelson

Would the right hon. Gentleman put on record that my hon. Friend the Member for Tottenham (Mr. Atkinson) did not say, "Don't be a trade unionist", but said something far more complicated which should not be summed up like that?

Mr. Carr

The hon. Member for Tottenham can well look after himself. I do not believe that I said that he said that. I think that he was drawing a very real moral from this sort of legislation, namely, that to be a trade unionist is often, under this sort of legislation, disadvantageous—

Mr. Atkinson

This is so important a statement that I wish to make sure that there is no misunderstanding about the fact that the last advice which I would give the House is, "Never be a trade unionist."

Mr. Carr

Nor, let me assure the hon. Gentleman, would it be any advice from me. But let me say to him and other trade unionists that we would get rid of this legislation—[An HON. MEMBER: "What would the right hon. Gentleman put in its place?"] I will come to that.

Nearly 10 years ago I had the honour for three years to be the Parliamentary Secretary to the Ministry of Labour, and I cannot help recalling now how right hon. Gentlemen opposite and, indeed, the whole Labour Party, when in opposition, used to attack the slightest suggestion of Government interference in wage negotiations. Even a hint by Conservative Ministers that a wages council, an arbitration board, or a court of inquiry should so much as take the national economic position into account when considering its decisions, brought down the wrath of the whole Labour Party on our heads.

Mr. Laurence Pavitt (Willesden, West)

rose—

Mr. Carr

I am sorry. I do not want to give way too much.

I cannot help recalling a debate—it was the last occasion on which my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and myself were a Front Bench team in the same debate—which took place on Thursday, 6th February, 1958. It was opened by the present Lord Robens, who was then "shadow" Minister of Labour. It was in the nature of a censure debate, ending with a Division against the Government.

Lord Robens said: The second charge is that the Government have contributed to industrial unrest by political interference with the free negotiating machinery in industry. Later in the same column he said: … a direct instruction to arbitration courts that they must not merely look at the case submitted but must realise that the Government are saying that there must be no pay advances at all."—[OFFICIAL REPORT, 6th February, 1958; Vol. 581, c. 1366.] That was another of his complaints. That was the basis of the censure against the Government.

That debate was wound up by the right hon. Member for Belper (Mr. G. Brown). I wish that he could be with us today, but I understand why he cannot in view of his present and quite different responsibilities. In the debate he criticised the action taken by my right hon. Friend. He said: … this is only one of a long series of interventions by the Government designed to arrange things so that they can hold up our wage advances. Slightly earlier, he had said: We have never been in business in order to freeze the position of the British worker at the point reached at any particular moment of time."—[OFFICIAL REPORT, 6th February, 1958; Vol. 581, c. 1461 and 1465.] No wonder the right hon. Gentleman came to the brink of resignation last summer. No wonder he could not stomach these sorts of measures. I wonder what made him withdraw.

Mr. Pavitt

rose—

Mr. Carr

The position is fundamentally the same today as it was then. The first Secretary of State could have made exactly the same argument then as he has made today. At least, in those days right hon. Gentlemen opposite spoke with an authentic voice based on a real feel of what makes things tick on the factory floor. How one longs today for Government policy and action to be touched with the merest brush of practical experience and understanding of the pressures and incentives which motivate action in industry at all levels—from the shop floor up to the board room.

As I said in another debate last week, what we are getting from the Government day after day, in place of practical policies, is a succession of white elephants conceived in school masters' studies and economists' ivory towers.

There is no doubt that one of the country's urgent needs both for its strength in the world and for the prosperity of its people is to get increases in earnings in balance with increases in productivity; and we have not been successful in achieving that yet. As the First Secretary fairly said, nor have other countries achieved it; although, unfortunately, we must realise that it is even more important for us, because of our situation, than it is for many other countries. But of one thing I am convinced: it will be achieved only by a whole battery of policies, all creating pressures towards a highly competitive, high productivity, high earning economy and it will never be achieved just by sitting on earnings, profits and prices. It will certainly never be achieved by machinery such as the Prices and Incomes Act, 1966, or by its intended successor, the Bill before us.

Therefore, we shall oppose the Bill. I shall attempt to expose its wrongness and expound what we believe is the only possible alternative I shall confine myself to basic arguments rather than deal with the detail of the Bill.

As the First Secretary said, the Bill cannot be considered in isolation. If it could, we might be able to dismiss it, to use Mr. George Woodcock's description of it, as "a bauble or plaything" and be indifferent to its passage. Unfortunately, however, it has to be looked at in the context of all the other actions by the Government in this field over the last 2½ years. In this perspective, it is yet another floundering step towards failure. We believe that it will be inadequate in practice and dangerously wrong in principle, and for those reasons it must be rejected. The Government can no longer be allowed to go on unopposed in this fatal direction.

The story started, as the First Secretary made clear, in the reign of the present Foreign Secretary at the Department of Economic Affairs. To begin with, in the eyes of the Government, all was hope and light. The milennium of the National Plan was at hand. The theme song of those early days of 1965 might well have been, "All good friends and jolly good company". But, alas, before long that tune went flat. The Declaration of Intent on which the Foreign Secretary and both sides of industry worked so hard became another scrap of paper, not because of lack of good will on the part of the signatories, but because the folly of the Government's economic policies made it impossible of achievement.

One of the most noteworthy parts of the First Secretary's speech was the way in which he justifies all the measures of the last year because of the economic mess of last summer—as if he had no responsibility for that economic mess. But it was he and his right hon. Friends who caused it.

At the time of the General Election last year, the Prime Minister told the country, on television: I don't think that you can ever legislate for wages increases … once you have the law prescribing wages I think you're on a very slippery slope. It would be repugnant, I think, to all parties in the country. He said that on 10th March, 1966. That was right then, and it is still right now.

Sir Gerald Nabarro (Worcestershire, South)

Read it to them again.

Mr. Carr

Yet within a few months the Prime Minister was doing just what he had told the country would be wrong. I assure my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) that there is no need to read it again, because there is something else which the Prime Minister said later which it is worth reading to the House. I will come to that.

I return to the July measures in contravention of what the Prime Minister told the country at the election. We must distinguish between the two parts of the Government's action last July—the period of the "freeze" and the period of "severe restraint". It is possible, and it may even be necessary, however unpleasant, for a Government, at a moment of national emergency and for a short period, to clamp a complete standstill on all incomes. It is brutal, but there is a rough justice about it which most people will accept if they can be convinced that it is temporary and that the emergency requires it.

However, what is wrong, as the Prime Minister told the country in March last year, is to have legislated and State-administered wage increases. But that is exactly what we have had for the first half of this year and it is what is proposed in the Bill we should go on having in another form for a further year at least. Such a system bites so arbitrarily and unevenly that it produces gross anomalies and injustices as well as failing to produce economic expansion and efficiency. We have demonstrated that, and the First Secretary knows we have demonstrated it, by the Prayers which we have moved against every Prices and Incomes Order which the Government have introduced under the 1966 Act.

If the Bill goes through, the House will be in a perpetual state of prayer. I give notice straight away that the Opposition will insist that every Order is prayed against and examined in detail. We shall study the First Secretary's words very carefully, but I am not clear from what he said about what are the exact powers in this Bill to pray against Orders. That is a point which we shall wish to probe and press strongly when we come to the Committee stage.

We are told that the whole purpose of the Bill is to be a bridge of statutorily supported moderation across which we shall move from statutory and compulsory standstill and severe restraint to a fully voluntary long-term policy. But who believes that? The Government have an enormous credibility gap to overcome. As I have already recalled, the Prime Minister told the country in March, 1966, that it would be wrong to control wage increases by legislation; yet he did it four months later. He again told the country categorically in another television interview on 6th October, 1966, that there would be no extension of legislative powers when the 1966 Act ran out this August; yet this Bill has been introduced to extend them.

We do not trust this Government's word, because we have learned by experience not to do so. Whenever the pressure is on, the Government will turn to compulsion because they know of no other way.

What will happen a year from now if, as may well be the case, inflationary pressures are building up again? Will they really let these powers lapse? The First Secretary was remarkably coy about that a few minutes ago. Will they do that, or shall we be debating the Prices and Incomes (No. 3) Bill? Are there any bets?

The truth is that compulsion is part and parcel of Socialism in this as in other spheres. While some members of the Government genuinely believe in freedom and in a voluntary system of wage bargaining—and I have no doubt that they include the Minister of Labour—other Ministers do not even pretend to believe in it. The Minister of Transport let the cat out of the bag in a recent party political broadcast on 10th May, when she said: As a Left-wing Socialist, with Dick Crossman and many others, I have produced documents analysing the sort of policy a Labour Government must have. If it is to have proper planning, we said, then we must plan incomes. Socialist planning sounds very fine, until one finds oneself on the receiving end. Then one finds that in hard practice the Socialist concept of planning can only be made effective if it is backed by compulsion. It starts without compulsion, but with Ministers and officials meddling in detailed affairs. The meddling leads to muddle, and the muddle then requires compulsion to clear it up.

Meddle, muddle and compulsion: we oscillate between them. When we come to look at what is achieved, we see that in April, 1965, the Foreign Secretary, who was then First Secretary and Secretary of State for Economic Affairs, told the House: There is now an agreed prices and incomes policy in existence."—[OFFICIAL REPORT, 7th April, 1965; Vol. 710, c. 533.] By July, 1966, only 15 months later, to use the words of the present First Secretary in a speech at Durham 10 days ago, we were threatened with run-away inflation". We are told that that is why we had to have compulsion.

So we have muddle leading to compulsion. But what has compulsion done for us when we have endured it? The Government now say that they expect a rise, in the 18 months between July, 1966, and December of this year of 6 per cent. in wage rates. In the comparable period of the 1961–62 pay pause, they rose by 5½ per cent., with no compulsion. When we come to prices, since 1964 they have risen by 10.8 per cent. During the last 12 months of compulsory control of both prices and incomes, as the First Secretary told us, prices have risen by 2½ per cent. The significance of that 2½ per cent. figure is that it is the average rate of increase over the last six years of Conservative government, with no compulsion. What more eloquent commentary could there be on the futility of the Government's methods, particularly when we have had unemployment thrown in as well. High unemployment was presented to us as the dreadful alternative to compulsion. In fact, we are having both.

Mr. Pavitt

When the right hon. Gentleman talks about compulsion, he will recall that in 1957 it was a question of the Health Service workers—the lowest-paid workers—compelled by the Government not to have arbitration. In 1961, it was the nurses who were compelled by the Conservative Government.

Mr. Carr

That is not true, because those workers were offered arbitration from the beginning, and the matter was finally settled at a figure which, I believe, was 7 per cent. If I am wrong in that, my right hon. Friend the Member for Enfield, West, who had a great deal to do with it at the time, will be able to put the record right when he comes to wind up the debate for this side of the House.

We conclude from what has gone on hitherto that there is not one bit of solid evidence to suggest that the present policies which have failed so far will lead to better results in the future. The truth is that we have either too much compulsion or not enough. We are getting the worst of all worlds. The fact is that, if wages and prices are artificially controlled for long and held against the inexorable forces of supply and demand, either the dam will burst in an uncontrollable flood or the Government will be forced eventually to supplement price and wage control with some form of control of engagement; in effect, ordering what is to be produced and on what work people are to be employed.

Sir G. Nabarro

Direction of labour.

Mr. Carr

Direction of labour in some form or other, as my hon. Friend says.

Similarly, it is not credible to suggest that the T.U.C. and the C.B.I. have enough power over their members to parcel out each year what the Prime Minister has described as the "national dividend". If they ever acquired such power, which is not likely, in our opinion, we should indeed be in the grip of a corporate State.

Thus, the present policies of the Government will lead us either to chaos or to compulsion over a still wider field. Moreover, in judging them, we must never forget that much more than economic efficiency is at stake, because we believe that trade unions and employers' organisations independent of the State and exercising the right of free collective bargaining are still the hallmark of liberty in an industrial country. Conversely, trade unions and employers' associations which become agents of the State and instruments of State-organised central planning lead inevitably, however unintended the result may be, to an authoritarian society.

It is for all those reasons that we believe that a clean break must be made with the Government's present policies and that we are opposing the Bill.

What, then, is the alternative? Basically, and despite its many past failures and imperfections, we are in no doubt that industrial relations must be conducted by free collective bargaining and that all our policies should be directed to strengthening that system and making it more fool-proof against abuse, rather than doing things which weaken it and are in danger of destroying it.

Mr. William Molloy (Ealing, North)

Would the right hon. Gentleman agree that those employers who refuse to enter into any form of negotiation ought to be ashamed of themselves, because they do not satisfy the conditions of his party or of ours?

Mr. Carr

We have often said that we believe in trade unionism—

Mr. Molloy

Let us have a straight answer.

Mr. Carr

We believe that employers should allow trade unionism, just as we believe that trade unionists should not enforce a closed shop policy against other people's will, and that collective bargaining between the two sides should take place. However, if we are to depend on this system of free collective bargaining, it means that in future it will have to be made to operate under the disciplines and incentives of a more effective economic policy and within a modernised legal framework.

The problem that we have is to balance the equation—

Mr. Orme

rose—

Mr. Carr

I am anxious to get on with my speech, but, nevertheless, I give way to the hon. Gentleman.

Mr. Orme

What does the right hon. Gentleman mean by a "legal framework"? Will this mean legal sanctions against trade unions?

Mr. Carr

If the hon Member will wait a few moments, I shall give him an outline of it. Today is not the day on which to debate it in detail.

The problem which we have to solve is to balance the equation between productivity and earnings. This can be done either by stimulating increases in productivity, or by repressing increases in earnings, and the Government's chief error is that they have put almost all the weight of their authority and their machinery and policy on the repression of earnings. This simply will not work without even more Draconian powers than they have yet adopted. The Government are as sterile and obstinate as mules when it comes to measures for stimulating productivity.

As I said in my opening remarks, a high productivity/high earning economy must be the objective, and for the achievement of this we need a comprehensive and mutually supporting range of economic and industrial policies all pressing in the same way. The Government, having set the economic tide running in the opposite direction, have then been trying by exhortation, by compulsion, and by various strange devices, to get everybody to swim in the opposite direction, and it is not surprising, under those circumstances, that at best we stand still.

If we are to move forward, there are five essential requirements of policy. First, the Government must keep an overall balance between supply and demand in the economy, and particularly a closer balance in each main industrial region between the number of jobs vacant and the number of people available to fill them. This is fundamental to everything else, and it has been the failure to maintain this balance in the past which has been the chief cause of our troubles, the chief cause of extreme deflation and all the agonies that went with it before the war, and the chief cause of chronic inflation since.

There can be little chance of good industrial discipline, little encouragement to a responsible attitude to work, little incentive for tight and progressive management unless, broadly speaking, employers are able to choose their men, and men can choose their employers, without the balance being tilted too far one way or the other.

Secondly, there must be a reduction in the growing proportion of the gross national product absorbed by Government expenditure for non-productive purposes, thus leaving more room in the economy for immediate productive growth.

Thirdly, there must be a reform of our tax system. The principal need is to reduce direct taxation—[HON. MEMBERS: "A profit spree."]—so as to encourage savings, to encourage profitable investment, to encourage risk taking, and to encourage effort by individuals and corporate bodies alike. In addition, it is in our view necessary to remove the selective element in the employment tax, which actually subsidises low productivity in manufacturing industry while arbitrarily adding to the costs of all other activities regardless of their contribution to the national economy.

The fourth measure which is required is that there must be a continuous sharpening of the edge of competition. This is the answer to hon. Gentlemen opposite who cried, "A profit spree", when I referred to reducing direct taxation, because it must go hand in hand with sharpening the edge of competition. This means a constant readiness to increase the effectiveness of our legislation on monopolies, mergers and restrictive trade practices. It also means positive measures to attack restrictive labour practices, although this is much more difficult to do in any legislative process. The main responsibility for this must lie with management and the most hopeful line of approach is probably through expert productivity bargaining. This is why we believe that productivity bargaining at the plant and factory floor level should become a much more important factor in determining earnings in future than it has been in the past.

It is also in this field of spotlighting obstacles to growth and encouraging higher earnings geared to productivity that we see a constructive and active role for a body such as the Prices and Incomes Board. I agree with the First Secretary that it has done some useful work. If only we would relieve it of its sterile work its influence and its effect might increase. It should also be one of the main objectives of the National Economic Development Council and the "Little Neddies" to encourage productivity in these ways.

Fifthly, and here I come to the point about which I was questioned, there should be new legislation to reform the whole structure of our industrial relations system. The principal components of this reform would be, first, to make collective agreements enforceable by both sides. Secondly, to create a new Registrar of Trade Unions whose approval would be required by all associations, whether of employers or employees, wishing to enjoy the status and rights of a trade union. Thirdly, to set up a new industrial court, with divisions throughout the country, available quickly to adjudicate on breaches of collective agreements, to hear claims by individuals against unjust dismissal by their employers, or claims against unfair disciplinary action, whether by employers or by trade unions.

I know—and this is clear from the intervention a few moments ago—that many people are suspicious of what they call a legalistic approach to what is essentially a matter of human relations. I wonder what the hon. Member for Salford, West (Mr. Orme) thought about the legalistic approach when his right hon. Friend was describing the complications of some of the Clauses of the Bill.

Mr. Orme

The right hon. Gentleman is advocating far more.

Mr. Carr

I am advocating something different. Almost every activity in life, except industrial relations, takes place within a legal framework, and in every industrial country except Britain industrial relations take place within a legal framework. In practice a legal framework is a help, not a handicap, to sensible and honourable voluntary relationships because such a framework creates a climate which encourages more thoughtful and responsible action by both parties to the bargain.

Let us consider this question of the enforceability of collective agreements. As I said, as far as I know Britain is the only industrial country in the world in which they cannot be enforced, and while our record may be better than that of some other countries in terms of the total number of working days lost through strikes, our record is worse when measured in terms of the number of strikes. Moreover, we have to face the fact that about 90 per cent. of all strikes which occur in Britain are unofficial, in the sense that they contravene union rules and the majority of these are also unconstitutional, in the sense that they are in breach of collective agreements.

It is against that background, and against the need for collective agreements to include more items which can have a positive and influential effect on increasing economic efficiency as well as industrial peace, that the case for the enforceability of collective agreements is unanswerable.

Mr. Orme

The right hon. Gentleman has outlined a basis of legal development which is quite fantastic. About 35,000 workers have been involved in the trouble with which the Labour Govern- ment have been faced during the last 12 months. What does what the right hon. Gentleman is saying mean in terms of trying to enforce legal action in any dispute that takes place, many of which become official at a later date?

Mr. Carr

I suggest to the hon. Gentleman and to other hon. Members who are trade unionists, and who are fearful of new legislation of this kind, that they should consider the position of their fellow trade unionists in other countries. They all work within a similar legal framework. I believe that they have all come to find it a strength to their movement and their aims, not a weakness, and they do not live perpetually in the law courts. This is a discipline and framework within which every other activity of life is conducted, and which we would not dream of being without.

The legislation which we propose will impose new obligations and responsibilities just as much upon employers as upon trade unions. It is in no sense anti-trade union. In those countries where this sort of arrangement is in force trade unions find that they make just as much use of it, and that it is of just as much strength to them as to the employers.

Finally, I stress that not one of the five main policies about which I have been talking will do the job on its own. They all stand together as a comprehensive package. The proper balance between supply and demand—especially for labour in each industrial region; the holding back of Government expenditure; the reform of the tax system; the sharpening of the edge of competition, including the attack on all restrictive practices, and the reform of the structure of our system of industrial relations—all these must be applied together and with persistence. Then we shall get the economic tide running with us instead of against us. Then we shall be both liberating market forces and making use of them and harnessing them to the public interest.

In such a climate supplementary machinery can play a useful part in helping us to achieve our objectives. In such a climate there is a valuable function for the National Economic Development Council as an independent forum outside the Government, in which the Government, both sides of industry and economists are made to knock their heads together and to have their thinking and their future actions influenced by exposure to all the facts of the nation's situation and to points of view other than their own.

Similarly, in such a climate a body such as the Prices and Incomes Board can be useful, in exposing to the public gaze the full facts behind major wage claims, and in making sure that the public interest as well as the interests of the parties involved is clearly known and stated. It might also be useful for there to be a delay in prosecuting a claim long enough to enable the Board to make its inquiry. Likewise, in such a climate the Government themselves could and should state clearly their view of what the national interest requires. In such a climate the T.U.C. and the C.B.I. could play a positive educative rôle in influencing their members.

But these are all auxiliary devices, operating at the margin of the problem. They cannot be prime movers in determining income levels. They can be useful minor aids to a Government's overall policy but they are no substitute for such a policy, as the Government have been trying to make them for the last two years and especially the last year. It is impossible to stop the onrush of inflation by putting Mr. Aubrey Jones and his Board in its path, to hold up their hands like policemen on point duty. Either they will be run down, as they were until July of last year, or the Government will be driven to take powers of compulsion, as they were last summer and as they will be again. The underlying and fundamental requirement is to get the basic economic and industrial policy right. The present Government's policy is fundamentally wrong and must be changed. That is why the Bill is a vain hope, bred by desperation out of past failure.

5.33 p.m.

Mr. James Tinn (Cleveland)

Unlike the right hon. Member for Mitcham (Mr. R. Carr), I approach the Bill from the point of view of a trade unionist, and, in particular, a trade union Member of Parliament. Last year, at the annual conferences of my union, I strongly supported the Government's policy on prices and incomes and what is now the Prices and Incomes Act—including Part IV, about which many trade unionists understandably had reservations.

