HC Deb 22 March 1967 vol 743 cc1712-26
Mr. Speaker

Mr. Stewart. Statement.

Mr. Heffer

On a point of order. As the White Paper on Prices and Incomes Policy has not been available until this very minute, Mr. Speaker, may I ask whether it is possible for the sitting of the House to be suspended for a short period to allow hon. Members to get the White Paper and to read it before we hear the statement by the Minister?

May I also ask whether, in future, the Government will make White Papers available to hon. Members at least an hour before statements on them are to be made?

Mr. Ogden

Further to that point of order. I understand that the White Paper is not available in the Vote Office.

Hon. Members

Yes, it is.

Mr. Speaker

The question of availability of papers before statements on them are given is a matter which the hon. Member must take up with the Government, and not with Mr. Speaker.

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

With permission, I wish to make a statement.

The Government have been considering in consultation with representatives of management and trade unions the lines on which the prices and incomes policy should develop after the end of June. I am laying before the House this afternoon a White Paper summarising our views on this question. But the House will wish to have a brief indication of the main points in it.

The essence of prices and incomes policy is that growth of money incomes should be related to growth of real wealth, and that movements of prices should give adequate return to producers while ensuring that consumers and workers share in the benefits resulting from improved methods of production. The value of such a policy is that it can give everyone in all walks of life and every place of work a clear interest in increased efficiency; and that it can so safeguard our balance of payments as to make possible sustained economic growth and a high level of employment.

During the last six months of last year the policy took the form of standstill; at present, it takes the form of severe restraint. These forms are a temporary product of necessity. As growth proceeds, prices and incomes policy can become less restrictive till it reaches its full stature as one of the instruments for ensuring that wealth is more efficiently produced and more justly shared. We have yet to reach that stage; but after the middle of this year it will be right to have more flexible arrangements than those now in force.

On the prices side, the Government attach great importance to continued efforts to restrain price increases and to encourage price reductions. The criteria which should govern price behaviour will be those laid down in the White Paper of April, 1965 (Command 2639), which were agreed between Government, management and unions. A necessary part of prices policy is that the voluntary arrangements for early warning of proposed increases should continue to apply and where appropriate we will be discussing development of the arrangements with the Confederation of British Industry and interested trade associations.

On the incomes side it would be inappropriate in our present economic circumstances to reintroduce a positive norm on the lines of the annual norm of 3 to 3½ per cent. which prevailed up to July, 1966. During the 12 months beginning on 1st July next we do not think any group of workers ought to expect to receive an increase in pay simply and solely as a result of the passages of time. Any proposed increase ought to be justified against specific criteria. As in the case of prices, these will be the less restrictive criteria which were laid down in the White Paper of April, 1965. The White Paper which I am presenting to the House this afternoon also draws attention to certain additional considerations which need to be taken into account.

The continuation and development of the voluntary early warning arrangements for pay are of great importance. We welcome the decision of the T.U.C. to strengthen its own arrangements for securing notification and vetting of pay claims. A successful prices and incomes policy depends on a wide measure of agreement between Government, management and unions. It is our intention to encourage the voluntary operation of the policy, and in this context we attach great importance to the rôle of the C.B.I. and the T.U.C.

As the House is aware, Part IV of the Prices and Incomes Act will expire on 11th August, 1967. The Government's objective is to achieve a return to full reliance on a voluntary operation of the policy as quickly as possible. On the matter of reserve powers the Government are consulting further with the C.B.I. and T.U.C. and I shall make a further statement after Easter.

I do not underestimate the problems of achieving an effective policy for productivity, prices and incomes, but I believe that the whole nation now recognises the need for such a policy and will not be content to return to a so-called "free-for-all" which is, in fact, injurious to all, and which strikes its hardest blows at those who are least able to defend themselves.

Mr. Iain Macleod

Is the First Secretary of State aware that that statement is about as clear as mud to the House? Would he agree that it is less than half a statement, because what we are anxious to know are the Government's plans for legislation? In considering that and the consultations that the right hon. Gentleman will be having, will he take into account the view, which is strongly held not only on one side of the House, that the time has come for the Government to abandon the attempt to enforce a wage policy by statutory means?

Beyond that, may I ask the First Secretary two questions? First, on the sentence which begins, "As growth proceeds"—which is slightly comic, perhaps, in present circumstances—when the right hon. Gentleman suggests that we should return for criteria to the White Paper of April, 1965, how does he reconcile the criteria of that Paper which were in the light of a norm of 3 to 3½ per cent. with the criteria which he is suggesting today and in his new White Paper, which I have not had time to study, for a period of nil growth and nil norm?

