HC Deb 15 April 1969 vol 781 cc1003-6

I come now to incomes policy and industrial relations.

The achievement of the objectives we have set ourselves, and the avoidance of further difficulties, must depend upon restraint in the growth of incomes. The measures I have to propose are not called for by the very small growth in public expenditure. That could have been looked after quite comfortably by the natural buoyancy of the revenue. They are occasioned by the need to restrain private consumption, and a vital further consideration here is the rate of growth of incomes.

The question of how this rate of growth can best be moderated is one which has commanded the attention of successive Governments now for twenty years or more. In this period we have experienced voluntary restraint, compulsory restraint of varying degrees of severity, as well as statutory and non-statutory prohibitions of increases. None of these methods has been free from difficulty or disadvantage. A completely voluntary policy places too great a burden of responsibility on individual negotiators, and represents an abdication by the Government from a rôle which they should properly fill.

On the other hand, a rigorous compulsory policy such as we had during the standstill and have been applying under the 1968 Act is viable only in exceptional circumstances and then as a short-term measure. It was for these reasons that when I announced the current policy in my Budget statement last year I said that it could have only a limited life.

In the wake of devaluation it was entirely right to place a special emphasis on the need to take extreme powers to moderate the growth of all forms of income and all prices. There was bound to be a strong upsurge in prices, and without restraint incomes would almost certainly have accelerated much more than in the event they did. Confronted as we were with the possibility of a vicious price-wage spiral we felt it right to take steps which we knew would be unpopular.

The serious spiral dangers which the policy was designed to guard against have not occurred, and there is reason to believe that the price increases which stemmed from devaluation have now largely worked their way through the economy. We have reached a situation, therefore, where the Government can contemplate moving to a policy which can offer a long-term solution to the problem of moderating the rate of growth of prices and incomes without resort to stringent statutory powers.

To continue to rely on stringent statutory powers would, in the long run, have prejudicial effects on industrial relations and thus be prejudicial to our industrial performance. A long-term policy must involve a considerable measure of public acceptance and of voluntary application. Moreover, no observer of the British economy can doubt that the present climate of industrial relations is a serious obstacle to the attainment of our economic objectives, and that the improvement of that climate should be a major aim of policy.

When, therefore, the present powers expire at the end of this year we propose to rely instead on the provisions of Part II of the 1966 Prices and Incomes Act. These provisions will enable the Government to refer proposed pay increases to the Prices and Incomes Board, and to defer their implementation for three months, so that the Board can complete its report on a reference in time for its recommendations to have influence on the parties proposing the increases.

The Government have no intention of abandoning the many gains that have been achieved by their policy over the past four years. Over this period great changes have been achieved in the attitudes of those concerned in collective bargaining, in particular by encouraging the establishment of links between increases in pay and increases in productivity. This has brought to the bargaining table for the first time considerations which are vital to our national economic performance.

The momentum of this process of reform must be maintained and the Government will issue guidance to negotiators and to those responsible for the determination of prices on the scale of appropriate increases and the circumstances under which they can properly be made. Consultations will be held with the T.U.C., the C.B.I., and the N.B.P.I. with a view to the publication of a White Paper later in the year. In the meantime, however, the present policy and powers will remain in effect.

The reforms and changes in attitudes that the policy is bringing about will do much to improve our industrial performance; it is essential that this be con tinued But it is equally important that we reinforce this by bringing about more orderly arrangements in industrial relations generally. In particular we need to facilitate the smooth working of the process of collective bargaining in industry and to help to prevent the occurrence of unnecessary and damaging disputes, of which we have seen all too much recently, and which are totally incompatible with our economic objectives. The Government have, therefore, decided to implement without delay, during the present Session, some of the more important provisions incorporated in the White Paper "In Place of Strife". My right hon. Friend the First Secretary will be intervening later in this debate to explain the provisions which the new legislation will embody.