My task—and no doubt that of other trade union Members—in putting across the case to my comrades was made considerably easier by the consistent and down-to-earth advocacy of the present Foreign Secretary, who was then First Secretary. My union wholeheartedly supported the Government's policy at that time.

Indeed, the National Union of Blast Furnacemen has been second to none throughout in its support of the Government in this connection. This fact tended to heighten the dilemma in which I, together with many other trade union Members of Parliament, found myself earlier this year. It was a classical dilemma, with two horns. The first was Part IV of the Act, about which we felt most doubt, and which it was rumoured would be extended. Many of us had conveyed to our union comrades the assurances given to us that such an extension was not contemplated.

When it was foreshadowed that the Government intended to continue to extend Part IV many of us felt that we had been put in a very difficult position. We took all the legitimate measures that were open to us to impress upon the Government the strength and depth of our feelings and the concern which not only we, but trade unionists generally felt at the prospect that this part of the Bill would be extended.

I want to make it quite clear that my union brought no pressure to bear upon me in this matter. I have not had one communication from it urging me to take the action that I took.

Mr. James Hamilton (Bothwell)

Is it not the case that no trade unions bring pressure to bear upon any Member, because they have no control over Members of Parliament?

Mr. Tinn

I agree. That is the point that I was making. I am glad to have my hon. Friend's corroboration. It is a point which should be made clear.

The Government have honoured their undertaking, which we passed on to our members, that Part IV should not be extended. That entitles the Government to our support. In our view, it removes a massive obstacle that many of us saw in the way of our support for the Bill. The Government's good faith in this matter is established.

But I want to refer to a more positive and compelling argument for the Government's policy on prices and incomes. First, the Trades Union Congress itself has often gone on record as accepting the necessity for an incomes policy. The difficulty arises from the fact that the T.U.C. does not believe that the voluntary system can be usefully assisted by legislation involving compulsion, for certain very arguable reasons.

Yet, on the contrary, I believe that without legislation there would be serious difficulties for the trade unions themselves. In particular, the incomes policy would tend to apply only to those people who were members of trades unions and, even more narrowly, to those members whose unions operated the voluntary system. Neither of those effects would be fair. It would be grossly unfair for non-unionists to escape the voluntary discipline of the unionists. It would not merely be unfair that the co-operating union members should be at a disadvantage compared with the members of the non-co-operative or maverick unions, but very dangerous to those unions and those trade union leaders who loyally tried to operate the voluntary system. Therefore, with all respect, I differ from the General Secretary of the T.U.C. I believe that this legislation buttresses the voluntary system.

There would be no prospect of the Measure weakening or threatening the unions unless the provisions for making Orders were to be abused—if the Orders were made too frequently, without due consideration and with only nominal consultation—but the experience of the last few months has shown again the Government's good faith. We have no evidence to support any accusation that the Government cannot be trusted in this connection, and no reason whatsoever for supposing that they will abuse their powers.

Sir Edward Brown (Bath)

I am trying to follow the hon. Gentleman's line of argument. This debate is taking place before the end of July. What will be the attitude of the unions at the end of July, when Part IV of the Act finishes and this Bill is substituted? Will there not be a declaration of war by the unions over priorities to get their claims through the pipeline?

Mr. Tinn

I am glad to be able to reassure the hon. Gentleman. The one certain thing is that there will be no declaration of war. Those of us who think that this is a good Bill may have been a little hurt by Mr. Woodcock's dismissal of it as a "bauble", but there was no indication of a future declaration of war. It is interesting to recall, on the evidence of Mr. Woodcock himself, that in 1965 the T.U.C. was prepared to support a Measure, which never went further, very similar to this one. There is no substance in the hon. Gentleman's fears.

Mr. James Hamilton

Following my hon. Friend's line, it is only fair to say that by a very large majority the trade unions accepted a voluntary policy, fully aware that the Government were to introduce this legislation. I thought that my hon. Friend's intention was to tell the House that since the voluntary system was introduced 43 unions have made applications to the T.U.C.. Of those applications, 20 have been rejected, and the unions have accepted the situation.

Mr. Tinn

It is always very helpful to have an hon. Friend who fills in any gaps there may be in one's contribution.

One argument that is often used, and used, I believe, dishonestly—even though the dishonesty may be unintentional—may be summed up as the "low-paid worker" argument. It is the low-paid worker, we are told, who has suffered from the standstill. No doubt he has suffered relatively more than has the higher-paid worker, but the argument is dishonest because the fact is that that man suffers much more in any free-for-all expansion of wages.

I have been to many branch meetings of my union, and have found that while in general conversation one always finds a readiness to support the low-paid worker, to sympathise with him and to stress the urgency of his needs, when it comes to deciding on a wage claim there is a rather different story. One still finds the readiness to propose an increase for the low-paid worker, but no readiness to accept any consequential narrowing of the differential. One finds an insistence on the differential being maintained. That hoists up wages generally and, inevitably, hoists up prices. It amounts to little more than a confidence trick on the low-paid worker, since all his anticipated rise is swallowed up in later price increases.

That being so, I should have thought that the low-paid worker could be best protected, could, perhaps, only be protected, in the context of a wages policy—and we may not yet have discovered the best policy; I do not pretend that we have—which could be deliberately operated in his favour, with an easing of his position as one of the principles of its operation.

I do not need to detain the House further, but I want to affirm what I believe to be the truth of the matter. However vocal and strong the opposition might seem, I believe that the support of the great majority of trade unions for the prices and incomes policy still remains, although it must be admitted that it has taken some knocks because of a feeling—only partly justified, but partly justified, nevertheless—that the prices side has not operated as firmly as the incomes side. Nevertheless, those trade unionists see it as a step towards a more deliberately planned economy in which some of the uncertainties and hazards, such as unemployment and short time, can be removed, together with some of the injustices and inequities.

For those reasons, I hope that the House will give the Bill a Second Reading.

5.48 p.m.

Mr. Kenneth Lewis (Rutland and Stamford)

I thought that the Minister tried to escape as far and as fast as possible from the compulsion that has surrounded his and the Government's policy during the last few months. He made every effort to stress the value of the voluntary system, and spoke about the limitation of powers contained in the Bill. When we last had a Second Reading debate on a Prices and Incomes Bill we did not have the kind of compulsion that ultimately faced us when Part IV of that Measure was introduced in Committee. Then, when we had dealt with the Bill in those marathon sittings, we were told that the compulsion would last for only a year and that Part II would then come into effect. As it then stood, Part II was not nearly so onerous—indeed, I did not vote against it—as is the Bill with which we are now faced.

I am sorry that the cooling-off period has been extended and that because of this a measure of compulsion has been introduced again in this Bill. In the very interesting debates we had on Second Reading and in Committee on last year's Bill much was said from both sides about collective bargaining and the need to support it. In view of the interest I have taken in this subject over the years, I should be the last to decry collective bargaining. We should support and encourage it.

However, there has been much pretence about collective bargaining. We should not delude ourselves into thinking that it has worked with perfection in recent years. During the period of shortage of labour which we have been in, collective bargaining in many cases has weakened the strength of employer. From the trade union point of view, I suppose that this is an advantage. It has not required much to weaken some employers, who were weak from the start. Collective bargaining in this context led to a situation in which wages and prices began to chase each other, to the detriment both of the consumer and the balance of payments. Collective bargaining as we have known it in recent years has also meant that productivity has often been a meaningless irrelevance.

On Second Reading and in Committee last year we had with us the General Secretary of the Transport and General Workers' Union. He was then the right hon. Member for Nuneaton, Mr. Frank Cousins. We miss him today. He made a valuable contribution, not only in those debates, but otherwise in the House. I was disappointed when he left us. From the point of view of the House of Commons and of trade unions, I thought that Mr. Cousins made a mistake in leaving us. I think that his union made a bigger mistake in pressurising him to leave the House, because the House needs people who are still active trade unionists, just as we want people who are still active industrialists. It is no good the House depending upon trade unionists and industrialists who have long ceased to participate in trade union or industrial activities.

Mr. Trevor Park (Derbyshire, South-East)

Is not that remark, coming from that side of the House, somewhat hypocritical? When the General Secretary of the Transport and General Workers' Union was a Member of the House there was continual criticism of him by the Opposition because he remained secretary of the union. The Opposition cannot have it both ways.

Mr. Lewis

But he could still have been active in his union without being its full-time paid secretary. There is a great value in having in the House someone who is actively connected with his union. However, I do not want to get on to that track. I was leading up to quote this passage from the speech Mr. Cousins made on Second Reading: … everybody favours an incomes policy. That was massive, coming from the General Secretary of the Transport and General Workers' Union, in view of the line he took on that Bill.

Mr. Cousins went on: Most people favour an incomes policy provided that it does not apply to them."—[OFFICIAL REPORT, 14th July, 1966; Vol. 731, cc. 1791–92.] And he then proceeded to say that he wanted no part of an incomes policy. We know that that was because while he and many others were prepared to have an incomes policy inflicted upon others, they did not want it to affect their own members.

The difficulty about so much of the collective bargaining in the last few years, both when we were in office and under the Labour Government, has been that collective bargaining has largely been a case of, "Let us collect". Without some form of incomes policy, without some form of restraint, both Labour and Tory Governments have concluded that the only other alternatives are worse—worse for the economy, worse for industry, worse for the country.

One of the alternatives to an incomes policy is large-scale unemployment, not 500,000, but double that number. The other alternative is inflation, which gradually erodes the currency. Reasonably full employment, not over-full em- ployment, is the most valuable thing that the nation can have. I believe this, because I was there in the days before the war when we had such utter deflation that the 2 million unemployed created great social problems: industry was running down and the country was weakened economically. It also created a situation in families which I had experience of and which I do not want to see return.

I do not want high unemployment. I do not think that inflation is an alternative, either, because the first thing that it does is to bankrupt the Treasury. After it has bankrupted the Treasury and then the country, we are back into high unemployment again. Since, in such circumstances, we have not the resources to employ people, we can neither export nor prime the pump on the home market. So, whichever party is in power, we are back to seeking some sort of incomes policy.

I believe that the National Board for Prices and Incomes has a part to play. I have said this consistently over the last year or two. It must be given a part to play in a proper climate, a climate in which the economy is not over-heated, a climate in which there is a certain amount of slack in the labour market. On this there must be agreement between the Government, employers and the unions, and they must sensibly try to secure that economic climate, which is a difficult operation and which is certainly not an exact science.

The National Board for Prices and Incomes must have a certain amount of power; it must have a means by which it can exercise restraint. Therefore, I supported the three-month waiting period, and I still do. I am sorry that it has had to be extended to seven months. The fact that this has been necessary is a clear indication of the failure of the Government's economic policy as a whole.

Mr. John Biffen (Oswestry)

My hon. Friend has no objection in principle, I gather, to the powers of delay. What will send him into the Lobby against the Bill tonight when the power of delay is for six months, whereas when it was three months last year he was in favour of it?

Mr. Lewis

If my hon. Friend will wait for a few minutes, I shall come to that.

The previous First Secretary of State said this on the Second Reading of last year's Bill: the Bill enables"— the Government— to require that there shall be a standstill on the proposal for a maximum of three months."—[OFFICIAL REPORT, 14th July, 1966; Vol. 731, c. 1756.] That was a promise. It has been broken. There has been a change of Ministers, so we have a change of policy. The Government's policy is collective, so they do not get away with changing policy on the basis that there is a new Minister. We have musical chairs and we have a change of tune. This was a firm policy stated by the right hon. Gentleman's predecessor, but the present First Secretary of State extends the period to seven months under the Bill.

The General Secretary of the T.U.C., commenting on the Bill, said that he thought that it was innocuous, by which he meant either that it will not work and, therefore, does not matter, or that it will work and yet will have no effect. In my view, the extension of the period to seven months—this is where I come to my answer to my hon. Friend the Member for Oswestry (Mr. Biffen)—makes the Bill anything but innocuous. The extension is sufficient to bring a certain amount of odium on the Board. Whereas there might have been criticisms about a delay of three months, there will be a good deal of heavier criticism directed against the Board on the seven months' period. This could wreck the influence of the Board. Seven months gives the impression of an extension of the ban, an extension of Part IV of the Act. I do not believe that the country is in favour of extending Part IV, and I think that it is getting "fed up" with bans.

If the economy had been right, if, after a certain amount of deflation in the last year or 18 months, the economy had now been expanding, the cooling-off period of three months would have been useful. But, in doubling the period, the Government have extended the period of restriction on the collective bargaining system, making it more difficult to have productivity deals and making growth in the economy over the next six or seven months more difficult.

My hon. Friend the Member for Oswestry has always been against a prices and incomes policy. He has been as consistent on his side as I have been on mine. But, on 5th June, the Daily Telegraph published an article by him in which, judging from his past comments, my hon. Friend made some surprising observations. In this article, he said that the Prices and Incomes Board had made a greater impact than the N.E.D.C.

Mr. Biffen

That was not saying much.

Mr. Lewis

It is generally accepted that the N.E.D.C. has made a good contribution towards improvements in productivity and so forth. If proposition No. 1 does not now appeal to my hon. Friend as being much of an advance, perhaps he will think better of his proposition No. 2. He talked of the success of the Board and its Chairman, and he then went on to say—I must be fair to him and point out, in fairness, that that was at the beginning of his article; his later comments followed a harder line—that the Board was going downhill because it was getting into the control of the Government.

I had always thought that my hon. Friend had believed that the Board was in the control of the Government anyway. Whatever he may say in a subsequent speech today, it seems that my hon. Friend is, nevertheless, now coming closer to those of us who agree that a prices and incomes policy is necessary. My right hon. Friend the Member for Mitcham (Mr. R. Carr), for the first time this afternoon, said at the Opposition Dispatch Box that he thought that a standstill period was valuable

I believe that the Prices and Incomes Board has a rôle to play today and will have a rôle to play when we return to office—and I am much more optimistic about that, of course, than the First Secretary of State, who said that it would be a long time before we got back. I believe that the independent reports of the Board are valuable. I see the Board as a form of economic or industrial ombudsman. I want it to remain independent of the Government, and this, again, is why I am disappointed that the period is to be extended. I want the Board to be independent of the Government, as I want it to be independent of all sections of industry, because in this way it can provide a means by which public opinion can be enlightened through its reports.

In my view, a three months' period can do several valuable things. It can enable the Board to investigate and to establish whether a case is good or bad. It can enable the country to appreciate what the case is, because the Board is independent, and it can enable the country, also, to see whether its reports are meaningful. Second, by the three months' period, public opinion can be influenced, the Government can be influenced, and both sides of industry can be influenced through the Board's reports.

Sir E. Brown

My hon. Friend is making the case for the authority of the Board. What we are discussing now is the content of the Bill, which limits the powers of the Prices and Incomes Board. My hon. Friend is moving nearer to us now. It is interference by the Government that we oppose.

Mr. Lewis

I am sure that my hon. Friend is right. We are all moving into the middle. What happens in the House of Commons is that, on this side, someone on the extreme right comes into the middle when he gets into the Government. On the other side of the House, someone on the extreme left comes into the middle when he reaches the Government Front Bench. Of course, those of us who are always in the middle get nowhere.

The truth is that a prices and incomes policy in which a Prices and Incomes Board has a role to play has now been accepted by the party opposite, although we first thought of it. Hon. Members will recall that the N.I.C., which we started but which was destroyed by criticism from hon. Members opposite and from the unions, was the spark which lit up this policy.

I believe that the situation would have been improved by the absence of the Bill. It would have been better if we had depended on Part II of the old Act. The Government must be very unsure of their economic policy if they have to introduce this Bill. Whether there will be as interesting a debate in Committee on this Bill as there was on the last I cannot say. But I am sure that something from the last Measure and from this will remain a permanent part of our industrial scene from now on, because it will be required and it has a contribution to make.

At the end of the day, our economic problems will not be solved by having a prices and incomes policy and a Prices and Incomes Board alone. Our criticism of the party opposite should be not only on the present question, but on the broader issues on which my right hon. Friend based much of his speech—criticism of their economic policy, of their taxation policy and their failure to secure growth—in short, the Government's general economic policy. It is that which makes their prices and incomes policy difficult to operate. Because we would deal with the economic policy of the country as a whole far better than it has been dealt with during the past year or two, we would be able to utilise a Prices and Incomes Board and a prices and incomes policy far more effectively and beneficially than has been done by the present Government.

6.10 p.m.

Mr. Peter Doig (Dundee, West)

I welcome this opportunity to discuss the second Prices and Incomes Bill. Unlike some previous speakers I should be happy if, at some time in the future, we discuss a Prices and Incomes (No. 10) Bill. That is because, first, I believe in a prices and incomes policy, and, secondly, I also believe that even this one is far from perfect.

I hope that my right hon. Friend will accept that what I have to say is meant as constructive criticism. I believe that the biggest failing so far has been that there has been too much emphasis on incomes and not enough on prices. The Monopolies and Restrictive Practices Commission has pointed out that certain products are priced too highly, but this comes to light only because the firm that manufactures and markets them happens to have a monopoly. We recently had the examples of colour films and soap powders, to take but two, where the Commission was able to show, because a monopoly existed, that prices were being charged in excess of what was fair and reasonable.

Through keen competition we have had further examples of excessive price charging. For petrol and certain brands of coffee there have been substantial price reductions as a result of keen competition. But it would be wrong to conclude that the only people who charge excessively are those who have monopolies or are subject to keen competition. There is a whole lot of other firms manufacturing a whole range of other products which also charge excessive prices, that is, prices beyond what would give them a fair return for their share in producing the commodities concerned.

My criticism of the Prices and Incomes Board is, first, that it has not paid enough attention to prices. What prices have been investigated by the Board? We have had all sorts of reports about investigations into wage increases and salaries, but we have heard very little about investigations into prices. Last year, I brought to the attention of the Department of Economic Affairs the fact that some boarding-house keepers in London who were responsible for maintaining the outside of their buildings in the same state of repair as when they took them, who were responsible for all the inside repairs, for insurance—in fact, for everything—had suddenly had an increase of 200 per cent. in their rent. It was totally unjustified. There was not even justification for a 2 per cent. increase, let alone 200 per cent.

I sent the Department facts and figures, with a list of the people involved. But the Department did not investigate the matter, and did not send it to the Prices and Incomes Board as I had asked. The answer I got was that because this affected only one small part of London—I admit that that was all the evidence that I had—it was not worthy of its investigation. But if there is a wage increase affecting only one small industry in London it will investigate that. It therefore seems to me that the policy is not operating fairly.

Mr. Arthur Lewis (West Ham, North)

Is not the moral that my hon. Friend should have told these dear ladies to join a trade union, when they, too, could have been persecuted?

Mr. Doig

I shall not be sidetracked here.

I am making a point which I want to keep clearly in hon. Members' minds. That is that the Department did not give the same investigation to prices and increases in prices as to increases in income. But the increase to those boarding-house keepers, who supply what is known as a bed and breakfast service, put a substantial increase on the cost of living of many workers who live in those establishments. If that increase had been passed on in some other way, or they had asked for an increase in their wages to pay for it, there would have been an inquiry. But there is no inquiry as long as the increase is only on them. It would not have been so bad if there had been any justification, but there was none for that increase.

The fact is that prices are still going up, and that is not denied by either side. What are the Government doing about it? Quite honestly, they are doing very little. From time to time we have new inventions, new production methods that make price decreases possible. But we rarely hear of a reduction in price except in the two categories I have already mentioned.

The right hon. Member for Mitcham (Mr. R. Carr) referred to my right hon. Friend the Foreign Secretary and his statement at one time that he would not support keeping workers at the position they were in financially at any particular point of time. I imagine that that statement would be supported by every Member on this side of the House. We want to improve the workers' standard of living. We do not want to keep it where it is or to reduce it.

There are two ways in which it can be improved. One is that we can reduce prices and keep wages as they are, with certain minor modifications to correct anomalies. The alternative is that we can allow prices to rise and then agitate through the trade unions and other bodies for higher wages. Of these two ways it seems to me that by far the fairest is to have a strict control over prices, in which case everybody benefits, including those on fixed incomes, pensioners and everybody else, as well as the workers. If we do not have that and resort to the old method it is obvious that somebody gets hurt.

The country that I come from, Scotland, is one of the places that gets hurt because traditionally we have been lower paid than the people down here. There are other parts of Britain in the same boat, but when one compares the average wage of workers in Scotland with the average worker's wage in London there is no doubt that the Scottish worker suffers because of this, and it is perhaps one of the reasons why I support this policy.

How can we more strictly control prices? It can be done fairly easily. I advocate setting up a Government costing department. Every firm of any size in the country today has a costing department which works out the cost of producing its products. It works out the cost of ingredients, adds so much for overheads and a percentage for a fair margin of profit, and a price is arrived at. Very often the price is then subject to the approval of the managing director; in many cases he adds on a amount because the market can stand a higher price, and so an excessive price occurs from time to time for many commodities. There is no machinery at present for stopping this.

We must, therefore, introduce an element which will provide such machinery. I believe that the only way to do it is by a Government costing department. It need only be a very small department because the strange thing is that the commercial firms are frightened of adverse publicity of this kind. Because they are frightened of it we have only to investigate one or two items and the deterrent effect on the others will be considerable and far-reaching, giving a very large return for a very small outlay.