The most notable omission from the First Secretary's statement seems to be any reference to the lower-paid worker. Is this to be found in the White Paper, or is it a change of policy? Has the right hon. Gentleman accepted the view, which I put to him last time we discussed these matters, that it is not possible to deal with the problems, many of which arise through family circumstances, of the lower-paid worker through the wage structure, but that if he wishes to move in this sector he should rely upon the social security system?

Mr. Stewart

As I made quite clear, this is not a statement on the subject of powers. It is a statement—and it was necessary to make a statement—on the questions of norm and criteria because that is needed for the guidance of those who will be engaged in wage negotiations. The other statement will follow later.

This is not a period, as the right hon. Gentleman described it, of nil growth. We certainly hope and expect to see a period of faster growth than we now have. [Laughter.] This is not a period of nil growth. If the right hon. Gentleman studies both this White Paper and the earlier one, he will find that this is clearer to those who study it than he supposed. He will find that there is no difficulty about reconciling what I have said about the criteria with the decision that we have had to take about the norm.

We are proceeding first from standstill, where there were no increases except in a few very restricted cases, to severe restraint, where increases are allowed if they are in conformity with strictly drawn criteria, and next to a period where increases can be permitted in accordance with more generous criteria. I believe that in the next stage after that one can also think of more generous criteria and of a positive norm, but this is something on which we must proceed by stages.

As to powers, the right hon. Gentleman asked me to take into account the views held about the methods by which the policy can be carried out. I wonder whether he agrees with his right hon. Friend the Leader of the Opposition that policy in these matters ought to be carried out simply by restricting demand?

Mr. Iain Macleod

What about the lower-paid workers?

Mr. Stewart

That, again, will be familiar to those who have read the White Paper. The criteria in the earlier White Paper contained a reference to the lower-paid worker, and it is, therefore, also in this one.

Mr. Iain Macleod

I shall confine myself to a last point made by the right hon. Gentleman, as there are a number of other Members who wish to ask questions. I am familiar with the previous White Paper, and the criteria laid down in paragraph 15 thereof, but the right hon. Gentleman must agree that this begs the question. What is a reasonable standard of living, and who are lower-paid workers? Unless he defines these matters, the criteria he is putting forward now in relation to the lower-paid workers are meaningless.

Mr. Stewart

I do not think that the right hon. Gentleman could have been so familiar with the last White Paper, or he would not have had to ask whether there was any reference to the lower-paid workers in this one. That is what he asked, and it showed that he could not have remembered what was in the previous White Paper.

I accept the difficulties of defining the lower-paid workers, but I believe that with the experience we gather, both from negotiation and from the working of the Prices and Incomes Board, we shall be able to have a workable definition. Meanwhile, even during the period of severe restraint we have been able to make some progress in this field.

Mr. Heffer

In view of the fact that the Prime Minister said that the T.U.C.'s decision on prices and incomes was an historic one, and as the T.U.C. policy stated quite clearly that it did not wish either a continuation of Part IV, or the activation of Part II of the Act, why is it that in the White Paper, which I have only just seen, the Government are proposing to activate Part II, which must, inevitably, lead to a clash with the T.U.C. and a very difficult position for the Labour movement?

Mr. Stewart

I agree that the decision of the T.U.C. about the development of its own powers in this field was an historic one, and a very important element in the development of prices and incomes policy as a whole. I have said that the powers will be the subject of consultation, but I do not believe, whatever views may be held on that, that this detracts from the value of what the trade union movement as a whole has been doing and will continue to do.

My hon. Friend complains that he has only just had the White Paper. This is due simply to the fact that it has been our practice in the House in the past, when a White Paper is laid, for a statement to be made at the same time. This does not preclude the House on a future appropriate occasion from having more detailed discussions.

Mr. Higgins

Will an increase be justified on the right hon. Gentleman's criteria if productivity in an industry goes up by 10 per cent. and the demand for the product being made goes down by 50 per cent.?

Mr. Stewart

If there is a situation in which labour costs are reduced, there will, prima facie, be a case for an increase, yes.

Mr. Maxwell

Is my right hon. Friend aware that the success of the prices and incomes policy has been most beneficial to our export drive, and to saving the £? I would like to ask him, on behalf of my constituents, in particular the railwaymen and the railway workshop men, whether these criteria will permit them an urgently needed wage increase which they deserve, and for which they have asked.