The second point is that we are repeatedly urged by whichever party is the Government that we should have more savings, that we should encourage people to save money. But in the situation that has existed all through my lifetime the people who save money by putting in in banks are fools for the simple reason that its purchasing power, even with the interest added on, becomes less after a number of years than when they first put it in. Therefore, there is no incentive for savings in the set-up that has existed for so long. If we want to encourage savings there must be strict control over prices so that money saved grows, not merely in the number of £s people have at the end of a certain time, but in the purchasing power of it. Intel- ligent people in the past invested their money not in savings banks or government defence bonds, but in buildings, machinery and companies, and they made money. The others have lost money because after 10 years or so their so-called savings buy less than the money originally invested.

Time and again in these debates we are urged that productivity should decide increases in wages and profits. What about those who are unlucky enough to work in service industries? Things are becoming so bad that the only way to keep bus drivers and others employed in service trades is either to import foreigners to do these jobs or, when the service becomes in danger of collapsing, to agree to give large increases to attract people back to run the trains and buses. Those employed in service industries will always fall behind if we continue with this productivity principle. The only answer is to have stricter control from the other side—on prices.

Few people wish to return to the old free-for-all situation. After all, anarchy in wages and prices is as bad as anything else. The answer is to have some control. Either we increase wages and prices or we control wages and take steps to reduce prices. The latter is by far the best, not only for workers but for all sections of the community. I urge the Government carefully to consider this point and to be prepared in the future to control prices to a greater degree. If they do this they will recover their supporters not only in this House but throughout the country.

6.23 p.m.

Mr. Richard Wainwright (Colne Valley)

The hon. Member for Dundee, West (Mr. Doig) testified eloquently to the failure of his Government's prices policy. When he went on to advocate a national pricing system based on costs, plus a reasonable margin of profit, he was advocating something which, I believe, would lead to much higher price levels in many sectors of the economy. I know many manufacturers who would be delighted with any policy which enabled them to have a reasonable margin of profit on top of their ascertained costs. Just because of the fears I have of the C.B.I. as a body, which operates largely on the theory of recovering costs plus a reasonable margin of profit, I am sceptical of the approach of the Government towards prices generally.

When dealing with the wages and salaries part of the Bill the First Secretary said that he was introducing an incomes policy which would be both voluntary and effective. I agree that effectiveness is even more important to a voluntary policy than to a policy which is fully backed by statute. If a statutory policy proves ineffective it is always open to the Government—and this often happens—to say later, "The muddle is not due to any failure of principle but simply because the statute needs mending and repairing, and then we will be back on course". But a defeat for a voluntary policy would be a defeat for the whole principle of voluntaryism. The fear of my hon. Friends in the Liberal Party is that in a year from now we may be back here with Ministers saying, in terms of infinite regret, that the voluntaryism, which they had nobly and optimistically tried, had failed; and they would then be inviting the House to go back to policies of strict compulsion.

The Liberal Party is not seriously opposed to the machinery which the Bill embodies; the use of the Prices and Incomes Board accompanied by some powers of delay. At Report stage of what will soon be known as the "Prices and Incomes (No. 1) Act", in August of last year, my Liberal hon. Friends divided the House on an Amendment proposed by my hon. Friend the Member for Cornwall, North (Mr. Pardoe) that there should be a period of one month added to the delaying powers in Part II after the Prices Board had reported so that there could be proper public consideration of the findings of the Board. It is interesting to note that, when replying for the Government, the Parliamentary Secretary said: Four months is quite a long time and, after discussions with the C.B.I. and T.U.C., we have felt that it would be unreasonable to seek to prolong the statutory delay beyond the four-month period. Later, he went on: … I would suggest that it is better left as it is, especially as we are still talking of a voluntary system."—[OFFICIAL REPORT, 9th August, 1966; Vol. 733, c. 1523–4.] Evidently there has since been some conversion on the Government side. The Liberal objection is not to the machinery, which we believe basically to be a quite civilised procedure—the warning and delay and opportunity for public consideration after expert and independent report—but our concern is that if industry is to be put through the rigours of this machinery, there should be some permanent improvement in the whole structure of pay settlements to show at the end of the day, and of that possibility we see no sign at all. We fear, rather, that the Bill will be creating a machine that will simply plough the sand and leave no result that will be more than temporary and without real significance, particularly in that there is no sign—in the speeches of Ministers, the White Paper of April of this year or any other Government pronouncement—that the Government intend to tackle the basic structure of pay negotiation.

The First Secretary spoke earlier of ascertaining the estimated rate of growth in the economy to discover what was the minimum increase that could be given to all workers. How much more we should have preferred him to say that they wanted to discover the minimum that could be given to those who are themselves on the minimum rate of pay and that, for the rest, there should be no question of a national, across-the-board increase but that improvements should be negotiated in each case at the place of work.

There has been no improvement and no change in thinking since April, 1965—how much should have been learnt since then—in the criteria which are handed down by the Government to the Prices and Incomes Board. We still have the same circular reasoning—that, in effect, a wage settlement which is in the national interest is something which is in the national interest; with no definition of what the national interest really is.

Mr. Kenneth Lewis

Apart from the possibility of the Liberal Party being returned to power, would the hon. Gentleman say how he thinks one might define the national interest?

Mr. Wainwright

As I suspect the hon. Gentleman knows, my whole case is that the idea of a single national interest in these matters is a myth and that what we must talk about is the infinite variation, the Persian carpet, of different decisions relating to different people in different circumstances. Again, in the criteria the Government have given to the Prices and Incomes Board, there is the extraordinarily threadbare proposition that … where there is general recognition that existing wage and salary levels are too low to maintain a reasonable standard of living. If that had been the criterion for wage settlements down the ages we would still be pursuing the most primitive employments of man.

We Liberals would like to see the machinery—reasonable machinery, by and large—embodied in the Bill used to shift the whole emphasis of pay settlements from these inflationary, nationwide, across-the-board settlements to a system of pay negotiation based mainly on the place of work. That has never been better defined than in a recent booklet by Miss Seear, Reader in Personnel Management at the London School of Economics, in which she stated: The place of work, not the headquarters office, is the place that matters. For it is here, and here along, that the work is done, the profits earned, the experiments made, the wages paid, the disputes flare up, the settlements are reached. Ultimately the only safeguard lies in the quality of the people who grapple with the innumerable trials and tribulations inevitable where many men are gathered together to do a job of work. Until the Government show that they intend to use this machinery for a really radical change in their whole approach to pay settlements in this country, my hon. Friends and I will feel obliged to oppose this legislation.

6.32 p.m.

Mr. John Horner (Oldbury and Halesowen)

Nobody knows whether the Government's incomes policy has worked. Last year, for the first time in about 25 years, average earnings in industry fell. That happened not as a result of the Government's incomes policy alone but as a result of a series of measures. The July measures ensured that average earnings in industry would fall. Unemployment rose, productivity fell and overtime fell. Bearing this in mind, we cannot, when considering this new Bill, judge the efficacy or otherwise of the Government's incomes policy.

References have been made to the T.U.C.'s attitude and I regret that my right hon. Friend the First Secretary is not here, because it seemed to me—and I say this I hope not unfairly—that he did not accurately state the T.U.C.'s view towards both this Measure and the activation of Part II of the earlier Act. The T.U.C. is opposed to it. At the March conference of the T.U.C. there was almost unanimous opposition to the activation of Part II, and the House is entitled to know the philosophy underlying the attitude of the T.U.C. towards this legislation and the earlier Measure. A document which the T.U.C. General Council placed before the Conference of Executive Committees stated: The success of such a policy"— the incomes policy cannot be judged by changes in costs from one year to another. There are too many variables in the situation for that". There have certainly been some variables in the last year. Success or failure, particularly in relation to achievement of the objectives to which trade unionists attach priority, can only be measured over a lengthy period. The Government may point to short-run results in terms of the limitation or even prevention of particular increases in incomes. If, however, those results are purchased at the price of productivity, or, even worse, at the price of disillusionment and cynicism, they are poor rewards for a fleeting gain. What worries me about the Bill is that it is an attempt to get another fleeting gain. Indeed, on the basis of the Government's own reasoning, I do not see the purpose underlying the Bill. I regret that the Government have seen fit to introduce it. On the Government's own showing, what they are likely to get is the minimum of effectiveness with the maximum of irritation.

It is because I am one of those on this side of the House attached to the philosophy and reasoning set out by the T.U.C. in the document I have quoted that I am concerned that the effect of the Bill may well impinge on and impair the efforts of the General Council to introduce the sort of incomes policy which, in the long run, is the only one which can work in our democratic society. We have been reminded that Mr. George Woodcock referred to the Bill as a "bauble", a plaything, an irrelevancy. He is responsible for what he says. We in this House are responsible for what we say and for any action we take in helping to put through a piece of legislation which I for one find obnoxious.

It may be that the Bill until activated remains a dead letter. It is the potential powers that we are giving to the Government which concern me. My objections to the Bill are essentially those I tried to set out with some of my hon. Friends in our earlier debates, when we questioned the rightness and wisdom of the Government seeking to intervene in the processes of collective bargaining by legislation.

I do not believe that there is anything sacrosanct in the machinery of collective bargaining. There is nothing in it so sacred that it should not be remedied if it be at fault, and clearly there is a good deal at fault in the processes of collective bargaining today. But the way in which those limitations should be removed and the processes improved is not by legislation. I think that is the view of the Government themselves, at least in so far as we have heard my right hon. Friend the Minister of Labour speak from time to time when he has abhorred the whole idea of getting the courts involved in the processes of industrial bargaining.

But when we try to find our way through the intricacies of this Bill, when we see how it tries to make up the defects of the 1966 Act to try to remedy the legal deficiencies seen in that Act, we seem to be weaving around ourselves a cocoon of further legislation. The obnoxious consequences of the original Act are fortified and extended in the Bill and my arguments against them remain the same. I shall not bore the House by repeating them.

It is the injustices and the inequalities which must, of necessity, concern us when the Government seek to introduce legislation dealing with wage settlements. The Government have sought to lift incomes policy to a rôle where at times in this last year it has seemed that their whole economic strategy has become dependant on their success or otherwise in being able to prevent a particular small group from getting a wage increase. We have been told that no more than 38,000 people have been affected by the Orders made under the Act. We have had to go through these sad occasions of hearing arguments as to why a small section of people should not receive a rise in pay. We have heard from the Government how their economic policy was in danger of being eroded by a small group getting a rise.

The whole thing has become a farce. That is what Mr. Woodcock and his colleagues meant when they said that if one judges an incomes policy by the fact that one has been able to stop a particular wage increase, one is running the risk of gaining a victory at the price of disillusionment and cynicism.

The Government must recognise that, whatever might be the guarded phrases used by one or two leaders of the T.U.C., there is hardly a trade union on record which supports the prosecution of the policy of the Government set out in this Bill. They are wholeheartedly opposed to it. I do not see what the Government think they can get out of it. I do not see the special nature of extending a four-months' pause to a seven-months' pause.

There was no gift of vision in what some of us said last July. It was my right hon. Friend the Prime Minister himself who said that once one puts a freeze on wages one is building up a host of consequential problems difficult to solve. It may well be that the Government, in the extension of the pause from four to seven months, have heeded those writers of editorials who have said that there can be no going back to the freedom of wage fixing after the period of the freeze. I believe that the T.U.C. is right and that we shall get disillusionment and cynicism. I am perfectly certain that we will get the minimum of effectiveness with the maximum of irritation.

In the Bill the Government are compounding the errors they made in the Act. They are doing it in a different set of circumstances. This is my main charge against them. The circumstances are different from those of January last year. We were told then that the Act was necessary for otherwise there would be an extension of unemployment. We are considering this present Bill when unemployment has been extended. We are considering it not in the atmosphere of eighteen months ago, when there were various arguments inside the T.U.C. and the unions generally about the reaction to the Government's proposals. We are considering it in different circumstances.

The T.U.C. and the trade union movement are giving deep thought to and are engaged in a revision of deeply held convictions and in trying to establish the framework of a voluntary system of incomes policy. My fear is that, perhaps unwittingly, the Government may take a step, once given the power, which will result in the extension of disillusionment and cynicism to such a degree that the T.U.C.'s own scheme may suffer. That would be a great tragedy.

As an example, I quote the case of my own union. This is a union of men who cannot strike, so no one need fear that there will be a withdrawal of labour. Firemen have their wages determined by a Whitley Council. That Whitley Council has been engaged over the years in seeking to revise the basic structure of firemen's salaries. At 11 o'clock on 21st July last year, it was to have come to an agreement following many months of intensive negotiations. At 5 o'clock on 20th July, it was told that everything was off because a wage freeze had been imposed.

At Christmas time, the firemen's case was referred to the Prices and Incomes Board. Although they had an agreement as to date, which would have have been 1st August, they had no final agreement as to sum and they were therefore caught up in the turmoils of legislation. There was to be no actual increase until 1st July. So when we hear that the six-months' pause was fair because it applied to everyone, I remind the House that, for the firemen, it was an eleven-months' pause.

But that was the law. However wrong one might feel it to be, nothing could be done. Reference was made to the Prices and Incomes Board at Christmas. The annual conference of the union was due in May, but could not be held. There were 148 resolutions on pay alone on the agenda but the Board had not reported, and to hold an annual conference of firemen at a time when the Board's report had not been made would have been asking for trouble. So, for the first time in the fifty-year history of the union—it celebrates its jubilee next year—the annual conference had to be postponed.

Finally, the report came out. I pay tribute to what Aubrey Jones and the Board have done in other directions. But the mountain has been in labour and has produced a mouse which cannot even squeak. All that would have been settled at 11 o'clock on 21st July last year—eighteen hours after the Prime Minister sat down—is given official blessing in the report. "You were on the right lines", says the Board. "What a pity you had to wait eleven months before you get it".

There was a productivity proposal. Everyone is talking about productivity. My union is concerned about it. The only way one can get it in the fire service is by seeing that firemen work longer hours. The relationship between manpower and duty systems is clear. My union is prepared to negotiate on that. The Board said, "You are on the right lines. This is an excellent idea". But then it produced a report which makes it almost unworkable.

I refer to this not in order to prosecute the point of view of those men with whom I have spent most of my working life. I do not regard this as necessarily a typical example of what the unions have had to endure over the last eleven months. When we are being asked to consider the mechanics—this Bill is the mechanical and legal framework of implementing a policy of the Government—we are brought up slap against the inherent contradiction that lawyers and Parliamentarians cannot settle wage negotiations. They cannot evolve, except in the broadest possible terms and in extreme caution, what powers Parliament should be giving the Government without fostering the atmosphere of disillusionment and cynicism that Mr. Woodcock has referred to.

The T.U.C. says, "Let us run it". The Government say, "We want you to run it, but we would like to have reserve powers". The T.U.C. says, "We do not want you to have those reserve powers". We are told that it is only a "bauble" so we should not lose any sleep over it. However, sooner or later this "bauble" will be used. My fear, on the experience of the last 18 months, is that it will not be used in the precise and specific circumstances of a particular claim.

That was not how we obtained the wage freeze. It was our own Chancellor of the Exchequer who said in The Hague that the deflationary measures of 20th July were adequate and the wage freeze was a "bonus". If foreign bankers again need to be shown that the Government can be tough with trade unionists, the Government will have another "little bauble", another plaything, but I do not regard it as a plaything. If sterling were put under pressure and the Government felt obliged to make a show of strength to reinforce this so called incomes policy, we would have given them an instrument which they would use. I said that the wage freeze was a bonus, in the words of my right hon. Friend the Chancellor of the Exchequer. Has it paid off? Nobody knows. We know that the deflationary policies have paid off. Sterling is stronger.

If it is not disillusionment and cynicism which we are engendering, if it is enthusiasm and confidence which we are asking from the trade unionists, I am bound to return to one of my earlier arguments. The right hon. Gentleman the Member for Mitcham (Mr. R. Carr) seemed to have a defective memory when he told us about 1958, the first occasion when there were exchanges between the Front Benches about incomes policy. After all, the Tories had six years after that to implement the sort of policies he finally adumbrated and they left behind a sterling crisis of monumental proportions.

If it is a run on sterling which obliges the Government to introduce the wage freeze from which they are seeking to extricate themselves by an orderly dismantling of controls, then I must ask once again how general secretaries of trade unions can tell their members that wages must be forgone and that agreements reached must be abandoned when the Government are still pursuing a wrong course to deal with the run on sterling.

We are in the throes of a Middle East crisis, and yet, after all the blood and bitterness and hatred that had to be gone through in order to achieve a base upon Cyprus, in the middle of the crisis we are told that we cannot use that base. This is a time when we are being invited to support a Government prepared to spend hundreds of millions of pounds in dollars to buy American planes, a drain upon our sterling balance, to produce some sort of presence in South-East Asia and to have bases in the Indian Ocean.

Mr. Speaker

The hon. Gentleman is getting a little wide of the Bill now, as he knows.

Mr. Horner

What I am trying to say is that my resistance to this obnoxious piece of legislation and my abhorrence of the powers which the Government are seeking to retain and extend would be somewhat modified if I felt that in other directions different courses were being pursued.

I have said enough to indicate that I shall not be able to support the Government on the Bill. While it remains in its present form, or whatever form may emerge from Committee, and while it is not acted upon, the judgment of the General Secretary of the T.U.C. may be accurate and it may remain innocuous. Certainly it remains irrelevant to the economic problems facing us. Whether it is irrelevant or not, the potential dangers inherent in the Bill are such that I cannot subscribe to them. I hope that the Government will think again, because the cynicism and disillusionment against which George Woodcock warned us some months ago is spreading through the trade union movement. I urge the Government, even at this late hour, not to extend that cynicism and disillusionment.

6.55 p.m.

Mr. David Howell (Guildford)

I gladly join with my hon. Friends, and I hope with some hon. Members opposite, in opposing the Bill. I personally am delighted that my own party, the Conservative Party, has reached the stage, after careful deliberation, where it feels that it can oppose the Bill and dissociate itself completely from its vague and imprecise language and woolly thinking, and, therefore, rather illiberal thinking, which has gone into this legislation and its predecessors.

In taking that position, my party must not be destructive. There has been enough destruction of our economy. It is our job to pick our way through the rubble of economic policy and try to build up some positive alternatives. The inevitable challenge from the Government Front Bench, if from nowhere else, is: "What would you do instead? What is your alternative? How would you deal with the short-term situation?" This is a challenge which we must face, and in answering it the first thing to point out is that behind this question are three assumptions.

The first, already questioned, is that the policy has worked so far; the second is that the policy in its new form will work in the future; and the third is that the policy is a genuine short-term policy, that it has its place in a Government short-term strategy, and that it belongs in this set of thoughts. These assumptions are not only questionable, but any evidence that we have suggests that they cannot be sustained.

First, has the policy worked? The First Secretary has made claims for it, but the more one examines the figures, the harder it is to believe that any statistics to support the claim that this policy has worked can be disentangled. Throughout the whole time that this policy has been operating, the Government have been operating a policy of major credit restriction and a squeeze on the economy. I do not believe that one can point to specific instances where the operation of this policy, of which this Bill is a new development, has contributed to our supposed overall economic aims, which are greater competitiveness, higher exports and lower costs. If it is hard to see how the evidence could be disentangled, how can any claim be made that this policy has worked? I agree with the hon. Member for Oldbury and Halesowen (Mr. Horner) that it has not worked. If there is evidence either way, it has yet to be produced.

The second point which has been touched on is the influence of this continuing policy on productivity. The First Secretary made a number of claims for the way in which this policy and the application of the previous prices and incomes policy had helped to improve productivity and bring into being productivity bargains. I am sure he has some specific instances to quote. However, there are many other instances—and I can quote some—where developments in productivity and new incentive schemes have been brought to a grinding halt by this kind of policy. There are many instances of management consultants being called in to inject new incentive schemes and better pay systems into both public agencies and private firms and the reforms being brought to a halt. There are many other unreported instances where again and again staffs who had embarked on new organisation schemes have, because of these policies, far from being encouraged, were discouraged and the schemes brought to a halt.

The House has not had any substantial evidence or statistics or satisfactory answers to questions by hon. Members to show that this policy has been decisive in achieving the aim which the Government say they want to achieve—cutting costs and raising exports.

The second question is whether it will work in future, will this extension of the policy operate? Here, of course, the key is the Prices and Incomes Board. The Aubrey Jones Board has done excellent work. Aubrey Jones personally has been very able in penetrating into industries and managing to see where the competitive system has failed, or where market forces have failed to operate, and in suggesting ways in which the structures of industries could be reorganised, new pay systems injected and new methods operated so that industry would become competitive again and reduce costs. In that area he has been extremely successful.

But when it comes to the point that he is asked to act as the great judge and arbiter, when he is to operate and give judgment about the direct movements of wages, that is placing Aubrey Jones and the Board out of their depth, asking them to do things which they cannot do, to do things which will actually work against their far more valuable work, and it would be a great pity to damage the excellent work which the Board has done. For that reason I can only shake my head when asked whether the policy will work in future.

Mr. Alexander W. Lyon (York)

Is it not true that Aubrey Jones, in particular, and the Prices and Incomes Board, in general, welcome this opportunity to act as judges, not, I agree, to be the watchdog of a compulsory prices and incomes policy, but to be the judge in specific wage movements and price movements, and also wish to have some kind of reserve compulsory power, although not the power which has been adopted by the Government?

Mr. Howell

That is not my understanding of the Board's position. Certainly the Board wishes to continue much of the excellent work which it has done already in promoting greater efficiency and improving competitiveness and improving wage structures. That gives rise to a much broader question, which is still connected with the operation of a policy of this kind, and which is whether hon. Members will one day want to have the opportunity of questioning a man like the Chairman of the Prices and Incomes Board about the way in which his contribution to policy is made, because as long as we lack that opportunity we are seriously limited about the way in which we as a House can make judgments about or debate such things as the prices and incomes policy.

The third question is whether this is a short-term policy at all, and here we come to the heart of the constitutional muddle in the Department of Economic Affairs and Government thinking. I remember very clearly the "founding father" of this type of prices and incomes legislation, the right hon. Member for Belper (Mr. George Brown), saying that it would take many years to build a prices and incomes policy. Many others who are very involved with this work and who have great expertise on the subject have said the same.

Of course it is true that it will take many years to alter the habits and attitudes of society towards prices and incomes, and yet the Bill is now being waved before us, as the previous legislation was waved before us, as though it were some device which could make a direct contribution to our present economic situation, as though the operation of this kind of legislation had something to do with the movement of export prices in the coming months and with the movement of overall retail prices, our performance in world markets, the balance of payments and the strength of sterling. The more one considers this connection between prices and incomes legislation and our immediate economic aims, the more the connection dissolves into nothing until it does not exist, for there is no connection between the prices and incomes policy and the Government's immediate economic aims.

Many of those who have taken a leading part in proposing this legislation and putting forward the idea of a prices and incomes policy have recognised that it is a long-term policy, that the Government can have a legitimate involvement with the movement of prices and incomes in the long term in various ways, but that in the short term this policy does not start to be a contribution to our immediate problems.

This brings me to the point to which my right hon. Friend the Member for Mitcham (Mr. R. Carr) brought up so clearly when he said that of course we must turn our minds and energies to other things, first if we are to achieve ordered stability, the starting point for the economic growth for which all hon. Members are always calling, and, secondly, if we are to go forward to sustained economic growth and expansion and a credible economic performance in the world's markets. He rightly mentioned the necessity for creating an improved climate of industrial relations and an improved framework which I believe and which many trade unionists believe will involve changes in the legal framework in order that collective bargaining can be more effective and so that unions can be stronger and more supple in their pursuit of productivity bargains.

Mr. Orme

What evidence does the hon. Gentleman have that trade unions are in favour of an extension of legal sanctions into collective bargaining or anything else? Can he give chapter and verse?

Mr. Howell

I did not say trade unions in general; I said some trade unionists. Secondly, it is not a question of legal sanctions in collective bargains. Collective bargains should be as enforceable as employers and employees want. But I would have thought that many trade unionists would believe as I do that the time has come when we can strengthen the collective bargaining system and the way in which bargains are reached, so as to enable trade unions to go about the business of getting higher earnings. I would have thought that that would he a desirable aim, and it is quite the opposite of the aim of the present policy, which is to have low earnings.

This, combined with other reforms in management and incentives, can be the way forward rather than into this morass of unintelligible and vague legislation. I believe that it could also provide an entirely new spirit, with the injection of reforms of management techniques and cross-production techniques into the public sector where they are as necessary as in private industry, so that there can be proper incentives and proper bargaining processes and a proper spirit of invention. It could be argued that until that comes about the chances of bringing the growth of public expenditure under effective control are very small.

Those are positive ideas, and I believe that my party is right to put them forward now as the Government's present policy goes deeper and deeper into the morass, until the only product which comes out is a totally stagnant economy and a demoralised trade union movement.

7.7 p.m.

Mr. Norman Atkinson (Tottenham)

The right hon. Member for Mitcham (Mr. R. Carr) gave us a very interesting treatise on the policy of the Conservative Party at the forthcoming General Election. Curiously, his list of priorities seemed to have been compiled with great urgency. I cannot understand why it should be thought that there is any need for urgency, for many things will happen before the party opposite has the opportunity to present such a policy to the electorate, and even then it will have a still longer opportunity in opposition to correct many of the mistakes and weaknesses which the right hon. Gentleman seemed to perpetuate in his list of priorities.

The right hon. Gentleman referred to the right hon. George Woodcock, the leader of the T.U.C. We ought to try to get the record straight. It is true that George Woodcock described the Bill as innocuous, but he also said that if any part of it were put into effect it would become obnoxious. He went on at length to say that he would not have the same irreverent attitude if the Government tried to apply any of the Bill's provisions to a trade union involved in wage negotiations.

The second thing to make clear about George Woodcock is what his attitude would have been if he had been a Member of Parliament. He was talking purely as a trade unionist, and said that he regarded it, presumably because of his discussions with the Government and Aubrey Jones, as irrelevant so long as it was not used, but then went on in clear terms to say to me that if he were a Member of this House he would not support the Bill. That was my deduction, from those discussions which we had.

We therefore ought to be clear about the T.U.C. Some of my hon. Friends have mentioned its reactions and it is now known that no major union except the General and Municipal Workers' Union supports this legislation. Therefore, the T.U.C.'s attitude for the future is clear. There is no doubt that this policy will be rejected by Congress and by the annual conference of the Labour Party this year—

Mr. Peter Mahon (Preston, South)

My hon. Friend has indulged in some conjecture. Many hon. Members had the privilege of listening to the person to whom he refers and I do not believe that he said that, if he were a Member of the House, he would vote against the Bill.

Mr. Atkinson

I agree. I did not credit him with those exact words, but said that I had deduced from what he said that, had he been a Member, he would have voted against it. This was evident, because he said that although it was irrelevant, it would be obnoxious once it was used. This was clear from the discussions. Also, when answering questions, he was doing so as a member not of the legislature but of the T.U.C. One would gather that impression from his remarks—

Mr. Park

Would it not be equally correct to say that there was nothing in Mr. Woodcock's remarks to suggest that he would be prepared for a moment to vote for the Bill?

Mr. Atkinson

I would certainly have that impression, also, and that sums up the outcome of that discussion. If the First Secretary has evidence to the contrary, we should hear something about the negotiations with the T.U.C.

I would remind my right hon. Friend that this is the third temporary Measure introduced in this Parliament, presumably as part of the Prime Minister's "dismantling process". But the legislation extends periods of wage control and, therefore, cannot be part of that process but a piece of more permanent legislation. The First Secretary said that the prices and incomes policy must be geared to the economy and implied that, instead of a laissez-faire system of wages and prices, we should have legislation like this to back up voluntary systems. He said that we were aiming at a voluntary system, but then argued for the permanency of this legislation.

We are now back where we were a year ago, with a voluntary system based on compulsory legislation, which is a curious system. I am interested in the development of political ideas in this respect on this side. I look upon this period as transitional, prior to the creation of a different society, and I believe that we should now be formulating ideas and creating the basis for a classless society.

But many of my hon. Friends who have rejected the idea of a Socialist classless society see the Labour movement's rôle as something else. This is important in terms of wage legislation, particularly when we are considering possible permanent legislation—

Mr. M. Stewart indicated dissent.

Mr. Atkinson

My right hon. Friend may shake his head, but I have heard his right hon. Friend the Chancellor of the Duchy arguing for permanent wage legislation, which is more or less the view of many leading Members of the Government.

This is a serious debate in the Labour movement's history, concerning managerial techniques in a capitalist system and how we should manage modern capitalism. It is, therefore, important for us to understand what wage legislation like this involves. The Government now believe that these methods will create a system to correct the inherent weaknesses of the capitalist society. They see it as part of a process of achieving this balance by managerial methods and eliminating some of this society's worst excesses.

Those who reject the conception of a classless society favour instead what they call a "consensus society", with all sections of class interests taking decisions together. They see the possibility of a generous welfare society with the maintenance of present class interests. They see, side by side with the Government, the interests of the trade unions and big industries like Leylands, Courtaulds and I.C.I. taking part in that decision-making process. But that is not practical. It is not political reality without some method of controlling wages, because the contradictions are so sharp that there could never be continuity in such a society.

This is the reason for the weaknesses of our society and for problems with the balance of payments and inflationary crises—lack of control between the relationship of wages, prices and profits. Therefore, they must introduce this sort of permanent legislation to build the consensus society which they see as the alternative to Socialism. This is their conception of the Labour movement's rôle and this is why they attach such great importance to permanent wage legislation. It is now time for the Labour movement to discuss these fundamentals.

In 1964, the Labour Party was elected with a majority of three. We were nearly in a bankrupt situation as a result of the efforts of right hon. and hon. Members opposite. Because of this situation, the Labour Government found themselves hooked to a policy advocated not only by British, but by international bankers. With a majority of that kind, they knew that they would have to go back to the country in a very short time on a basis of popularity. It was, therefore, necessary to go for long-term loans. But the Government had to accept the conditions on which those loans were made.

It is clear that the advice given to the Government by the International Monetary Fund and the banks in Europe as part of the package at that time was that they should pursue a policy of compulsory wage control in order to avoid the problems which were likely to arise and cause further trouble for the pound. As a result, we had two things: one was that first priority was given to the value of the pound and the other was that policies of this sort were pursued by the Government to achieve that aim.

The First Secretary smiles. I do not know what jokes are made about this sort of thing, but the evidence from the I.M.F. and elsewhere is that this was the advice given to the Government. Presumably, there is sufficient evidence in the policy which the Government have pursued in the last two years to suggest that they accepted the advice of the I.M.F. Therefore, we have every reason to believe that those were the conditions of the borrowings which were made.

That was contrary to the basis on which the Labour Party fought two elections. We had argued about stop-go and deflationary policies of the sort which have been pursued since. We were telling the country that, once there was a new management, we could have a policy of continuous growth. We have always argued as Socialists that in this transitional period we could achieve a policy of continuous growth to build the necessary foundations to enable us to make the changes which we wished to make.

There has been departure all along the line from our original ideas. There has been a rejection of stop-go and deflation has been used as a substitute. Many of us are critical of that situation. There is still time for the Government to change course or to get back on to the course which they were following in 1964 and to pursue the policies of continuous growth which they then put before the nation. To do that successfully there must be Government intervention—but not of the kind which is being pursued by the Government.

When we were arguing on the basis of continuous growth and a fast-growing economy to enable us to do the things which we outlined, it was necessary to get our priorities right. So that we could advance the technologies of our economy it was further necessary to become much more sensitive to what those priorities were. This was our argument. We have always argued a case for an investment board to be able to distinguish much more sensitively between the tinsel and chrome plating of our society and the necessities so that we might achieve an export-led reflation.

But these ideas have since, been rejected. Pragmatism has taken over. One of the casualties has been some method of controlling our investment and of directing investment policy in the economy. Before long, we must return to it, because a wage policy of the present sort is no substitute for controlling investment or for guiding and building a high-wage economy based on fast growth.

There is a number of things which are necessary in a fast-growing economy. One of them is change. This involves all of us—trade union members and the whole nation. There is one thing which we shall not do in this or any other situation. We shall not bring about the changes which are required and mobility of labour, as the Government call it, or build a flexible society, unless we establish the first principle, and that is the right of every man to work. This goes alongside the question of a wage policy.

Because of the Government's inheritance and problems, and because of the policies of deflation which they have been pursuing, we have had continuous and escalating unemployment in the last two years. We are bound to ask what will happen in future. The Government have always argued that a wage policy and prices and incomes legislation are alternatives to unemployment. That was the choice which the Prime Minister put to the T.U.C. But the Government have come to the conclusion that we should have permanent unemployment as a piece of policy. To back up that statement, I quote from this month's Economic Trends: The total registered unemployed not seasonally adjusted has fallen from its peak of 603,000 last February to 541,000 in May. It continues: There should be little further change in the underlying level of unemployment once expansion gets fully under way. That is a brutal way of saying that this is the Government's policy. They have totally accepted the Paish arguments about having continuous unemployment of 2 per cent. I question members of the Government Front Bench about this statement, which presumably the Treasury and the D.E.A. have accepted. It is a Government publication, giving an outline of the Government's policy. I should like to quote the second sentence again: There should be little further change in the underlying level of unemployment once expansion gets fully under way. That is the reassurance which has been given to those who have loaned us money. We are linking to it a policy of unemployment of about 2 per cent. Therefore, there goes one of the other ingredients necessary in a fast growing economy, namely, guaranteed employment, or the right to work for everyone.

In their July proposals the Government announced certain policies, one of which was to cut the 1967–68 investment programme of the nationalised industries by about £95 million. Ministers said that the object of this cutback was to maintain prices. We had an assurance at the time that that policy would not involve increased prices. That was part of the package deal announced on 20th July.

What has happened since? On the Friday before the House rose for the Whitsun Recess, the Minister of Power took his shoes off and crept into the Chamber in his stockinged feet so that no one could hear him and announced a 10 per cent. rise in the price of electricity. [An HON. MEMBER: "Average."] An average of 10 per cent. In many cases, it was much more.

There was the Government whispering this basic change in policy, despite the cuts which they have made last July and the promises which had been made then. Against all the advice about cutting back on our investment programme, the Government had to come to the House to announce a 10 per cent. increase in electricity charges.

There again, part of their policy has been disproved by history since that time—

Mr. Arthur Lewis

The Minister went on to explain that, in part, this was due to the Government's own policy of creating the unemployment which was responsible for the shortfall in the take-up of the new electricity for which the capital investment had been put in. In other words, they created it themselves.

Mr. Atkinson

That was one of the outcomes of the fall in the demand for electricity, and part of the reason for raising the price.

When we were arguing the case for increased investment in the nationalised industries and, indeed, in the whole of industry, we were told that this was part of the policy to keep down prices. My submission is that it is as a direct result of the cuts that we see the creation of the problems which face us at the moment and, therefore, history is on our side in that sense.

My right hon. and hon. Friends on the Front Bench argue about collective bargaining being a system which has failed, is inadequate, and creates anomalies. However, it is part of our economic system. No one argues that it is perfect. The truth is that collective bargaining has done too well and has obtained too much for our workers. We have been saying for two years that our workers have been getting too much and will have to take a little less. We have been saying that they are the cause of the inflationary situation. Ministers representing the Labour movement are arguing that workers have to take less as their share of the cake. That is an argument which many of us reject. No one can argue that workers are taking too much from our economy in its present stage of development. However, the whole purpose of this Measure is to make sure that they have less.

I come now to the control of prices, which is one of the most important features of this legislation, and I want to comment on the Government's attitude towards many facets of the policy, on their reasons and on their inconsistencies.

On 22nd November of last year, when the First Secretary introduced his White Paper, he said: Proposals for price increases must be judged by criteria of severe restraint. The criteria set up in the White Paper on the standstill cannot, therefore, be relaxed. … He went on: It is important that prices should be reduced wherever possible."—[OFFICIAL REPORT, 22nd November, 1966; Vol. 736, c. 1150.] My right hon. Friend has reiterated that statement today, and it is because of its dishonesty that people rejected the leadership of the Labour movement at the local elections. Throughout the country, people understand what is going on and have comments to make about it.

The Government know that they cannot afford to reduce prices. That statement by the First Secretary was wrong then and it is wrong today. There are many people who may not be sophisticated economists, but who know that a fall in prices is equal to an increase in wages. The whole nation can see that, if prices are reduced, wages are increased, because the demand for goods is increased and consumer levels are increased. The nation can see clearly that, when a Government introduce wages legislation and talk about a reduction in prices, they are "pulling someone's leg". The Government know that if they reduce prices they annihilate their own wages policy.

If the object is to cut down the purchasing power of our people, prices cannot be reduced at the same time. The object should be to push up prices so as to reduce consumer levels. If the arguments about the balance of payments, inflation and the rest mean anything at all, the policy of the Government should be to reduce wages but to raise prices, and that is what they have been doing. They have introduced taxation methods to push up prices, and they should not be heard complaining about it, because it should be part of their policy. They have used many methods to achieve higher prices, but it has not been lost on the country that we cannot have lower prices and less wages. By having lower prices, wages are pushed up to a higher level. It is wrong to make these sorts of statements, and the country recognise it.

There is an alternative, and it is to argue the case for free wage negotiations, having price controls at the same time. That is a policy which is rejected by right hon. and hon. Gentlemen opposite. They, in company with the C.B.I. and other representatives of the employers, have never advocated the control of prices and, coming back to the banker's policy being pursued by the Government, unfortunately they themselves have had to rule out the idea of price controls. On the fringes, they were able to achieve some results, but they have had to reject the idea of looking into the whole matter of price regulation and control.

From an analysis of consumer spending, we know that we can, without difficulty, control the price of 70 to 80 per cent. of the commodities bought in the retail trades. We know that it can be done, and that our fuel and transport can be readily controlled by the Government. It is a feasible policy. By analysis of our industrial structure, we know that we can control the prices of 65 or 70 per cent, of those prices. Therefore, there is a wide basis upon which this Government could pursue a policy of price control, at the same time having free wage negotiation.

In the light of free wage negotiations and against price controls, they would bring about the policy of redistribution which they advocate. Anything conceded in free wage negotiation would have to be paid for at the expense of distributed dividends, and that should be part of the Government's policy. It would increase productivity, because any employer conceding wage advances against a price ceiling would have to reinvest in his own industry and modernise it to create the productivity to cover the cost of the wage advances offered to his workers.

There is an alternative policy, and I hope that, before long, the Government will again come to grips with the seriousness of the situation and reject the idea which they have been sold of pursuing a banker's policy to its logical conclusion, because, though they may have saved the £ in the process, they will have lost the Labour movement.

Mr. Speaker: I must remind the House that there are still a number of hon. Members who have sat all day trying to catch Mr. Speaker's eye.

7.38 p.m.

Mr. Terence L. Higgins (Worthing)

I agree with the hon. Member for Tottenham (Mr. Atkinson) when he expresses fears about the development of what he calls a "consensus society". In another context, it might be referred to as a "corporate State".

The Bill is a typical example of the way in which the present Government seeks to implicate the trade union movement and the employers' organisations in their policies, so that, should they fail, they will be committed to the Government's mistakes.

I think it would be helpful to distinguish the various phases through which the Government's policy on prices and incomes has gone since they came to office in 1964. First, we had a period of voluntary restraint. Then came a period of freeze, followed by a period of severe restraint. I understand that the period which we are now entering is to be called "moderation". If that is so, the euphemisms are becoming more elegant and the terminology more refined.

If we were to go through the whole thing again, we might find that we have experienced simply four periods of exhortation, frustration, inhibition and relaxation. I think that the real danger is that it is possible that we shall get a repeat of the whole cycle, and it is because this would be a very serious matter for the economy of the country that I want to spend a short time going over the basic principles of the policy of which the Bill forms a part.

The most important thing to do when considering this Bill is to enumerate the various things which we have sacrificed before the totem pole of the Government's incomes policy. The first of these, as the hon. Member for Tottenham rightly said, is that the process of collective bargaining, of free wage negotiations, has been seriously, and perhaps permanently, damaged.

I share the views which have been expressed from both sides of the House that Part IV of the Act, which the Bill is supposed to replace, has created a precedent, and that we have no guarantee that it will not be reintroduced at a later stage in the proceedings when the Government find themselves in a situation in which economic difficulties arise.

The second factor which we have sacrificed in order to adhere to the Government's prices and incomes policy is the movement of resources in the economy in response to changing consumer needs. This has been both inhibited and delayed by the measures which the Government have taken. This applies—and I remind the hon. Member for Tottenham of this—not only to the movement of labour, but also to the movement of goods. This is why we on this side of the House are not in favour of a price control policy of the kind which the hon. Gentleman has been advocating.

The Government's policy is very much against economic growth, not least because the criteria on which they are basing their prices and incomes policy is concerned entirely with the cost or supply side and makes no allowance for alterations in demand. This came out clearly from my intervention during the First Secretary's statement some weeks ago when he announced the criteria to be used during the period covered by this Bill. I asked what would happen if productivity in an industry doubled, and the demand for the product halved. Would that justify a price increase?

This is a dilemma which the Government have never faced, and the criteria which they are using are likely to reduce output and lead to less satisfaction of consumer demand, rather than the other way about. We cannot accept the right hon. Gentleman's argument that the Government's policy has encouraged productivity agreements. It is complete and utter nonsense. The typical case is that of the Birmingham car delivery drivers, where it was admitted that productivity had declined as a result of an Order made under the Act. If the right hon. Gentleman had attended more of the fascinating debates that we had on the Orders under the existing legislation he would not have come forward with that kind of argument.

The third thing which has been sacrificed is the principle of sanctity of contract, on which sound industrial relations must inevitably be based. I am deeply concerned about the answer which I received to my intervention during the right hon. Gentleman's speech today, because it appears that under the Bill it will be possible for a trade union or its members, to claim against an employer for a back payment refused during the earlier period of severe restraint. We have been assured throughout all debates on prices and incomes policy that employers would be protected if anyone were to act contrary to an Order. However, as I understand the position now it is that unions will be prevented from suing to obtain such a claim, but if they take industrial action and force the employer to pay up, or, if one likes, to volunteer, he will have no redress. I hope that whoever replies to the debate will make it clear whether this is, in fact, so.

Fourthly, we come down to a situation in which discrimination and intimidation are the whole basis of the Government's policy. All the Orders which we have had have tended to discriminate against small groups, and in one case against a couple of individuals, and again if the right hon. Gentleman had been here to listen to the discussions he would not have come to the House this afternoon and said that this policy had been applied prudently. It is true that we never have quite found out what basis of selection is used in deciding who shall have Orders slapped on them.

It appeared at first that the Government were picking on the weakest cases—there were a number of Orders of this kind—and then that the Government were picking on awkward cases, such as the Transport and General Workers' Union. But if the right hon. Gentleman is saying that the power has been used prudently he ought to tell us the basis on which he has selected cases in the past, and the basis on which he proposes to select them in future, because it is nonsense to say that the Government's policy so far has been universal. It has been universal only in that a few Orders have been used to intimidate trade unions in general, but the Government know that they have no statistics to show the extent to which it has been universal, and in fact it has been grossly unfair and inequitable.