Mr. Stewart

I am certainly not at this stage going to begin applying the criteria all round to particular cases, as my hon. Friend must very well realise. But I agree with the first part of his question, that we have witnessed a very substantial improvement in the balance of payments, in our exports, and in the strength of sterling. I should draw the atttention of the House to the fact that by virtue, in the main, of commitments already entered into there is likely, between the middle of 1966 and the end of 1967, to be an increase in wages of about 6 per cent. over those 18 months. I think that this illustrates the need, on the one hand, for us to give continuing attention to improving productive efficiency, and, on the other, for having an effective prices and incomes policy.

Mr. Barnett

While one must accept that a free-for-all would be harmful, would not my right hon. Friend agree that no incomes and prices policy can be anything more than marginally effective? Would he therefore agree that what we need now is co-operation rather than compulsion if we are to get the growth that we vitally need?

Mr. Stewart

We certainly must have co-operation. It is true that the prices and incomes policy cannot, as a single instrument, deal with our problems. It must be part of the whole range of economic policy, but I believe, particularly in the light of the figure which I mentioned to the House just now, that it is at present an extremely important part of policy.

Sir J. Rogers

In his statement the right hon. Gentleman said that no increases should be granted because of the passing of time. Can he say what plans the Government have for dealing with the decrease in purchasing power of the £ as a result of the inflationary tendency in the economy, which grievously affects lower-paid workers?

Mr. Stewart

If it is a question of arguing the case of the lower-paid workers, it is argued on that criterion, and not merely on the passage of time. What I wanted to make clear was that at the present time, as distinct, I hope, from subsequent periods, we must stick to the point that claims must be justified in the light of specific criteria.

Mr. Biffen

Is the right hon. Gentleman aware that there is widespread and continuing distrust and opposition to any policy which seeks to convert the C.B.I. or the T.U.C. into a sub-contractor of Government policy? The right hon. Gentleman referred—

Mr. Speaker

Order. We cannot have speeches. Brief questions.

Mr. Biffen

The right hon. Gentleman referred to the T.U.C. vetting wage increases. Who will vet the wage increases of those who are not unionised? Does he hope that the C.B.I. will vet price increases?

Mr. Stewart

There is no policy for making either of these bodies a subcontractor to the Government. The point is that the policy works most effectively where there is a wide degree of voluntary co-operation. The T.U.C. has offered and is practising that degree of co-operation. I agree that we would not get a parallel to that everywhere else, but in its own field it is valuable and should be encouraged,

Mr. Varley

Is my right hon. Friend aware that to suggest activating Part and strengthening it even before Part IV has expired may prejudice and undermine the T.U.C's own voluntary policy? Would not it be better to wait and see whether the voluntary policy works before suggesting activating Part II?

Mr. Stewart

I have said that this is under consultation. It was necessary, I think, to begin that process of consultation at the present time, but we have still to see what results come from it. I do not, in any case, believe that it will undermine what the T.U.C. itself is doing, and I think that this was made clear at the recent conference of executives.

Mr. Richard Wainwright

In view of the supremely important rôle which the Government now propose to give to the C.B.I. and the T.U.C., especially in regard to the activation of Part II, will the First Secretary tell the House as precisely as possible his intentions with regard to the large number of important managements which either do not belong to the C.B.I., or, if they belong, recognise no particular loyalty to it? Likewise, are there not numerous employees who are not effectively associated with the T.U.C.? How are these to be brought within the ambit of a voluntary policy?

Mr. Stewart

It is not only with those two bodies that the Government have consultations—and not only with those two bodies that the Government are in touch on the actual operation of the policy. During the period of standstill and severe restraint we have made the contacts that have been necessary, and they have achieved the success of the policy during that period. We will continue in that way.

Mr. Bob Brown

I concede the success of the Government's policy in containing the increase in the cost of living, but does not the First Secretary agree that one of the greatest causes of irritation to housewives has been the excuse of S.E.T. and other Government taxation for increasing profits, especially in the distribution of food?

Mr. Stewart

I know that there have been some well-founded complaints on that score, but, as my hon. Friend has pointed out, if we look at the general result, as reflected in the very limited increase in the index of retail prices—that increase including factors due to S.E.T.—we can say that the amount of abuse of this kind has been very limited.

Sir E. Boyle

What are the implications of the right hon. Gentleman's statement and the White Paper for negotiations on teachers' pay? Can he say categorically that the Government will not now try to hold up negotiations on teachers' pay? Secondly, does the White Paper mean that the Government representatives on the teachers' pay negotiating machinery are to be rigidly bound by the criteria set out in paragraph 22?

Mr. Stewart

The criteria must be taken as applying to all increases in incomes, but it is not intended to hold up negotiations.

Miss Lestor

Bearing in mind the connection between large families and poverty, can my right hon. Friend tell the House whether the Government are still considering dealing with the question of the lower-paid worker rather by an adjustment in family allowances than by an increase in wages?