The fifth thing which we have sacrificed has been the principle of not having retrospective legislation, and the Government not overruling court decisions. It is always a lamentable lapse to have retrospective legislation, as in the case of the war damage Measure, and this is not merely a lamentable lapse, but a nasty habit. It is happening again and again, and this was the point made by my hon. Friend the Member for Runcorn (Mr. Carlisle) when he asked what the position was about appeals now being heard. The right hon. Gentleman said that we would have to wait until they had been heard. This is a sudden change of Government policy. Hitherto, every time it has looked as though a court decision might go against the Government the right hon. Gentleman has issued an Order, and under the Bill he is to have more and more retrospective power to overrule the courts. This is a big cost indeed to have to pay for the kind of policy which we are being asked to support.

Finally, we have sacrificed sensible management of the economy, because the whole facade of the incomes policy has been devoted to distracting attention from the real need to manage the level of aggregate demand. It has been regarded by the Government as a substitute both for the short-run management of the economy, and for taking long-run measures on which economic growth must depend. It therefore seems to me that we are in a situation in which we have made enormous sacrifices for a policy which I suggest to the House has been virtually worthless.

We have not had any very clear estimate from the Government of what they think the effect of the policy may have been on the level of prices and incomes. Indeed, they have admitted that they find it impossible to calculate what the gain may have been, but I guess that at the end of the day, if we take the period 1966–67–68 overall, we shall find that the net effect of the policy for which we have sacrificed all the things which I have mentioned has been virtually nil, but perhaps when the Minister winds up the debate he will give us a forecast.

I think that the situation was summed up admirably in an article in the Spectator of 24th March, when it said: Nor, in spite of being pressed to do so in the House of Commons, has the Chancellor of the Exchequer been able to give any assessment of what beneficial effect, if any, the Government's so-called incomes policy has had on the nation's balance of payments. But just as the public is being talked into crediting that there has indeed been an economic miracle, so the 'incomes policy', … is being hailed as the magic that has brought it about. The fact is that we are still in a serious economic situation and that the contribution made by this policy for which we are being asked to sacrifice so much has been negligible.

I want, finally, to say a few words about the way in which the cycle has developed, because I think that there is a grave danger that we will go through the whole thing again because of the inadequacy of the Government's real long-term thinking. It is extraordinary that the First Secretary should have indulged in what I think can only be described as a condemnation of his predecessor. The right hon. Gentleman stressed in a speech to the Durham Labour Women's annual rally, on 3rd June, that the period leading up to last July was one where the situation was that In the event, prices as a whole—taking into account not only what people buy each week, but the things that they need to buy every few months or once a year—have risen since July by 6d. in the £. This is serious, but it is not the runaway inflation that threatened us last year. So, exactly two-and-a-half years after the present Foreign Secretary told us that we had a workable incomes policy, we are told by the First Secretary that we were then in a period of runaway inflation. This was a period of complete failure of the voluntary system, which the right hon. Gentleman is now telling us will be resumed at a future date. It is not surprising if all hon. Members regard that with some suspicion.

I hope that the Government will answer a specific question. This afternoon, the First Secretary said that we were going back to the voluntary system after the implemention of Part II and of the Bill. Am I wrong in thinking that there is no state in which Part II automatically lapses, but that it will continue in force after the period which is covered by the Bill?

I do not believe that we shall go back to a voluntary system. Once the Government have had these powers they are likely to want to retain them. That fact was clearly borne out by the Prime Minister on 2nd April of this year, when he said that a return to greater reliance on statutory provisions might be necessary—presumably again if the voluntary system does not work.

This is something of which hon. Members on both sides of the House should beware. The Government have relied throughout not on an incomes policy which has been a mere facade, but on the normal Treasury view that one must control the level of aggregate demand. The great danger is that we shall find ourselves in a position in which the Chancellor and the Government believe that an incomes policy will make a significant difference and will, therefore, engage in reflation before it is justified by the strength of our economic position.

The structural changes necessary to get us out of our present difficulties are not being made. The moment that we rely again on an incomes policy, the moment the Government again begin to reflate, we shall find ourselves back in the position of last July, in terms of our economy, the weakness of our balance of payments position, and of compulsory powers relating to prices and incomes. I am deeply worried by the fact that the Chancellor now appears to be proposing to indulge in considerable measures of reflation, in conflict with the much more responsible view which he took earlier.

The right hon. Gentleman has begun to loosen up a little the hire-purchase restrictions on motor cars, and his speech over the weekend made it clear that he intends to go much further. We are now told that big increases in pensions are in the offing. No one is more in favour of increases in pensions than I am. They are infinitely to be preferred to many expenditures of the present Government in other directions, and they do not necessarily involve inflation—but they do if we add them to all the other ill-thought-out measures of the Government. In those circumstances, we are surely heading straight back to the position in which the Government will reflate and will try to rely on a prices and incomes policy.

I do not believe that that policy has made any significant contribution to our economic welfare. I am deeply concerned that the present situation will develop into one in which the whole cycle runs through over again and we sacrifice all the things that I referred to at the beginning of my speech, quite unnecessarily and in defence of a very stupid policy.

7.55 p.m.

Mr. Alexander W. Lyon (York)

The concluding remarks of the hon. Member for Worthing (Mr. Higgins) underline a point that I shall seek to make. The success of otherwise of an incomes policy, whether voluntary or compulsory, is of great significance to the rate at which we can reflate and the time when we can contemplate doing so. I agree wholeheartedly with the hon. Member in thinking that there is a connection here—although he says that the connection is more in the mind of the Chancellor than in reality.

I shall have some criticism to make not only of the Bill but also of the way in which the incomes policy has so far been applied by the Government. Nevertheless, I say at the beginning that I have always been a firm supporter of a prices and incomes policy. I have upheld the right of the Government to make their case felt and to take part in the movement of incomes and prices. I have long been converted to the view that any kind of voluntary policy which is left without some kind of compulsory reserve powers is probably doomed to failure, in the present state of our industrial mentality. Therefore, some kind of reserve powers are essential, and as far as I can see they will be for a long time to come.

I believe in an incomes policy for two reasons, which relate to its objective, which sometimes come into conflict. First, an incomes policy has a short-term objective in trying to relate increases in incomes to increases in productivity. The history of our economy since the war shows that we should try to solve this problem, which has so far proved insoluble. Until we do, whatever the state of the economy through deflation—however we control the level of income through deflation; this is the argument between the hon. Member for Worthing and myself, because I think that the incomes policy has had an effect, and he does not—there is an increasing demand for labour, and skilled labour in particular.

An incomes policy has a profound part to play in regulating the movement of incomes during that period when the market forces would tend to push up in an inflationary spiral the level of wage rates. For this reason it is essential for us to try to win an effective victory for the incomes policy before we launch ourselves on reflation.

The second objective of an incomes policy is one in respect of which I doubt whether I shall get much agreement from hon. Members opposite. I would have thought, however, that it would appeal to everyone on this side of the House and, in particular, to those who have been the most virulent critics of the Government's incomes policy. It is a long-term but none the less basic ingredient of an incomes policy to try to bring about a fairer adjustment in the incomes of the community, and in this way to raise the standard of living of everybody.

My hon. Friend the Member for Tottenham (Mr. Atkinson) was talking about our aim of achieving a classless society. I believe in that as devoutly as he does, and an incomes policy, in the long term, is perhaps the best way of achieving it. We have been playing about with the problem of the redistribution of incomes for about 50 years, in greater or lesser degree—greater degree when we were in power and lesser degree when the Conservatives were in power. We have been messing about with it by means of taxation.

What we ought to be doing is tackling it at the roots, trying to determine what is a fair share of the wealth of the country for each individual member of the community, and trying to weight things in favour of those whose bargaining power is weak and whose numbers are, perhaps, very great, as against those whose bargaining powers are strong and whose numbers are very limited. The incomes policy has a vital part to play here.

Therefore, when I came into the House to defend the Government against some of the attacks of my hon. Friends in the debates we have had on Orders, I did not do so, as was sometimes suggested, out of some kind of legalistic desire to accord with the legislation, but from a profound conviction that unless we establish a viable incomes policy the pace at which we shall approach social equality is bound to be much slower than I would wish. For this reason, I believe that somehow we have to establish a viable policy.

Inevitably, to change a pattern of mind and outlook that has been growing up for hundreds of years will take time. We cannot overnight get the kind of social equality we should all like through an incomes policy. When one plants an acorn one has to wait quite a few years for it to grow into an oak tree. Inevitably, during a period of change there is tension between the long-term and the short-term objectives of the policy.

My criticism of the Government has been that they have concentrated too much on the short-term objectives, sometimes sacrificing the hopes of achieving the long-term objectives. That was inevitable. When the Government took over, we had reached the situation—and no hon. Member opposite can take any credit for it—in which we were running into a balance of payments deficit of frightening proportions, and we tried to stem the process by the measures we took, and the institution of voluntary incomes policy.

I do not accept the view that the voluntary incomes policy was wholly unsuccessful. It had begun to change people's attitudes. It was beginning to gain acceptance in the popular mind, and in the minds of those responsible for negotiating increases in incomes and prices. But it was too slow for what we wanted. It is true to say that there was a pattern of runaway inflation. In the first year of the voluntary policy we had incomes going up by 9 per cent. and prices going up by 5 per cent. A halt had to be called to that movement.

Why did we have that pattern? Was it not simply because there was no reserve power at the back who could say "No" to those cases which were wholly unjust and where there had been no justification for an increase? Without that power, once those sectors of the community achieved an increase, those others who felt they had a justifiable case for an increase were moved to put in for more. The result was a galloping inflation that had to be stopped.

Clearly, in the logic of events, there had to be some kind of reserve compulsory powers. I believe that the Government were absolutely right in requiring those powers by last year's Act. Where I fear they went wrong was in not trusting too much to this new power and this development of the incomes policy. We heard repeated today yet again the remark of the Chancellor of the Exchequer at The Hague that if the incomes policy were successful it would be a bonus to the other policies he was advocating.

That is my criticism—that at a moment when it was possible to break through into an incomes policy, when acceptance was beginning to show in the public mind, but when we needed that body of reserve compulsory powers to enforce the policy, we bring in wholesale deflation because we cannot trust the incomes policy which we ourselves have advocated. If there had been more trust in the incomes policy there could have been less trust in deflation. It is on this point that troubles have arisen.

Everyone was prepared to accept the prices and incomes freeze—I agree that the hon. Member for Oswestry (Mr. Biffen) was not, he has a different conception of the economy, but most people were prepared to accept a wages incomes and prices freeze because there was a certain rough justice about it. It is in the period of severe restraint, when we have to pick and choose in the management of affairs, when we have to determine who shall or who shall not get increases, or who shall or shall not get permission to put up prices, that we have to be much clearer about what we are trying to achieve, and it is only acceptable if there is a general upward movement of the standard of living. It is almost impossible to apply such a selective incomes policy—which is really what an incomes policy is about—in a period of deflation, when we are trying to hold down levels of increases generally and only letting a few small increases get through.

It is clear from the kind of criteria that were set out in the various White Papers on the standstill and the period thereafter that the Government had in mind only this short-term objective of keeping down increases in prices. Most of the criteria relate simply to a delaying power. Most of the issues between the Government and the trade unions have related simply to a power to delay a particular award; ultimately, the award was made. I must confess that when there was public discussion about what the criteria should be for the period of severe restraint—though there should be some thaw—I had never envisaged that we would immediately give permission for increases that had been delayed for six months, because it meant that some increases were allowed that were not justified by any reasonable criteria.

That nonsense was perceived by the Prices and Incomes Board in relation to the award in the electrical contracting industry. The Board first said that that award—of, I think, 13 per cent.—was unjustified by any reasonable criteria of an incomes policy, but then said that it was justified by the new White Paper on severe restraint which allowed payments to be made if they had been agreed in time and amount before 20th July. Clearly, if we were trying to evolve a realistic incomes policy, the criteria would have been related to the long-term—to productivity agreements and increases in the standard of living of the lower-paid workers—those are justifiable criteria, but not simply and without question, to give an increase during the period of severe restraint to the six million workers who were entitled to a pay increase on 20th July.

The other part of my criticism relates to the ineffectiveness of the price element in this equation. The Government first of all refused to take any powers to deal with increases in rents and rates—yet the rent is the very essence of the ordinary household budget. If one puts up rents one will inevitably get a ferment of discontent if the "old man" cannot also bring home a higher wage packet.

I have heard the explanation for this, namely: if councils are not allowed to increase rents, where will they get the money to make up the deficit on the housing accounts? If that were the only cause for concern, one method by which this could have been alleviated was by payment out of central funds from some of the amounts which we have been reaping off in the cause of inflation. Again there is the conflict between the measures which were taken for inflationary purposes and those which should have been taken to make the incomes policy workable.

The worst offence of all related to prices. The Government said that they intended to apply the policy to prices as well, but I have asked some Questions in the last week about how effective this was. I tabled two Questions to five different Ministries. I first asked how many applications there had been from manufacturers and retailers to be allowed to increase prices since 20th July last. The surprising feature of the replies is how few applications there have been. True, in a fair percentage of cases the Government did not grant permission; there was some reduction before the price was approved. The overall number, however, is infinitely small in view of the number of price increases which occur every year. The Board of Trade received 525 applications, which would be the biggest number. The Ministry of Agriculture, Fisheries and Food received 200. The Ministry of Transport received only one application. None of the other Ministries received any. That is a total of 726. Over the vast mechanism of prices there were only 726 references.

Mr. Biffen

This is a very small point. I have noted the assiduous researches of the hon. Member, but they have not been comprehensive. I assure him that at this very moment the Department of Education and Science is wrestling with the problem of what should be the right scale of charges for pony rides.

Mr. Lyon

It is true that my researches were not comprehensive, but they included the two major Departments. More interesting answers came to my second Question, which was how many complaints the Ministries had received from members of the public or from Members of Parliament about price increases. The answer to this was a factual one which could have been soon ascertained. I put a little sting in the tail and asked in how many cases the Ministry concerned had acted to reduce prices.

Here I received some very interesting answers. Apparently the number of complaints was about 18,000. The Department of Economic Affairs gave this as the overall total it had received. Obviously that Department channelled them off to various other Ministries. The Board of Trade got 5,150. The Ministry of Agriculture, Fisheries and Food got 4,000. In reply to the second part of my Question, which was in how many cases the requested increase was approved, all five Departments of State, acting separately, gave me the same answer, namely, that they had investigated all complaints, unless from information available to the Department the justification for the increase was already known.

It can only be assumed from that evasive answer given by all the Departments that in not one case out of the 18,000 was action taken to reduce prices. I cannot conceive that all 18,000 were justified by the criteria in the White Paper. Here the Government could have acted to get the psychological atmosphere for acceptance of the prices and incomes policy. They could have taken action on those price increases which were clearly unjustified. The only Order which was made was in relation to laundry prices, and that came only after most laundry prices had increased.

Therefore, one got the impression, rightly or wrongly—the Minister who is to reply will no doubt deal with any criticisms I have made—that the Government were soft on prices and hard on incomes. That came about simply because we were acting only for the short-term objective of trying to stem the rising tide of inflation at this moment. Therefore, the Government should now decide what is, and fight for, the long-term objective of the incomes policy. They should take the necessary measures to achieve the long-term objective of bringing about greater equality in the community.

Some reserve power will inevitably be necessary. My hon. Friend the Member for Oldbury and Halesowen (Mr. Homer) mentioned the case of his own union. He said that we had been arguing for the past year about a piddling few cases of 38,000 people. He demonstrated by his argument that, if there had been no reserve powers in the last 12 months, the case of the Fire Brigades Union would have gone ahead. It is true that the National Board for Prices and Incomes accepted that that case was justified. However, many other cases in which there was no justification for the increase would also have gone ahead in the absence of powers. There must be some reserve power to deal with those who will not co-operate in a voluntary policy.

Having made these criticisms, I again congratulate the Government upon trying, despite all the difficulties, to get a viable incomes policy. Solid progress has been made. The progress has not been as good as the believers in the policy would have liked, but it is clear that the T.U.C. would not now be embarking upon an attempt to bring about a more rational procedure for negotiation of wages unless there had been this period in which we have tried to use compulsory powers.

This is the massive acceptance of the idea of an incomes policy, the idea that the nation has a right to a say in negotiations and that negotiations cannot be simply left to the two parties, the workers on one side and the employers on the other. This is the great gain. This gain will continue, provided that we try to secure real justice and provided that we try to deal with prices and with incomes outside those of trade unionists and with the whole question of dividends and rents. All this must be part of a policy which I hope will be tenaciously pursued.

For this reason, I support the Bill. I only wish that the reserve power had been stronger. I recognise the pressures on the Government which have made it impossible for them to take the kind of reserve powers which Mr. Aubrey Jones has requested and which I would have gladly supported. I hope that the Government, now that they have taken some power, will continue with this policy and will fight for all that they are worth to achieve real success so that the standard of living of every member of the community can be raised.

8.19 p.m.

Mr. John Biffen (Oswestry)

Inevitably, the debate has been a blend of metaphysics, historical reminiscence, and diagnosis; and to some extent it has been concerned with the very hard practicalities contained in the Bill. I shall direct most of my remarks to the Bill, but I think that it would be in the traditions of the debate if I at least made a passing reference to what I call some of the metaphysics and some of the history.

There is a widespread presumption that everyone favours an incomes policy and that only the "Adam Adamants" of economics who have come out of the Ice Age dissent from it. This is the prevailing mood, and I do not particularly want to kick against it this evening. I say only this. "An incomes policy" is not a self-revealing phrase. It means almost anything to anyone.

What we are debating is not the virtue or otherwise of an incomes policy, not the significance or otherwise of a practical incomes policy, but, primarily, whether we prefer to have an economic policy which proceeds from the control of the aggregate level of demand, which, as my hon. Friend the Member for Worthing (Mr. Higgins) said, one might in shorthand fashion call the traditional Treasury view, or, on the other hand, whether we believe that there should be powers of identification and selection given to the Government and those within whom they can induce a spirit of co-operation to affect the pattern of prices, of incomes and of investment.

It is the second view which has been in the ascendant, and not merely since the present Government took office. We acknowledge that that view had widespread support in the period from 1961–62 onwards. I say all this merely by way of introduction, because I believe that this is what the debate is about at the, so to speak, metaphysical level.

I believe that we should be far better served if we concentrated our energies on supporting the view that it was the prime function of Governments to get the aggregate level of demand right. I was delighted to hear my hon. Friend the Member for Worthing warn against the dangers of premature reflation—

Mr. Higgins

Large-scale reflation.

Mr. Biffen

—yes, large scale—signs of which he already saw in the actions of the Chancellor of the Exchequer.

So much for the metaphysics. I turn now to the history of the matter.

Most hon. Members have felt obliged to pass some sort of judgment on whether the last 12 months have seen the success of the stautory powers of Part 1V, or whether, in fact, it was the credit squeeze which was primarily responsible for the movement of prices and incomes. For my part, I do not think that one can do better than the hon. Member for Oldbury and Halesowen (Mr. Homer), who said that we did not know and it was in the nature of the problem that we never would. I know of no substantial body of evidence to support the argument of the hon. Member for York (Mr. Alexander W. Lyon) that the existence of Part IV had a tangible and measurable effect upon the movement of prices and of incomes.

I shall put a few statistics to the House. I apologise for so doing, but I think that they can help us in deciding whether the existence of these considerable statutory powers has had much marked effect upon the movements of either prices or incomes. Between July, 1966, and April, 1967—the latest available date—the index of wage rates—I use the index, conscious of all its limitations—moved from 154.5 to 156.5, an increase of 2 points in nine months.

Next, I take the corresponding period of nine months, September, 1957, to June, 1958, after the Thorneycroft measures. I have deliberately gone back to that point in time because there was no question of an incomes policy, even in its most incipient form, dominating current conventionally accepted economic thinking at that time. During that corresponding period of nine months, the index moved from 111.5 to 113.4, an increase of 1.9 points.

It seems to me that, from those two corresponding periods, one can say that it looks as though the situation was roughly the same, and it is that kind of evidence which, I think, sustains the argument of the hon. Member for Oldbury and Halesowen and the great many other hon. Members who have rightly said that by far the most important factor affecting the movement of prices and incomes has probably been the existence of the July credit squeeze measures. The same case can be made on the retail prices index, but, to save the time of the House and, I hope, to allow other hon. Members to speak, I take it that I shall be excused from embarking on a general exposition of the various statistics I have here.

I come now to what is, probably, the more important part of our business today, the Bill itself. There are two major features of the Bill: first, the enhancement of the Prices and Incomes Board; second, the supposition that this will usher in a voluntary system, supervised, presumably, by the T.U.C.—with some gentle lines of encouragement from the Government—and, I suppose, by the C.B.I.

Let us consider the enhancement of the National Board for Prices and Incomes. The Board has become pretty much the sole regulator from now on. There is no question of the Government's being able, of their own accord, to control individual prices and incomes. In future, they must get the green light from the Prices and Incomes Board.

This has been advanced as a virtue, but I feel that it ought at least to excite in us some consideration of just what the Board is now to become or, perhaps, has become. What the Board can examine is, in turn, determined by the Government, and determined by them with their knowledge of the staff and competence of the Board. I am sure that the Prices and Incomes Board was never designed so that it should become a mechanism of arbitration. It was never designed to become a mechanism of price control. It was never designed to be the sole regulatory power or sole regulatory valve for a prices and incomes policy in the next 12 months.

I do not believe that that was ever in the mind of Mr. Aubrey Jones when he went to the office. [An HON. MEMBER: "It was."] If it was, I can only say that he had delusions of grandeur. [An HON. MEMBER: "He jolly well had."] This is developing into an ungenerous commentary on the Prices and Incomes Board in terms of its personnel. I am not interested in that. What should concern us is the actual power of the Board and what we can expect of it.

I put this to hon. Members opposite: how many cases can the Board possibly cope with with any degree of scholarship, skill and research in depth? I do not offer my comment. I offer a comment from the New Statesman, from an article by Mr. Arnold Strang in the current issue: The Board, with its projected manpower strength and budget, will be able to deal with no more than 20 or so cases a year". If that is so, and bearing in mind that Mr. Jones himself has said that he wants to have an increasing rôle in the matter of prices, the number of wage cases which can conceivably be dealt with by the Board will be very limited.

Do hon. Members for a moment doubt that, if the policy is to have any element of realism at all, what will be referred to the Board will have to be major trade union negotiated claims? Let no one doubt that, if the policy is to be meaningful, one's ability to identify a militant trade union, or possibly not even a militant one, but, at least, a trade union, will be a major factor in what is referred to Mr. Jones and his Board. All those employees who are nonunionised—and there are very many of them—will proceed safely in the knowledge that none of them will be selected for reference to the Prices and Incomes Board.

We might ask ourselves who will be employed to carry out these researches in depth. Are hon. Members opposite so overwhelmed by the case made on wages in retail drapery that this is a development which they wish to see encouraged? We do not know who will investigate these cases. We know that it will not be Mr. Aubrey Jones and the small body of people visible to the public and the House. A firm of consultants will be hired to do the job.

An American firm of consultants was used for the examination of newsprint prices, and in the case of bank charges a firm of foreign consultants was used. If the Board is to have this new quasi-arbitration rôle, perhaps determining what it thinks are to be superior systems of wage negotiation and bargaining, do hon. Members opposite relish the prospect of American consultants being employed on this job? Does the experience of Roberts-Arundel, at Stockport, carry any message for the techniques of American management in this country and in this sphere? We should know whom Mr. Aubrey Jones will hire to carry out these surveys. If the cases which he will conduct are limited in number presumably the Government will attach immense significance to the conclusions.

My second point concerns whether we should sanction the Bill because we believe that it will lead to a voluntary policy. The whole idea of a voluntary incomes policy is one on which we require considerable and detailed definition before we accept it as self-evidently good and to be applauded.

We understand from the Prime Minister that this means that the T.U.C. will take greater powers of control and regulate the claims of the constituent unions. I wonder if that is a rôle that the House should willingly put upon the T.U.C. Presumably it will be done in the name of Government policy, and the conclusions reached will be presented to some extent as though this was the outcome of deliberate Government concern.

Should the House willingly yield up these powers? I think not. This places on the T.U.C. intolerable burdens. First, there is the assumption that the existing pattern of income is fixed; in other words, that the distribution of total income as between employment income and other forms—self-employment, dividends, interest, rent, social security receipts, and so on—is fixed within those broad classifications and all that the T.U.C. has to do is to allocate the order of priorities for employment income. Does any member of the trade unions regard the present balance as fixed and permanent? I would not have thought so.

I happen not to be a trade unionist, but I am much concerned with the reality of any policy which proceeds from legislation here. If the T.U.C. has one interpretation and the Government, perhaps unconsciously, have another, only a nonsense will follow, and it carries with it all the seeds of destruction so eloquently referred to by the hon. Member for Oldbury and Halesowen, with whose speech I found myself in overwhelming agreement.

There is a number of cases one can make on the question of whether or not the T.U.C. is in a position to supervise a policy on behalf of the Government. I wish to give just one or two quotations, first from what Mr. David Currie, President of the Clerical and Administrative Workers' Union said at the union's annual conference at Margate a short while ago. The Financial Times reported: Referring to the T.U.C.'s proposals to run its own incomes policy, Mr. Currie said: 'We cannot say that Congress will succeed in applying such a policy. We do not know if it has the skill, the knowledge and the authority to make it work'". The report added: Mr. Currie pointed out that the T.U.C. entered this field with substantial weaknesses. It represented only about one in three of employed people and about one in five non-manual workers. We have seen what a virile trade union leader like Mr. Clive Jenkins will do in the circumstances of the past 12 months. I cannot imagine what he will do if he is expected to obey the advice handed down by the T.U.C. Actually, as any regular reader of Tribune will know, he has told us that as far as he is concerned a T.U.C. sub-contracted incomes policy is a non-starter.

Take it a stage further. What are we to do about prices? Are they to have differential treatment from incomes? Are the Government proposing that we should try to encourage trade associations to take an active rôle in the pricing structure of their members? If so, why have we been spending I do not know how many years trying to break down the paraphernalia of trade association price control and price rings inherited from conditions of the 'thirties? Are we to reverse this whole process, sanctified by some sort of view that we are promoting a voluntary prices structure?

These are the issues to which the House must address itself, not in a spirit of partisanship, but with complete, total and ruthless realism, because to believe that a voluntary policy has a hope of succeeding is to encourage people to believe in the moon. It has no hope at all as long as one gives people their capacity for independent action. If one believes that all the maverick trade unions and employers must then be brought into conformity and the safety of a comprehensive and universal trade union and employer system, one is moving nearer to the corporate State than I believe anybody in this country is prepared to accept.

It is comparatively easy to make the kind of critical speech which I have made tonight. However, I have never disguised from the House my view that the most important item in the control of the economy is to get the aggregate level of demand right. For that reason I was pleased to support the Chancellor of the Exchequer in his July measures. I am now pleased to offer this advice to him: that he should keep a steady nerve and, above all, resist any siren calls for early reflation. He should not be unsettled by the taunts that he is held in thrall by the Treasury or banking community. The greatest danger we face is early reflation. This morning's news in the Financial Times, under the heading "Sensible Advice to Governments", refers to the annual Report of the Bank for International Settlements. It contains points on which we should ponder with special care, for it comments: The section on Britain concludes with a sentence to which the Chancellor would be well advised to play the closest attention, all the more so in the light of the measures announced in the past few days to stimulate consumer demand. Since, the Bank says, a longer-term easing of the balance of payments constraint is directly linked with private investment, it is important that private sector spending is tailored to make room for the recovery in business spending when that occurs. Inasmuch as the Chancellor has been the recipient of a good deal of criticism—and advice, proferred under the guise of an alternative policy—from the point of view of this Measure, he should not continue the process of encouraging the public to believe that there is contained in this House or in Whitehall, or in whatever businesses or trade unions the Government can get to co-operate, a skill and power which enable us to identify the key prices and incomes and then to try and influence them.

Ultimately, the character of this country depends on the high street, the shop floor and boardroom and not on the lobbies of Westminster or the corridors of Whitehall.

8.40 p.m.

Mr. Trevor Park (Derbyshire, South-East)

If the right hon. Member for Mitcham (Mr. R. Carr) detected a lack of enthusiasm in the House for some of his remarks, I assure him that he was not mistaken, particularly since he was engaged in the fascinating, but rather indiscreet, practice of letting the cat out of the bag. The way in which he did so, with respect to future Conservative policy, dismayed some of his hon. Friends as much as it confirmed some of mine in their suspicions about what the Conservative Party would do if ever it was returned to power.

I say frankly that if the only alternative to what the Government are now proposing was the policy which hon. Gentlemen opposite have put forward, then I would support the Government the whole way, for the Opposition remedy, as described by the right hon. Member for Mitcham, would be ten times worse than the disease. Hon. Gentlemen opposite have learned nothing, and have forgotten nothing, about their 13 years in office. If they were returned to power and attempted to put into practice some of the proposals about which they have spoken today, the outlook for industrial peace would be dark indeed.

I do not believe that the Opposition's alternative is the only alternative to the present incomes policy. There is another and better one, as described in part by my hon. Friend the Member for Tottenham (Mr. Atkinson) and my hon. Friend the Member for Oldbury and Halesowen (Mr. Horner). It is almost 12 months since I withheld my support from the Government on Second Reading of the first Bill of this kind. I expressed the view at that time that it was ill-conceived, that it would result in a state of affairs which would embitter relationships between trade unionists, employers and the Government and that once the Government had started along the path of legal restraint and punitive sanctions they would be forced to go further along that road until, in the end, the only way to achieve their objective would be to challenge the whole basis of collective bargaining and to seek to substitute for it a system of authoritarian incomes control. A month later, when Part IV was added, it seemed than the warnings which some of my hon. Friends and I had given were already coming true. By that addition, the Government took a further big step forward in the direction of compulsory wage control.

I am delighted to find that, just in time, the Government are now pulling back from the brink and that the notions which were canvassed in high circles a few months ago are being decisively repudiated by the Government. They have been forced to recognise by experience what they refused to concede to argument, and if the wage freeze has had some success in preventing incomes from rising, it has not been the result of Part IV, even less the consequences of its punitive provisions, but, as the Government recognise, the consequences of two factors, both of which are rapidly ceasing to be relevant. First there has been the phase of deflation, stagnant growth and rising unemployment which the Chancellor has assured us is now coming to an end, and, secondly, the voluntary self-sacrifice and restraint on the part of the vast majority of trade unions and trade union members during the period of the economic crisis.

After nearly a year's bitter experience, self-sacrifice and restraint are now wearing a bit thin. Trade union leaders cannot be expected to hold their part of the bargain indefinitely when the Government, through their failure to maintain price stability and to keep full employment, are falling down on their side of the undertaking about what the results of restraint would be.

The Government are right to recognise that, in these circumstances, any future hope for incomes policy must depend on voluntary means and cannot be brought about by legislative measures, and this is true if only because any attempt to proceed further along the path of coercion would involve certain confrontation not with a few recalcitrants, but with the whole organised trade union movement.

I believe that the prospects for an effective voluntary incomes policy are very much better than they were some time ago. I disagree, therefore, with the remarks just made by the hon. Member for Oswestry (Mr. Biffen). The T.U.C. report, adopted overwhelmingly at the conference of trade union executives on 2nd March, provides an excellent opportunity for the Government to get themselves off the hook by acknowledging that here is the authority and machinery to bring about by voluntary means the changes which are needed, and they should embrace the T.U.C. proposals with open arms.

Here, for the first time—and let us not minimise its importance—trade unions are freely giving up attributes of individual sovereignty to a central trade union organisation. The central organisation is taking on itself the responsibility of charting priorities in wage bargaining, priorities which the whole of the trade union movement will be invited to accept—and all this will take place with full consultation with the Government and after the most careful consideration of the Government's attitude and advice. What more do the Government want? How much more consistent with their own independent existence can the trade unions afford to give them?

I do not believe the Bill possesses one-tenth of the potential effectiveness of the T.U.C.'s proposals. If it is intended to assert Government policy on incomes in face of trade union opposition, then it does not go far enough and the seven months' delay without any control over retrospective claims will combine the maximum of irritation with the minimum of impact.

But if that is not the Government's intention, if the Bill is intended to serve, as my right hon. Friend said, as a bridge between the Government's earlier championship of coercion and their new acceptance of a voluntary policy, they should be reminded that it is the kind of bridge which, in its statement of 2nd March, the T.U.C. categorically and unambiguously repudiated.

If the Government wish by the Bill to retain a reserve of power to deal with recalcitrants who do not accept the advice of the T.U.C., I would urge them again to consider carefully the remarks of Mr. George Woodcock on this theme. Speaking at the conference of national executives, he had this to say: The Government say to us, 'Your scheme sounds all right, but what do you do with your recalcitrants?' I ask them: 'What do you do with our recalcitrants? Are you going to send them to prison?'. This, of course, is the implication of legislation. Well, you will not deal with recalcitrants by sending them to prison. I have not been able to guarantee that we shall see that everybody fits neatly into line. All that I say is that to ask for everybody to fit neatly into line is to ask something that is impossible for anybody. I do not think that the whole world comes to an end or that the incomes policy goes up the spout because someone happens to get away with a little bit. If incomes policy is not big enough, if its purpose, if its objective, if the way it is going generally, is not big enough to enable us to carry on over those little humps, then we had better not start at all. Those were the words of Mr. Woodcock and I recommend them for consideration of the Government even at this late hour. By introducing the Bill at this time the Government are jeopardising the chances of success of that same voluntary policy which they are claiming to support.

I pray in aid again the words of the General Secretary of the Trades Union Congress. The House will forgive me for quoting Mr. Woodcock a second time, but he has been mentioned on a number of occasions and not every mention has accorded correctly with what he has said on this point: I can see the dangers to our policy in this situation, where the Government retain their legal powers under Part II slightly extended, at a time when we are seeking to operate an entirely voluntary scheme. Clearly you would be blind if you did not see the dangers, because one thing is certain, one thing is known of all trade unions—it is one of our many good characteristics—that we prefer to deal with the people in whom the ultimate power rests. We do not like to go a circuitous route to come to the final conclusion … if that happens, then the point and purpose that I see in this conference will be vitiated, because we want from this conference the authority to get on with the job, which means we want the co-operation, the willingness of trade unionists genuinely to come to the T.U.C. Of course, if they think coming, even with the best will in the world, does not take them to a conclusion, then there is a danger that they may not come to us. Here is a Bill which is too weak to stand on its own, yet strong enough, if it is brought into frequent use, to sabotage the only alternative policy which can hold out any hopes of success. I have no doubt that I shall be told that the Bill applies to prices as well as to incomes and that if I withhold my support I am denying the Government the right to take effective action in the prices field.

I would like to answer that challenge. What does this Bill do in the prices field? Does it learn from the ineffectiveness of prices legislation during the last 12 months? Does it establish an effective machinery for price stabilisation of key commodities at national and local level? Does it in any way seek to eliminate, or even reduce, the numerous loopholes for increases which are allowed under the terms of paragraph 10 of the latest White Paper? Does it take any effective action about increases in rents, or rates, or bus fares, or, for that matter, electricity charges? We all know that it does not, and its silence on these matters condemns these provisions of the Bill to utter ineffectiveness.

We are faced with a paradoxical position. On incomes, where legislation cannot work and for which an alternative voluntary policy exists, the Government persist with legislative methods; on prices, where there is no sign of a voluntary agreement and where effective legislation is the only way in which to secure stabilisation, the Government make no move to acquire the kind of powers which are urgently necessary.

I beg the Government, even at this late stage, to look at this matter again. The Bill is ineffective, irrelevant and potentially harmful. I do not believe that I would be doing my duty by my constituents, by my party, or by my conscience if I were to give it my support in the Lobby tonight.

8.56 p.m.

Mr. Stanley R. McMaster (Belfast, East)

In the few minutes left to me I should like briefly to deal with the problems facing the country. This has been more of a debate on the economic situation than on the Prices and Incomes Bill, but we have been considering something which has worried Parliament ever since the war. Before the war, the country was greatly exercised dealing with trade cycles and the unemployment which they caused, but since the war that problem has been replaced by that of economic growth and how best to control it without running into deflation, or even devaluation.

Every time we have had a period of three or four years of growth and rising prosperity, the Government have suddenly decided to put on the brakes and to stop the economy. Shortly after I came to the House my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) introduced the regulator. He talked of controlling the boom which had occurred in the previous two or three years and which was leading to an over-heating of the economy and to rising prices so that British goods were being priced out of world markets.

My right hon. and learned Friend applied certain controls to the economy. Taxation was increased, the most direct and traditional method; interest rates were raised, and he used regulators, such as hire-purchase restrictions and restraints, like those being used today, and increased Purchase Tax, particularly on luxury goods, while the Bank of England demanded special deposits from the joint stock banks. To that list of weapons the present Government have added Selective Employment Tax.

For all the good these measures could have done in controlling prosperity, they could be wiped out overnight by extravagant wage demands, and this led the Government to try a prices and incomes policy. The great difficulty with such a policy is enforcement. What sanction can be used against individual workers or trade unions who refuse to accept restraint on their wages? How can they be punished if they do not play the game?

But all these methods have missed the target. This country should be concerned with higher rather than lower output. Increased output in the motor car and other industries is the only way to reduce unit costs. With greater productivity, we must attack restrictive practices in industry, whether of management or unions. Any effort to retain over-manning, any conservatism, must be attacked.

At the same time, international liquidity should be improved. With under-developed areas in Africa, South America, India and the Far East, it is clear that the capacity to consume manufactured products is great, but the world lacks the required liquidity and much more attention should be given to increasing it, so that the increased output in our factories can be consumed and our exports increased. One step would be to lower tariffs, carrying G.A.T.T. a stage further. Whether we get into the Common Market or not, surely there is scope here, in one of the most protected countries in Europe, to lower tariffs.

For greater activity in the economy, taxes should be lowered, which would give the incentive for increased productivity. Workers would no longer be afraid of working themselves out of a job or of losing a job by giving up restrictive practices.

Something which greatly concerns me is the decision of hon. Members opposite in similar debates at the mention of profits. Why should we be so afraid of profits? Have we no confidence in our workpeople? There are a few "dynamos", people who can contribute something. The great majority even of hon. Members are doing a job which many others can do, but few can contribute something special to society, and unless they get a proper reward, they will not exert themselves. If young, they will go abroad for better rewards and, if older, they will reduce their activity.

Therefore, one solution to our problems is to lower taxes. I am not so afraid of inflation as many hon. Members. We must give the entrepreneur encouragement to invest. He must be sure that his goods and his investment in capital equipment, which will increase his output, will lead to increased consumption and that the demand for his goods will be solid and resilient.

Therefore, I believe that a degree of controlled inflation, which would be no greater than in other developed countries, is necessary to encourage some members of the community to invest and build up savings and others to increase their capital equipment and machinery. We must have faith in Britain. The theme of this debate and the Bill shows a deplorable lack of confidence in the English working man's good sense, industry, ingenuity and ability to produce goods competitively.

This is why I deplore and cannot support the Bill and suggest that a complete new look at Government policy on both sides of the House is called for if Britain is to make her way in the world and keep up with what hon. Members opposite used to call the league tables when they compared our performance with that of Germany, Japan and other countries. We can do it, but this Bill is not the way.

9.5 p.m.

Mr. Iain Macleod (Enfield, West)

I apologise to the House for the fact that in the middle of the debate I had to be absent. However, as I more or less take a permanent lease of this Box between June and July, perhaps the House bore that with fortitude.

I begin with what may seem a dull legal matter, but I think it is of great importance. I have given the Chancellor of the Duchy of Lancaster notice of it. It concerns the question of Parliamentary control over Orders which can be made under the Bill.

As I understand it, there are three ways in which the Secretary of State can make Orders. The first is under Clause 1(2,b), which extends the standstill to six months. Paragraph 4 of the Schedule makes it clear, although I should like it confirmed, that such Orders are subject to the negative procedure. The right hon. Gentleman can make Orders under Clause 3(1). It is doubtful in this case if the negative procedure is applied by paragraph 4 of the Schedule. Obviously one should be able to pray against all Orders made under the Bill, and this Clause deals with the imposition of standstill after the publication of the Board's report. Lastly, the right hon. Gentleman can make Orders under paragraph 2(1,b) of the Schedule, which can revoke or vary downwards only the period of standstill provision. As I read the Bill, there is no power to pray there at all.

I hope that the Chancellor of the Duchy will be able to answer these points. It seems clear to me that there should be Parliamentary control over all powers to legislate by delegation in such an important Bill as this.

When the First Secretary made his statement on 17th April, my question and, I thought, his answer were quite specific. I said: 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?". His answer was that the Order would be subject to the negative Resolution procedure".—[OFFICIAL REPORT, 17th April, 1967; Vol. 745, c. 94.] I should be grateful if the right hon. Gentleman would clear up that matter.

We have occupied some time in praying against Orders under the Prices and Incomes Act. I find myself, in company with the hon. Members for Penistone (Mr. Mendelson) and Poplar (Mr. Mikardo) and other well-known Tories, in opposition to such Orders. I make it clear—and I say this as much for my own protection as for theirs—that, although we may object to the Bill, we do so for entirely different reasons. I think that very few of them would agree, although I agree, with the objectives put forward by my right hon. Friend the Member for Mitcham (Mr. R. Carr). My view, which was expressed by the hon. Member for Oldbury and Halesowen (Mr. Horner), is that the Government have elevated prices and incomes policy to a quite ridiculous extent and that it should form, as my right hon. Friend put it, a minor part of the armoury of those responsible for running the economy.

I wish to take up briefly and in passing—because this is something which comes over and over again into these debates—an intervention by the hon. Member for Willesden, West (Mr. Pavitt) in which he referred to the treatment of the nurses under a previous policy. Both sides of the House cherish their political myths, and this is one of them, but it is as well that we should dispose of it.

My right hon. Friend was right in the brief comment which he made in reply, but I should like to put the facts on record. In 1962, the offer of the management side was 2½ per cent.—not nil—in accordance with the norm. That was rejected, as was the second offer. The matter was then referred to the Industrial Court in July 1962. The award in September 1962 was 7½ per cent. back-dated to 1st April, and a further award of another 6¼ per cent. was agreed in April 1963. There was no nil norm. There was an offer. There was arbitration available, and, in fact, a large increase was awarded.

None of these things could have happened under the present policy, and there is no similarity between the treatment of the nurses or any other body of workers under previous Administrations and policies and those which, regrettably, we have seen recently. I hope that we shall hear no more of that story.