Mr. Stewart

Any adequate policy to deal with this problem must contain in it some element of wages policy and some element of social services policy. The Government are aware of that.

Mr. Emery

If, in the right hon. Gentleman's statement, there is not an implication of nil growth, it is certainly only a case of a movement from the snail to the tortoise. What does he forecast as the suggested growth for the coming year? Is it anywhere near what is suggested in the National Plan, or has that been torn up, too?

Mr. Stewart

The rate of growth will not be that forecast in the National Plan, as I have said on a number of occasions. I have also informed the House of steps to be taken to produce a further version of the National Plan. But the point is that the rate of growth, if compared with the figure that I gave the House as to what was expected of wages, exphasises the need for great care in the administration of the prices and incomes policy.

Mr. Emrys Hughes

Is my right hon. Friend aware that there is an impression in Scotland that Scottish workers are not treated as fairly as are workers in England? In view of the handling of the N.A.L.G.O. dispute, will my right hon. Friend assure the House that these blunders will not be repeated in Scotland?

Mr. Stewart

I do not accept that they were blunders, or that, in general, it could be maintained that workers in Scotland were not well treated, or fairly treated, in comparison with others, for this reason: owing to differences in dates of settlements some Scottish workers fared less well than English workers while other groups were more fortunate, during the operation of the standstill. The White Paper states that one of the considerations that ought to be taken into account in the coming period is how people fared under the standstill.

Mr. Nott

Further to the question asked by my hon. Friend the Member for Worthing (Mr. Higgins), if demand increases by 50 per cent. and productivity falls by 10 per cent., will the workers in the industry concerned be eligible for a wage increase?

Mr. Stewart

When the hon. Gentleman brings me details of an industry in which that has happened. I will give him an answer.

Mr. Murray

Will my right hon. Friend take note of the fact that many people outside the House think that the Gov- ernment have been too easy on price increases? The letters that I have had have shown this. Will he take action to prevent unjustified price increases?

Mr. Stewart

I do not believe that this impression is borne out by the facts. If my hon. Friend is urging that we should have more stringent control over prices, that would be something to be taken into account in any discussion of future reserve powers.

Mr. Patrick Jenkin

Does the right hon. Gentleman recognise the considerable injustice which has been done in the past to salary earners in industry? Does his new statement of policy allow industry to revert to its practice of regular salary increases? Since salary earners are on a ladder, would not this equate them with civil servants, who have been entitled to salary increases all the way through?

Mr. Stewart

I do not think that we should talk of the process of regular increases, because the whole point of this argument is that these were not necessarily regular increases but increases given at discretion, and intended to be in return for the growing value of an employee to his firm. It was for the very reason that they were not regular and assured that they were treated differently during the standstill from those who have assured annual increments.

I agree that that differentiation bore harshly on some people, and it is for that reason removed in the coming period. But this puts an obligation on employers to consider their salary structures and make sure that they really are liable to promote efficiency.

Mr. Park

Will my right hon. Friend confirm that he is aware that the T.U.C. has stated quite explicitly its opposition to the implementation of Part II of the Prices and Incomes Act? Is he further aware that that opposition would be much stronger if the Government made any attempt to strengthen Part II? Is it not clear that the only practicable approach to an incomes policy is a voluntary one, and not one based on punitive restrictions and legal measures?

Mr. Stewart

I do not think that one can draw the absolute distinction that my hon. Friend draws between a voluntary policy and one with restrictive measures. Any policy has to have behind it a large measure of voluntary acceptance. The point still under consideration is whether any kind of reserve or long-stop powers are necessary as well, in the interests of the great majority of people who want to make the voluntary policy a success. We must remember that in this argument there are very many parties—not only the T.U.C., but managements, the Government and the whole body of citizens.

Mr. Robert Carr

Since such meaning as the statement has hinges on the phrase "as growth proceeds", will the right hon. Gentleman tell us what is the projected growth for this year and for next year?

Mr. Stewart

No, I am not going to give a figure at this stage. [An HON. MEMBER: "None."] That is not so. There are good reasons for believing that there will be growth and that the rate of growth will increase, but I am not prepared at this stage to put a figure to it.

The point made in the statement is that the need for an incomes policy in general is, I believe, now generally accepted, with the exception of some hon. Members opposite, who prefer, as the Leader of the Opposition has suggested, to deal with economic difficulties by damping down. But while the need for an incomes policy is generally accepted, the extent to which that policy is to be severe or relaxed depends on the rate of growth. That is the point made in the Paper.