I want to start the short examination which I shall make of the Bill with the opening sentence of an article in New Statesman this week which has been referred to already: Mr. Michael Stewart's experienced team of embalmers moved in on the corpse of incomes policy this week with the Prices and Incomes Bill, Mark Two. Their unctions and ointments equip the deceased for temporary public display, but cannot long delay a decent funeral, if only in the interest of public hygiene. If I may say so, that seems to be admirably put, and it is the view of many people on both sides of the House.

We are discussing the Prices and Incomes (No. 2) Bill as part of a prices and incomes policy, but hon. Gentlemen opposite have always tried to put the accent on prices. The first Secretary will remember that almost all the Questions which he had on 17th April emphasised this point, and it was emphasised again today by the hon. Member for Dundee, West (Mr. Doig) and other hon. Members.

The reason is obvious. If wages are frozen or held back and prices continue to rise, ordinary people are caught in the trap and suffer both ways. "So", says the party opposite, "let us have price control".

I believe that we should say quite clearly that this is absolutely meaningless, that it is impossible of achievement, and, in any event, is aimed at the wrong target. The right hon. Member for Sowerby (Mr. Houghton) wrote recently: Price control by voluntary means or otherwise is probably impossible without choking retail trade with price lists and red tape. In the debate of last October, Mr. Frank Cousins said much the same about the retail trade, but argued that there could be some control over raw material prices. However, that is not possible since, in most cases, we do not control the factors which in turn control the price of those raw materials.

In that same debate, I said: If the proposals in relation to wages are foolish, the proposal in relation to prices is both perverse and illiterate. It is shooting at the wrong target. It is dealing with the symptoms and not with the disease. It is trying to cure the spots and not trying to cure the measles It is forgetting something that was wisely said recently in the Wall Street Journal: 'Price increases cause inflation no more than wet pavements cause rain'."—[OFFICIAL REPORT, 25th October, 1966; Vol. 734, c. 866.] The Government know this: yet, as with the laundries, from time to time they have thrown and will continue to throw an odd bone to their supporters, if that be are right term for those who sit behind them. The position simply is that the back benches are being "conned" about prices, and they will go on being "conned". They will go on grumbling and, when they have grumbled enough and collected enough signatures, they will be thrown one more bone to keep them quiet for another few weeks until, finally, they come to the conclusion that they ought to abandon a statutory incomes policy. Indeed, it would be wise if they did it now.

The Bill requires little comment. It follows the statement of the First Secretary on 17th April, with the addition of Clause 5. It really is ludicrous that we have to take up the time of the House to thwart the activities of Mr. Clive Jenkins on behalf of his members, and if the Court of Appeal so decides in the present case we will have to reverse the law so that £20 instead of £21 will be paid to those for whom the assiduous Mr. Jenkins is acting.

Yet this Clause is no more ludicrous than those in the Act. It is entitled: Protection of employers who have withheld pay increases before July 1967. Section 28 of the Act is entitled, "Restrictions on pay increases" and Section 30 is entitled: Authority for employers to disregard pay increases in existing contracts. The one which I should have thought was most offensive to everybody is Section 31, which starts with the words: So long as this Part of this Act is in force, Section 11(4) of the Wages Councils Act, 1959, shall not impose a duty on the Minister of Labour (in this section called 'the Minister') to make an order giving effect to any wages regulation proposals … No Tory Administration ever dreamed of such proposals, and if it had the barricades would have been manned by every Member opposite, and they know it, from the Front Bench to the last, and no one would have manned the barricades more eagerly than those who in half an hour will troop docilely into the Government Lobby.

The chosen vehicle for all this is the Prices and Incomes Board, and I propose to quote a sentence, with which I agree, in an article by my hon. Friend the Member for Oswestry (Mr. Biffen), which appeared in the Daily Telegraph of 5th June. Perhaps I might in passing take up my hon. Friend's comment that there was not an incomes policy in 1957–58. I agree that an incomes policy means different things to different people, but I should have thought that the beginnings of one was there. There was the price plateau, the three wise men, the guiding light, and the rest of it, and this dates back to about 1955. My hon. Friend said in that article: Now that trade unionists openly question the practicability—let alone the desirability—of the Prices and Incomes Board becoming an arbitrating and wage-fixing body, surely many others will want to know what unique concentration of talent enables this modest team to hand down the tablets … We are told that in all, counting clerks, messengers, and everything else, they are 128 strong, and that they can cope with 20 subjects a year. It is therefore clear that quite apart from what happens in future, they are hopelessly overloaded, and although I have a personal regard for Aubrey Jones I believe that no man in this country is fitted for the task that is being put on the Chairman of the Board by successive acts of Government policy in this field. The only sensible way is between partners to a bargain, with the Government if they must—and we did this—with some proper diffidence, because this is a very difficult field, indicating their view of what total burden can be carried.

This Board on which we are now going to rely has produced a number of reports which vary from the superficial, through useful, to the pontifical. One of the most important reports was the attempt to define lower-paid workers. I acknowledge that this is very dear to the hearts of hon. Gentlemen opposite if it can be done, but what did Mr. Awbrey Jones come up with as a solution? His solution resulted in a recommendation for paying all retail drapery trade workers below the basic minimum which had been suggested by the wages council. Not surprisingly that recommendation was ignored by the Government, who then confirmed the original wages council award. Where are we now in relation to lower-paid workers? There is no definition that anyone can accept. This part of the First Secretary's policy has no validity at all.

The other leg is supposed to be productivity. Apparently Mr. Aubrey Jones is to give some guide lines to the Government on the way in which to assess genuine productivity. I quote as an example, Sir Paul Chambers, speaking to the Royal Statistical Society. He said: No method of measuring productivity of as a whole, or of a division, has been devised which is meaningful, of practical use and reasonably simple to compile. If I.C.I. cannot do it with all its resources it will be interesting to see what sort of job Mr. Aubrey Jones makes of this proposal.

A principal objection which is held naturally most strongly by hon. Members opposite is that this policy particularly affects trade unionists. This was the reality of the exchange between the hon. Member for Tottenham (Mr. Atkinson) and my right hon. Friend. Neither he nor my right hon. Friend nor myself would suggest that trade unionists should leave their unions because of their temporary or permanent disagreement with the Government's policy. It is also true that the Government do not, by design, discriminate against trade unionists—but it happens all the same. It happened most clearly, as the House will recall, in the S.O.G.A.T. debate, when a trade union leader came to see me and told me that some of his members were thinking of leaving that union for precisely the reason that emerged in earlier speeches tonight.

The Joint Parliamentary Secretary to the Ministry of Labour challenges this and thinks he has a case. In my opinion there is clear, if unintentional—and it is not disputed that it is unintentional—discrimination, for more than one reason. First, claims by non-unionist labour—and those are the large majority—are largely unsupervised. Secondly, D.E.A. orders, for obvious reasons, affect those who organise the bargains. The others come in on the back of these agreements and often take the benefit of them. This is one of the strongest arguments for trade unionism. Thirdly, salary increases are simply left to exhortation.

We must remember that the whole policy was sold to the trade unions as an alternative to deflation and heavy unemployment—and now we have all three. Unemployment—including unemployment in the regions—is worse at all stages than in previous cycles. The figure started from exactly the same point. Unemployment in Scotland between July 1961 and May 1962 rose by 27 per cent., whereas be- tween last July and this May it rose by 51 per cent.

Mr. Archie Manuel (Central Ayrshire)

Give us the figures.

Mr. Macleod

They started from exactly the same point. I will give the hon. Member the figures from memory, but I am sure they are right. One period started with the figure of 260,000 unemployed and the other with the figure of 264,000. There is virtually no difference between the two, so the rise is strictly comparable.

Mr. Manuel

The right hon. Gentleman referred to Scotland. For the period that he is mentioning there is no comparison, because instead of the 80,000 at present at that time it was 160,000.

Mr. Macleod

I know that quite well. If the hon. Member only realised it, that strengthens my case, because that was in the second year of the squeeze and the winter is coming.

In Wales the comparable figures are 48 per cent. and 72 per cent. It is very difficult to see that any real good has come out of this incomes policy. The main object of the exercise, and a very laudable one, was an improvement in the long-term balance of payments prospect. We have not seen any fundamental improvement in this direction. It is not the absolute level of wages, or even of prices, that is the key, but productivity. And it is not artificial restraint that is needed first, but the provision of incentives.

The alternative is always described by the Government as a free-for-all. This is the dreaded jungle to which we must not return. But what is the free-for-all? It is the system of free collective bargaining which, until last July, the Labour Party was proud of having helped to create. That is what the free-for-all is. It is a system which, with all its faults, has been very widely admired and copied in other countries.

This is the Goebbels technique—the Nasser technique, to be more topical: if you repeat something untrue long enough some people will fall for it. They have all fallen for this stuff about the free-for-all. The free-for-all is such a phrase. It suits the Government to damn what once they praised, and once more some people are falling for it.

When this seemingly endless story—it is like the Forsyte Saga—of the Government's income policy will cease, no one is to know. Part IV lapses in August 1967 and a strengthened Part II is introduced—against the advice of the C.B.I., against the advice of the T.U.C., and against the advice, I would be confident, on a free vote, of the great majority of the House of Commons.

The powers of the new Bill, to which we are invited tonight to give a Second Reading, will lapse in August 1968, though some Orders made under it will go on for six months to February 1969. But what then? We have been given no undertaking whatever by the First Secretary. He has been absolutely frank with us, and I acknowledge it. It may be that Part II will come back in its original form and that can be extended from 12 months to 12 months into the future. It may be that in the end some even less acceptable form of compulsion will be found.^*

Let me put on record, out of the Prime Minister's own mouth, what has happened, and the House can judge whether or not it has been deceived. The first quotation was given by my right hon. Friend the Member for Mitcham, and my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) said "Read it again". It should be read again. It should be read at Morning Service and Evensong every day until the next election.

During the election campaign, the Prime Minister said on 10th March, 1966: I don't think you can ever legislate for wage increases, and no Party is setting out to do that … once you have the law prescribing wages I think you're on a very slippery slope. It would be repugnant I think to all Parties in this country. That is what the right hon. Gentleman said then, but when he saw the President of the United States in Washington on 29th July, he said: We have taken steps which have not been taken by any other democratic government in the world. We are taking steps with regard to prices and wages which no other government, even in wartime, has taken. If that had been said in March instead of in July, hon. and right hon. Gentlemen would be sitting on this side instead of filling the Government benches.

On legislation, the Prime Minister, introducing his statement on 20th July, said: ^*Note: See col. 573 It is not our intention to introduce elaborate statutory controls over incomes and prices."—[OFFICIAL REPORT, 20th July, 1966; Vol. 732, c. 636.] That is what he said—Part IV is what he did.

On legislation, let us notice, first, the promise to the people given to the B.B.C. in "24 Hours". He was asked: When the powers of the Act come to an end in August, Prime Minister, won't there have to be a continuation of them? The Prime Minister replied: In terms of legislative powers, no …' What are we doing this evening except continuing such powers? This is part of the technique. Once more one gets the cover plan, but it is the small print which later becomes the official doctrine.

Speaking at Greenford on 4th March last, the Prime Minister said: Failure now could mean the return to reliance on statutory provisions which neither the trade union movement nor the Government wants. So it is there, and when this present Measure lapses and something else is put in its place and the Prime Minister is accused, as he will rightly be accused, of a breach of faith, he will say, as he has said so often, "I warned you. I told you. Here it is in my speech at Green-ford on 4th March." Look closely at the small print and one can find it.

How can one trust a Prime Minister who says such things and acts so differently? He will not apologise—he never does. We saw that again this afternoon. But he has once more deceived the House and the country. The Bill is useless and unfair. The policy on which it is based has failed and is failing. We shall oppose the Bill at all stages.

9.30 p.m.

The Chancellor of the Duchy of Lancaster (Mr. Frederick Lee)

The right hon. Member for Enfield, West (Mr. Iain Macleod) gave me notice that he would ask the point which he first mentioned about Clause 1(2,b), Clause 3(1) and Clause 2(1,b). He is right in his belief that the negative Resolution procedure is applicable to Clauses 1 and 3, but not to Clause 2. The standstill imposed under Clause 2 has the effect of suspending an increase in a price or a charge or the implementation of an award or settlement either at the time of reference to the Board or after reference to the Board but before publication of the Board's report. If, at a later stage, a direction has to be issued, that will then become liable for the same negative Resolution procedure as will Clauses 1 and 3. Therefore, the parliamentary cover will apply at a later stage.

The debate has produced a very remarkable situation. Despite the fact that the right hon. Member for Enfield, West decried the Bill itself, he did not say that the Tory Party opposes a prices and incomes policy. Does he wish to say so now? [HON. MEMBERS: "Get on with it."] In other words, a party which itself, when in office, attempted to introduce a prices and incomes policy, and did it in such a ham-handed manner that it failed dismally, cannot very well now decry a Government who introduce a prices and incomes policy.

Each of the political parties has pronounced in favour of an effective voluntary prices and incomes policy as one of a number of instruments to assist in our economic recovery. I shall return to the point of the other instruments, because many hon. Members have suggested that the Government are relying only on the prices and incomes policy, but this is not so. I take it that the whole House is united in believing that the country requires an effective incomes policy. Indeed, outside the House the great industrial organisations within the T.U.C. and the C.B.I., and other organisations which are not affiliated to either of those bodies, are also in favour of an effective voluntary prices and incomes policy. Yet tonight, on the rather frivolous grounds which the right hon. Gentleman has just been basing his argument, the Opposition will divide the House against the Bill. [Interruption.]

Mr. Speaker

Order. Hon. Members who have not listened to the debate might at least listen to the winding-up speech.

Mr. Lee

Therefore, the only difference between the parties, a difference which I assure the House we do not find in our discussions with the T.U.C. and the C.B.I. is that, whereas the Tories argue that a voluntary policy must have no fallback powers, however small and temporary they may be, we believe that it is both unreasonable and certainly unsafe at this time to deprive the nation of a safeguard against a small breakaway from the voluntary principle which, if it were unchecked, would merely encourage many of those who now accept the voluntary principle itself to forswear that attitude.

If we are to engage, as I thought the right hon. Gentleman was, in a contest to prove the purity of our devotion to the voluntary principle, it is interesting to see how the Opposition have already got themselves into a considerable contradiction by their own actions. As the right hon. Gentleman said, they have opposed every Order which we have introduced under the 1966 Act. One would have thought that those who advocate an entirely voluntary policy at this stage would be the first to condemn those who break the voluntary nature of the present arrangements. But, instead of doing that, the Opposition have sought to condone every breach of the voluntary policy.

The obvious outcome of a defence of those who gain an unfair advantage from the voluntary actions of others is to discourage the volunteer and to discredit the voluntary system, which, the Opposition say, is the only one which they favour. In the debates on the Prayers which the Opposition put down against the Orders, neither in their speeches to which I listened nor in the ones I have read in HANSARD did I find a word of condemnation of those who broke the voluntary system or a word of praise for the vast majority of people who maintained it.

When they were in power, right hon. and hon. Members opposite tried to introduce a prices and incomes policy, but they failed. Because of the way in which this Government, on the other hand have carried through their approach to prices and incomes, there is the maximum agreement within the great organisation of labour. There is in this House acceptance of the need for a prices and incomes policy. It seems to me, therefore, that this debate and the Division to follow have been taken merely as an opportunity for the Opposition to make any political capital they can out of the economic problems of the nation.

Within Britain there is very little disagreement about it. There is no disagreement about the need for the Government to concern themselves with the attainment of the objectives of the policy, not leaving everything to be settled by sectional interests regardless of the national interest. There have been references to the T.U.C. statement on policy from the conference of executives on 2nd March, 1967. Here is another quotation from it: What trade unions and employers do in the field of wage and salary negotiations can affect the achievement of national economic and social objectives. Governments are entitled and, indeed, required to ensure that the attainment of those objectives is not jeopardised by selfish pursuit of sectional aims. What is at issue is not whether there is to be reliance on a voluntary policy, but whether there is to be some means, for a transitional period, of ensuring that the selfish pursuit of sectional aims is not given a free rein to destroy the voluntary principle, which, I believe, we all accept. This applies not only to wages, where the T.U.C.'s most commendable efforts to develop the vetting system are of such great importance. It must also apply to wages and salaries, including those of the large number of people who do not come within the T.U.C.'s arrangements.

My right hon. Friend pointed out at the beginning of the debate that here we have a situation in which the T.U.C. is taking a most responsible attitude and is now agreeing, in the interests of the nation as a whole, to vet the wage claims which its affiliated unions present to it. Unless there is legislation of the type we are indicating here those who are not affiliated to the T.U.C. will have an enormous advantage in that they would not be subjected to that vetting procedure.

Understandably, many of my hon. Friends have been concerned about the prices issue. Unless we had this kind of legislation there would be no control over price rises. We assert again, as I have done before, that, taking into account the great pressures to which we have been subjected, we have had remarkable success in keeping down price rises.

Mr. R. Carr

If the right hon. Gentleman says that these powers are needed to protect those unions that are affiliated to the T.U.C. and, therefore, must go through the vetting procedure, compared with those which are not, surely the powers will have to be permanent?

Mr. Lee

I do not accept that. Is the right hon. Gentleman saying that the fact that the T.U.C. has a need to vet is a contravention of the voluntary principle? He cannot have it both ways. We contend that during this temporary period, the transitional period of what I have described as the movement from a period of Part IV to the period in which we are taking far less powers, it is absolutely essential that the instruments on which we shall rely implicitly when these powers lapse should have an opportunity to be strengthened during this interim period.

Mr. R. Carr

The right hon. Gentleman may have misunderstood me. Surely, in a year's time, when the Bill lapses, so we are told, there will still be unions that are not affiliated to the T.U.C. and will, therefore, not be subject to the T.U.C. vetting procedure. Therefore, those unions subject to it will still need protection.

Mr. Lee

We have a job to do with organisations representing the Civil Service and teachers and others which do not come within the provisions of the T.U.C. The Government are creating similar kinds of organisations which can use the same criteria as the T.U.C.'s vetting committee for these kinds of organisations outside their control.

Mr. Biffen

rose—

Mr. Lee

A great deal of the legislation which we are suggesting on prices has been determined in conjunction with employers' organisations, with the C.B.I. in particular. When right hon. Gentlemen opposite try to give the impression that they are opposed to the idea of legislation, this is just not true. There was a period around March when both the T.U.C. and the C.B.I. were objecting to what they considered were powers which were too great.

Sir E. Brown

rose—

Mr. Lee

In the meantime, we have had discussions with both the T.U.C. and the C.B.I. and we are agreed that these temporary powers are necessary for the next 12 months.

One hon. Member asked my right hon. Friend whether the provisions in Clause 5 could be used in respect of cases which are now before the courts. The answer is "No". Those cases begun prior to 5th June are not in any way covered by this legislation.

Some of my hon. Friends have asked about the number of references to the Board in respect of prices. They have the feeling that we have been too soft about price increases. There have been 54 references since the inception of the Board, and 21 of those have been in respect of prices or fees. In a great many cases where the Board of Trade or Ministry of Agriculture, Fisheries and Food have had approaches from traders desiring to increase prices, considerable success has been achieved, either in getting the traders in question to agree not to proceed with their price proposals or in getting them to agree to take less of an advance than they were originally proposing.

A great many traders will not risk going to the Board. Naturally, if they are turned down by the Board, that is not very good from their business point of view. It is, therefore, not the case that the difference in numbers as between incomes and prices references going to the Board has come about because of any softness on the part of the Government.

Some hon. Members have suggested that the real need is to manage the level of demand and to take long-term measures to improve the economy. They said that the prices and incomes policy is no substitute for this. The Government certainly do not see the prices and incomes policy as a substitute for a wider strategy of management of the economy, but as an essential part of this strategy.

The policy of the standstill and severe restraint was not confined to prices and incomes. It included a range of measures intended to reduce the pressure of demand in relation to our real resources. We have no intention of trying to operate the prices and incomes policy in a vacuum and we are pushing on with the other elements of our economic strategy.

Reference has been made to the importance of the regional balance of employment. We have taken vigorous steps to improve this, notably through large investment grants for development areas. We are now proposing the introduction of the regional employment premium. A large increase in trading facilities in the development areas has already occurred and further expansion is in train. The general movement of the economy in the coming months will not be such as to put heavy pressure on the labour market and this will be a factor influencing the approach of both employers and unions to the call for moderation over prices and incomes.

We are looking closely at Government expenditure—a subject which has been the theme of a number of speeches—as my right hon. Friend the Chancellor explained in his Budget statement, bearing in mind the importance of having adequate resources available for necessary private investment as well as essential investment in the public sector.

The encouragement of competitive efficiency is an important part of the strategy we are pursuing. This is not only a matter of the work of the Monopolies Commission and the Restrictive Practices Court. We are seeking, through the prices and incomes policy, to do a number of important things, and the process of the examination of industrial situations by the National Board for Prices and Incomes, the Report of which was published today in respect of productivity agreements, is a particularly important example.

Indeed, after the remarks of the right hon. Member for Mitcham and the hon. Member for Colne Valley (Mr. Richard Wainwright), they may care to note that paragraph 181 of the Report states: The rate of growth of productivity agreements will depend in our view upon the maintenance of a prices and incomes policy. All that we have had suggests that the effect of Government policy, especially since July, 1966 has been to direct the attention of both employers and trade unionists away from conventional bargaining and towards productivity bargaining. But since productivity agreements require time and effort, whereas conventional bargaining is easy, many of them might turn back if the pressure were removed. The hon. Member for Colne Valley, after saying how much the Liberal Party agreed with everything in the Bill, said that he and his hon. Friends would vote against it because, he said, we were not discouraging national bargaining. That did not seem a logical argument to me.