Mr. Roy Hughes

But does my right hon. Friend appreciate that the proposals to activate Part II may have a serious detrimental effect on the T.U.C.'s voluntary policy, because many trade unions supported that policy believing that the Government would give up their legislative power of veto and control of wage claims?

Mr. Stewart

I believe that the general view held in the trade union movement is that it is vital that the T.U.C.'s own part in this matter should be played, whatever its disagreement with the Government on other aspects of policy may be.

Sir Knox Cunningham

Why will the right hon. Gentleman not give an estimated figure for the rate of growth this year and next year? Does what he has just been saying mean that the Government's refusal to allow the pay increase to civilian employees of the R.A.F. at Aldergrove will stop in June?

Mr. Stewart

I am not giving a figure now because we are engaging with the National Economic Development Council on the studies which will lead to a fresh version of the National Plan. It would be better not to make pronouncements or prophecies in advance of those studies.

Mr. Wellbeloved

Would my right hon. Friend accept the congratulations of hon. Members on the degree of co-operation which he has achieved by his patient and careful consultations with the T.U.C. and the C.B.I.? Would he give the House a clear undertaking that he will work for the same high degree of co-operation with Members of the House by consulting us before he issues any proposals for strengthening legislation?

Mr. Stewart

I am obliged to my hon. Friend. I have endeavoured at every stage to make this the subject of the fullest possible consultation. I have been conscious during that time that very many particular interests represented in the T.U.C. and the C.B.I. and in other bodies have their claims and their worries about this, but these must all be studied in perspective with the general interest of the community that we shall be able to prevent runaway inflation, that we shall not throw away the advantages which we have gained in our balance of payments and our general economy and that we shall not be driven back again to a situation in which some people may have to suffer from unemployment because others, perhaps better paid, have not been prepared to exercise restraint over wages.

Mr. Hall-Davis

In view of the fact that many people have suffered a fall in their real standard of living of 5 per cent. since 1965, does not the right hon. Gentleman consider it quite inequitable that the passage of time should be disregarded as grounds for any increase for a further 15 months from now?

Mr. Stewart

I believe this to be a necessary step at present. It is no good trying to get out of difficulties like this by the provision simply of larger money incomes, which, in the end, do not leave any of us better off.

Mr. Ashley

Can my right hon. Friend assure the House that there will be no weakening of the Government's resolve to supervise the orderly transfer from conditions of severe restraint to those of freer bargaining? Is he aware that the Government's determination to maintain reserve powers until a voluntary system can be guaranteed to work will be welcomed on this side of the House and throughout the country?

Mr. Stewart

It seems that I am already engaged in consulting hon. Members on this question. I think, however, that I should only repeat at this stage that this is still under consultation. What the Government must be sure is that, on the one hand, they do not unnecessarily irritate opinion by demanding more powers than may be necessary and, on the other, they do not let the situation run away with itself, so that we come back again to inflation and stop-go.

Sir H. Legge-Bourke

Is the right hon. Gentleman aware that the tendency to give somewhat donnish lectures to the nation on these subjects ties up very ill with the Government's shameless increase in their own expenditure and the taking on of 24,000 more civil servants in one year? May we now have an assurance that, during the coming year, the Post Office, for example, will not be allowed to put up its prices completely regardless of the Government's general policy?

Mr. Stewart

These questions go outside the scope of this statement. The hon. Member will have opportunities to make his complaints on these matters and receive answers.

Mr. Alfred Morris

Is it possible for my right hon. Friend to make any specific reference to how profits and dividends will be treated after the period of severe restraint? Also, would he say how rents will be treated?

Mr. Stewart

My hon. Friend will find these in the Paper. Perhaps I should not go over the whole of it now, but he will find that the whole field of incomes is covered there. I have considered further the question whether there is any unfairness to the House in making a statement when hon. Members have only seen the Paper. That could be avoided, of course, by not making a statement at all, but hon. Members have generally found it convenient, I think, to have an intro- ductory statement which does not, of course, in the least prejudice subsequent discussion after the Paper is read.

Mr. St. John-Stevas

Will the right hon. Gentleman tell us unequivocally whether he intends to take legislative powers to enforce his norms and, if so, what? Does he agree with the Prime Minister's declaration, reported in The Times, that he did not intend to retreat to fall in with trade union demands for a wholly voluntary system?

Mr. Stewart

I have explained many times that this matter is still under consultation; I will not, therefore, give a definite answer now. The general line of the Government's thinking at the moment has been made known to the parties concerned and it is publicly known, but this is still a matter to be discussed further, before I make a final statement to the House.

Several Hon. Members

rose—

Mr. Speaker

Order. We have a heavy programme. Mr. Stonehouse. Statement.