The Report issued today demonstrates that since the Government began taking the actions I have been outlining, productivity bargaining has become a far bigger element in our general industrial bargaining than ever before—so I take it that the Liberal Party will be voting with us tonight.

The right hon. Member for Mitcham began by condemning legislation on prices and incomes. He went on to demand legislation for everything in the industrial spectrum, except prices and incomes. He completed his remarks by saying that if only the Government did all of those things, he would even accept legislation on prices and incomes.

Mr. R. Carr indicated dissent.

Mr. Lee

That is what the right hon. Gentleman said.

Mr. R. Carr

rose—

Mr. Lee

I will not give way.

Hon. Members

Give way.

Mr. R. Carr

When the right hon. Gentleman reads the report of my speech in tomorrow's HANSARD he will see that I said nothing of the kind. I am sure that he would not wish to misrepresent me.

Mr. Lee

I will not withdraw anything I have said until I have read the right hon. Gentleman's remarks in the OFFICIAL REPORT. His words were within my hearing and what I have said was my impression of what the right hon. Gentleman said.

The right hon. Member for Enfield, West referred to the notorious Selwyn Lloyd pay pause. That took place during the nine months July, 1961 to April, 1962. Comparisons were made with what had happened during the equivalent period of this year. During the period of that pause, weekly wage rates rose by 2.9 per cent. and retail prices by 4.5 per cent. During the equivalent period of nine months from July, 1966, to April, 1967, weekly wage rates rose by 1.3 per cent. and retail prices by 2.5 per cent. Unemployment now is far less than it was at one period when the right hon. Member for Enfield, West was Minister of Labour.

The line of argument pursued by the Opposition would seem to be that a prices and incomes policy is something with which we have to put up, whether legislative or not, during a period of crisis. This is not our approach. The right hon. Gentleman was telling us about free competitive collective bargaining, and so on. Do I understand that he is now going back on what the Tories have said and is advocating a free-for-all? That was the inference of his remarks.

All the anomalies we now know so much about—the millions of low-paid workers and the obsolete wage structures—are products of so-called "free" collective bargaining. So long as that system obtained, we could never rid the nation of the inequalities suffered by millions of low-paid workers who, no matter how much they strove to increase their share of the national cake, could not do it.

The coming of the Prices and Incomes policy is not merely something to bridge an economic crisis. It is something which we believe will lead to a far better redistribution of that portion of the national income which we can allocate to wages, salaries and so on. Therefore, I believe that, if we can get across to the nation the fact that, whereas a prices and incomes policy when it is used in a period of crisis must be the creature of that crisis, it is not the case that the restrictions that we have seen both during the period of the Selwyn Lloyd pay pause and during this period constitute a prices and incomes policy.

I often get the feeling that it is really the economic problems themselves that people object to rather than the incomes policy which has to attune itself to them. It is to us a great encouragement that industry itself, so unlike the cynicism of the Opposition, is now convinced that, with the partnership we have established with it, we can make great progress in ensuring that the largest possible amount is available for distribution.

Is the right hon. Gentleman saying that there is more for distribution now without creating inflation and a balance of payments problem than is being paid out? Is he saying that, if this legislation were not available, there would be scope for big increases which are being held back because of it? Did the Opposition not learn their lesson in office when, because of their lack of policies, they drove this nation to an annual deficit of £800 million on the balance of payments? If they have not learned that lesson, the nation will know that they are not fitted ever again to be the Government.

The Opposition have called in question the efficiency of this system. But today the balance of payments is in surplus. The Opposition left behind a deficit of £800 million. We have tried to create economic instruments that will ensure that the nation does not go back to that which we found when we took office. We are not relying merely on the prices and incomes policy. Within the economic strategy we are adopting, we believe that this policy is a very useful adjunct and that it can, by the way it is worked, bring about a greater redistribution of incomes and eliminate, as far as may be, in those areas where the low-paid people could never hope to gain more by free collective bargaining.

If the Conservatives want to be alone in not accepting the need for a prices and incomes policy, so be it. But the fact that we have the great support of industry itself and, I believe, of the vast majority of the people, will ensure that we can go ahead with this policy and bring it to fruition.

Mr. William Whitlock (Lord Commissioner of the Treasury) rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the Bill be now read a Second time:—

The House divided: Ayes 288. Noes 235.

Division No. 363.]	AYES	[9.59 p.m.
Abse, Leo	Darling, Rt. Hn. George	Hamilton, William (Fife, W.)
Albu, Austen	Davidson, Arthur (Accrington)	Hamling, William
Alldritt, Walter	Davies, Dr. Ernest (Stretford)	Hannan, William
Allen, Scolefield	Davies, Ednyfed Hudson (Conway)	Harper, Joseph
Andereon, Donald	Davies, Harold (Leek)	Harrison, Walter (Wakefield)
Archer, Peter	Davies, Ifor (Gower)	Hart, Mrs. Judith
Armstrong, Ernest	de Freitas, Rt. Hn. Sir Geoffrey	Haseldine, Norman
Ashley, Jack	Delargy, Hugh	Hattersley, Roy
Atkins, Ronald (Preston, N.)	Dell, Edmund	Hazell, Bert
Bacon, Rt. Hn. Alice	Dempsey, James	Healey, Rt. Hn. Denis
Bagier, Gordon A. T.	Dewar, Donald	Henig, Stanley
Barnes, Michael	Diamond, Rt. Hn. John	Herbison, Rt. Hn. Margaret
Barnett Joel	Dobson, Ray	Hilton, W. S.
Baxter, William	Doig, Peter	Hooley, Frank
Beaney, Alan	Donnelly, Desmond	Houghton, Rt. Hn. Douglas
Bellenger, Rt. Hn. F. J.	Driberg, Tom	Howarth, Harry (Wellingborough)
Bence, Cyril	Dunn, James A.	Howarth, Robert (Bolton, E.)
Benn, Rt. Hn. Anthony Wedgwood	Dunnett, Jack	Howell, Denis (Small Heath)
Bennett, James (G'gow, Bridgeton)	Dunwoody, Mrs. Gwyneth (Exeter)	Howie, W.
Binns, John	Dunwoody, Dr. John (F'th & C'b'e)	Hoy, James
Bishop, E. S.	Eadie, Alex	Huckfield, L.
Blackburn, F.	Edwards, William (Merioneth)	Hughes, Rt. Hn. Cledwyn (Anglesey)
Boston, Terence	English, Michael	Hughes, Hector (Aberdeen, N.)
Bottomley, Rt. Hn. Arthur	Ennals, David	Hunter, Adam
Bowden, Rt. Hn. Herbert	Ensor, David	Hynd, John
Boyden, James	Evans, Albert (Islington, S.W.)	Irvine, A. J. (Edge Hill)
Braddock, Mrs. E, M.	Evans, Ioan L. (Birm'h'm, Yardley)	Jackson, Colin (B'h'se & Spenb'gh)
Bray, Dr. Jeremy	Faulds, Andrew	Janner, Sir Barnett
Brooks, Edwin	Fernyhough, E.	Jay, Rt. Hn. Douglas
Broughton, Dr. A. D. D.	Finch, Harold	Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)
Brown, Hugh D. (G'gow, Provan)	Fletcher, Raymond (Ilkeston)	Jenkins, Rt. Hn. Roy (Stechford)
Brown, Bob (N'c'tle upon-Tyne, W)	Floud, Bernard	Johnson, James (K'ston-on-Hull, W.)
Buchan, Norman	Foley, Maurice	Jones, Dan (Burnley)
Buchanan, Richard (G'gow, Sp'burn)	Foot, Sir Dingle (Ipswich)	Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Butler, Herbert (Hackney, C.)	Ford, Ben	Jones, J. Idwal (Wrexham)
Butler, Mrs. Joyce (Wood Grean)	Forrester, John	Jones, T. Alec (Rhondda, West)
Cant, R. B.	Fowler, Gerry	Judd, Frank
Carmichael, Neil	Fraser, John (Norwood)	Kelley, Richard
Carter-Jones, Lewis	Fraser, Rt. Hn. Tom (Hamilton)	Kerr, Dr. David (W'worth, Central)
Chapman, Donald	Freeson, Reginald	Leadbitter, Ted
Coe, Denis	Galpern, Sir Myer	Ledger, Ron
Coleman, Donald	Gardner, Tony	Lee, Rt. Hn. Frederick (Newton)
Concannon, J. D.	Gineburg, David	Lee, Rt. Hn. Jennie (Cannock)
Conlan, Bernard	Gordon Walker, Rt. Hn. P. C.	Lestor, Miss Joan
Corbet, Mrs. Freda	Gourlay, Harry	Lever, Harold (Cheetham)
Craddock, George(Bradford, S.)	Gray, Dr. Hugh (Yarmouth)	Lever, L. M. (Ardwick)
Crawshaw, Richard	Greenwood, Rt. Hn. Anthony	Lewis, Ron (Carlisle)
Cronin, John	Gregory, Arnold	Lipton, Marcus
Crosland, Rt. Hn. Anthony	Griffiths, David (Rother Valley)	Lomas, Kenneth
Crossman, Rt. Hn. Richard	Griffiths, Rt. Hn. James (Llanelly)	Luard, Evan
Cullen, Mrs. Alice	Gunter, Rt. Hn. R. J.	Lyon, Alexander W. (York)
Dalyell, Tam	Hamilton, James (Bothwell)	Lyons, Edward (Bradford, E.)
Mabon, Dr. J. Dickson	Orbach, Maurice	Snow, Julian
McBride, Neil	Oswald, Thomas	Spriggs, Leslie
McCann, John	Owen, Dr. David (Plymouth, S'tn)	Steele, Thomas (Dunbartonshire, W.)
MacColl, James	Owen, Will (Morpeth)	Stewart, Rt. Hn. Michael
MacDermot, Niall	Padley, Walter	Stonehouse, John
Macdonald, A. H.	Page, Derek (King's Lynn)	Strauss, Rt. Hn. G. R.
McGuire, Michael	Paget, R. T.	Swingler, Stephen
McKay, Mrs. Margaret	Palmer, Arthur	Symonds, J. B.
Mackenzie, Gregor (Rutherglen)	Pannell, Rt. Hn. Charles	Taverne, Dick
Mackie, John	Parker, John (Dagenham)	Thomas, George (Cardiff, W.)
Mackintosh, John P.	Parkyn, Brian (Bedford)	Thomson, Rt. Hn. George
Maclennan, Robert	Pavitt, Laurence	Thornton, Ernest
McMillan, Tom (Glasgow, C.)	Pearson, Arthur (Pontypridd)	Tinn, James
MacPherson, Malcolm	Peart, Rt. Hn. Fred	Urwin, T. W.
Mahon, Peter (Preston, S.)	Pentland, Norman	Varley, Eric G.
Marion, Simon (Bootle)	Perry, Ernest G. (Battersea, S.)	Wainwright, Edwin (Dearne Valley)
Mallalieu, E. L. (Brigg)	Prentice, Rt. Hn. R. E.	Walden, Brian (AH Saint)
Mallalieu, J.P.W. (Huddersfield, E.)	Price, Christopher (Perry Barr)	Walker, Harold (Doncaster)
Manuel, Archie	Price, Thomas (Westhoughton)	Wallace, George
Mapp, Charles	Price, William (Rugby)	Watkins, David (Consett)
Marquand, David	Pursey, Cmdr. Harry	Watkins, Tudor (Brecon & Radnor)
Marsh, Rt. Hn. Richard	Randall, Harry	Weitzman, David
Mason, Roy	Rankin, John	Wellbeloved, James
Maxwell, Robert	Rees, Merlyn	wells, William (Walsall, N.)
Mayhew, Christopher	Rhodes, Geoffrey	Whitaker, Ben
Mellish, Robert	Richard, Ivor	White, Mrs. Eirene
Millan, Bruce	Roberts, Albert (Normanton)	Wigg, Rt. Hn. George
Miller, Dr. M. S.	Roberts, Goronwy (Caernarvon)	Wilkins, W. A.
Milne, Edward (Blyth)	Roberts, Gwilym (Bedfordshire, S.)	Wisley, Rt. Hn, Frederick
Mitchell, R. C. (S'th'pton, Test)	Robinson, W. O. J. (Walth'stow, E.)	Williams, Alan (Swansea, W.)
Molloy, William	Roebuck, Roy	Williams, Alan Lee (Hornchurch)
Moonman, Eric	Rogers, George (Kensington, N.)	Williams, Clifford (Abertillery)
Morgan, Elystan (Cardiganshire)	Rose, Paul	Williams, Mrs. Shirley (Hitchin)
Morris, Alfred (Wythenshawe)	Ross, Rt. Hn. William	Williams, W. T. (Warrington)
Morris, Charles R. (Openshaw)	Rowland, Christopher (Meriden)	Willis, George (Edinburgh, E.)
Morris, John (Aberavon)	Rowlands, E. (Cardiff, N.)	Wilson, William (Coventry, S.)
Moyle, Roland	Shaw, Arnold (Ilford, S.)	Winnick, David
Mulley, Rt. Hn. Frederick	Sheldon, Robert	Winterbottom, R. E.
Murray, Albert	Shinwell, Rt. Hn. E.	Woodburn, Rt. Hn. A.
Noel-Baker, Francis (Swindon)	Shore, Peter (Stepney)	Woof, Robert
Noel-Baker, Rt. Hn. Philip (Derby, S.)	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)	Wyatt, Woolrow
Oakes, Gordon	Silkin, Rt. Hn. John (Deptford)	Yates, Victor
Ogden, Eric	Skeffington, Arthur
O'Malley, Brian	Slater, Joseph	TELLERS FOR THE AYES:
Oram, Albert E.	Small, William	Mr. Charles Grey and
		Mr. William Whitlock.
NOES
Alison, Michael (Barkston Ash)	Campbell, Gordon	Fletcher-Cooke, Charles
Allason, James (Hemel Hempstead)	Carlisle, Mark	Forrest, George
Astor, John	Carr, Rt. Hn. Robert	Fortescue, Tim
Atkins, Humphrey (M't'n & M'd'n)	Cary, Sir Robert	Foster, Sir John
Awdry, Daniel	Channon, H. P. G.	Fraser, Rt. Hn. Hugh (St'fford & Stone)
Baker, W. H. K.	Chichester-Clark, R.	Galbraith, Hon. T. G.
Balniel, Lord	Clark, Henry	Gibson-Watt, David
Barber, Rt. Hn. Anthony	Clegg, Walter	Giles, Rear-Adm. Morgan
Batsford, Brian	Cooke, Robert	Gilmour, Ian (Norfolk, C.)
Beamish, Col. Sir Tufton	Cooper-Key, Sir Neill	Gilmour, Sir John (Fife, E.)
Bell, Ronald	Cordle, John	Glover, Sir Douglas
Bennett, Sir Frederic (Torquay)	Corfield, F. V.	Glyn, Sir Richard
Bennett, Dr. Reginald (Gos. & Fhm)	Costain, A. P.	Goodhart, Philip
Berry, Hn. Anthony	Craddock, Sir Beresford (Spelthorne)	Goodhew, Victor
Bessell, Peter	Crawley, Aldan	Gower, Raymond
Biffen, John	Crosthwaite-Eyre, Sir Oliver	Grant, Anthony
Biggs-Davison, John	Crouch, David	Grant-Ferris, R.
Birch, Rt. Hn. Nigel	Crowder, F. P.	Gresham Cooke, R.
Black, Sir Cyril	Cunningham, sir Knox	Grieve, Percy
Blaker, Peter	Currie, G. B. H.	Grimond, Rt. Hn. J.
Body, Richard	Dalkeith, Earl of	Gurden, Harold
Bossom, Sir Clive	Dance, James	Hall, John (Wycombe)
Boyd-Carpenter, Rt. Hn. John	Davidson James (Aberdeenshire, W.)	Hamilton, Marquess of (Fermanagh)
Boyle, Rt. Hn. sir Edward	Dean, Paul (Somerset, N.)	Hamilton, Michael (Salisbury)
Braine, Bernard	Deedes, Rt. Hn. W. F. (Ashford)	Harris, Frederic (Croydon, N.W.)
Brinton, Sir Tatton	Doughty, Charles	Harris, Reader (Heston)
Bromley-Davenport, Lt. -Col. Sir Walter	Drayson, G. B.	Harrison, Brian (Maldon)
Brown, Sir Edward(Bath)	du cann, Rt. Hn. Edward	Harrison, Col. Sir Harwood (Eye)
Bruce-Gardyne, J.	Eden, Sir John	Harvey, Sir Arthur Vere
Bryan, Paul	Emery, Peter	Harvie Anderson, Miss
Buchanan-Smith, Alick (Angus, N & M)	Errington, Sir Eric	Hastings, Stephen
Buck, Antony (Colchester)	Eyre, Reginald	Hawkins, Paul
Bullus, Sir Eric	Farr, John	Hay, John
Burden, F. A.	Fisher, Nigel	Heald, Rt. Hn. Sir Lionel

Heseltine, Michael	Maginnis, John E.	Rossi, Hugh (Hornsey)
Higgins, Terence L.	Marples, Rt. Hon. Ernest	Royle, Anthony
Hiley, Joseph	Marten, Neil	Russell, Sir Ronald
Hill, J. E. B.	Maude, Angus	Scott, Nicholas
Hirst, Geoffrey	Maudling, Rt. Hn. Reginald	Sharples, Richard
Hobson, Rt. Hn. Sir John	Mawby, Ray	Shaw, Michael (Sc'b'gh & Whitby)
Hogg, Rt. Hn. Quintin	Maxwell-Hyslop, R. J.	Sinclair, Sir George
Holland, Philip	Maydon, Lt.-Cmdr. S. L, C.	Smith, John
Hornby, Richard	Mills, Peter (Torrington)	Stainton, Keith
Howell, David (Guildford)	Mills, Stratton (Belfast, N.)	Steel, David (Roxburgh)
Hunt, John	Miscampbell, Norman	Stodart, Anthony
Hutchison, Michael Clark	Mitchell, David (Basingstoke)	Stoddart-Scott, Col. Sir M. (Ripon)
Iremonger, T. L.	Monro, Hector	Summers, Sir Spencer
Irvine, Bryant Godman (Rye)	Montgomery, Fergus	Tapsell, Peter
Jenkin, Patrick (Woodford)	Morgan, Geraint (Denbigh)	Taylor, Sir Charles (Eastbourne)
Johnson Smith, G. (E. Grinstead)	Morrison, Charles (Devizes)	Taylor, Frank, (Moss Side)
Johnston, Russell (Inverness)	Mott-Radclyffe, Sir Charles	Teeling, Sir William
Jones, Arthur (Northants, S.)	Murton, Oscar	Temple, John M.
Jopling, Michael	Nabarro, Sir Gerald	Thatcher, Mrs. Margaret
Joseph, Rt. Hn. Sir Keith	Neave, Airey	Tilney, John
Kaberry, Sir Donald	Nicholls, Sir Harmar	Turton, Rt. Hn. R. H.
Kerby, Capt. Henry	Noble, Rt. Hn. Michael	van Straubenzee, W. R.
Kimball, Marcus	Nott, John	Vaughan-Morgan, Rt. Hn. Sir John
King, Evelyn (Dorset, S.)	Orr, Capt. L. P. S.	Wainwright, Richard (Come Valley)
Kitson, Timothy	Orr-Ewing, Sir Ian	Walker, Peter (Worcester)
Knight Mrs. Jill	Osborn, John (Hallam)	Walker-Smith, Rt. Hn. Sir Derek
Lambton Viscount	Page, Graham (Crosby)	Wall, Patrick
	Page, John (Harrow, W.)	Ward, Dame Irene
Lancaster, Col. C. G.	Pearson, Sir Frank (Clitheroe)	Weatherill, Bernard
Langford-Holt Sir John	Percival, Ian	Webster, David
Legge-Bourke, Sir Harry	Peyton, John	Wells, John (Maidstone)
Lewis, Kenneth (Rutland)	Pike, Miss Mervyn	Whitelaw, Rt. Hn. William
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)	Pink, R. Bonner	Wills, Sir Gerald (Bridgwater)
Lloyd, Ian (P'tsm'th, Langstone)	Powell, Rt. Hn. J. Enoch	Wilson, Geoffrey (Turo)
Lloyd, Rt. Hn. Selwyn (Wirral)	Price, David (Eastleigh)	Winstanley, Dr. M. P.
Longden, Gilbert	Prior, J. M. L.	Wolrige-Gordon, Patrick
Loveys, w. H.	Pym, Francis	Wood, Rt. Hn. Richard
Lubbock, Eric	Quennell, Miss J. M.	Woodnutt, Mark
McAdden, Sir Stephen	Ramsden, Rt. Hn. James	Worsley, Marcus
Mac Arthur, Ian	Rawlinson, Rt. Hn. Sir Peter	Wright, Esmond
Mackenzie, Alasdair (Ross & Crom'ty)	Rees-Davies, W. R.	Wylie, N. R.
Maclean, Sir Fitzroy	Renton, Rt. Hn. Sir David	Younger, Hn. George
Macleod, Rt. Hn. Iain	Ridley, Hn. Nicholas
McMaster, Stanley	Rippon, Rt. Hn. Geoffrey	TELLERS FOR THE NOES:
Macmillan, Maurice (Farnham)	Robson Brown, Sir William	Mr. R. W. Elliott and
Maddan, Martin	Rodgers, Sir John (Sevenoaks)	Mr. Jasper More.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).