PRICES AND INCOMES

HC Deb 17 December 1969 vol 793 cc1368-481

4.20 p.m.

The First Secretary of State and Secretary of State for Employment and Productivity (Mrs. Barbara Castle)

I beg to move, That the Prices and Incomes Act, 1966 (Continuation of Part II) Order 1969, a draft of which was laid before this House on 8th December, be approved. What we are discussing this afternoon is the problem of inflation and the part which can be played in solving it by a prices and incomes policy. Of course, a prices and incomes policy is not, and cannot be, the whole of any Government's economic strategy—or of its strategy for social justice. The challenge facing us is that all the alternative forms of demand management that have been tried out by various Governments at various times have never yet succeeded in curbing inflation without curbing growth. They have often been savagely socially unjust, too.

It is for this reason that Governments in all advanced industrial countries keep returning to this problem, trying to find a solution. In discussing inflation we are not discussing a problem peculiar to a Labour Government. I have very good authority for saying that. I have the authority of no less a person than the former Conservative Chancellor the right hon. Member for Barnet (Mr. Maudling), who only a few days ago unburdened his soul on this theme in the Sunday Express of 30th November. He wrote: Every Government since the war has been haunted by the fear of inflation. No Chancellor has been able to find a final answer. Mr. Rising Price may occasionally be halted, but he is never stopped. We are discussing inflation in this context for two reasons. The first is because inflation hits hardest the people who have least protection against it, the pensioner who depends on the generosity of taxpayers to keep alive, and the low-paid worker who can never exert enough bargaining power to keep himself abreast of the unsatisfied demands of an affluent society. Secondly, it is because inflation, if it gets out of hand, is the enemy of economic growth. Successive Governments on both sides of the House have learned this lesson to their cost.

It is these harsh economic facts that gave birth to the concept of a prices and incomes policy. Hon. Gentlemen opposite now find it politically convenient to sneer at it, but they had an incomes policy—only It was an incomes policy, not a productivity, prices and incomes policy. As such it was so patently unfair that it never got off the ground. It was a crude, clumsy attempt to check demand by clamping down unilateral restraints on the wage earner, particularly, incidentally, the wage earner in the public service.

It was left to this Government, as a Socialist Government, to broaden the concept into something which did not do violence of every concept of human justice. Our concept was embodied in the Declaration of Intent of December, 1964, of which my right hon. Friend the Member for Belper (Mr. George Brown) was the architect. To those of my hon. Friends who have had reason to quarrel with him about some aspects of foreign policy, I would say that none of us could deny that in economic policy he has been consistently an expansionist.

It is his concept which imbues the whole content and tone of the White Paper which we are discussing as a background to this order. What is this concept? First, it is that if we are to secure steady and sustained growth we must find ways of breaking the hitherto almost automatic link between expansion and inflation. We must find ways of giving the go-ahead to higher productivity without at the same time giving the go-ahead to higher prices, which follow inevitably if increases we pay out to ourselves exceed what we produce.

Secondly, it is a concept of social justice. We have not got a true prices and incomes policy if it is one that ensures that certain people who do not command the key positions of economic power get left behind.

In short, it is a very difficult concept indeed to get across to people who have been conditioned by the "catch as catch can" philosophy of a materialist society. My right hon. Friend the Member for Belper was the first to recognise this. That is why he realised it was a great triumph to get the concept accepted in principle by both sides of industry. What we are discussing is the history of the application of that concept in practice and where we should seek to go from here. It is all set out in the White Paper very frankly and honestly.

We explain that because of the emergency situation which we inherited, the failure of the previous Conservative Government to solve the problem of inflation and the effect of that on our balance of payments, we had, as it were, to brutalise the policy—use it in stringent forms for short-term situations instead of being able to develop it gradually as a longterm policy. The result was that it has been effective for these short-term purposes, but only for short-term periods. The starting point of this afternoon's debate is how we can adapt it for its long-term rôle and at what pace.

No doubt voices will be heard at this stage saying "Why bother? Why not scrap the whole idea?" I am sure that hon. Gentlemen opposite will take that line. It is fashionable at the moment to argue, "The prices and incomes policy has failed. Look around, it is obviously in ruins". No doubt we may have an intervention from my hon. Friend the Member for Middlesbrough, West (Dr. Bray) quoting Professor Lipsey at us again, as he did in the columns of The Times, trying to prove that a prices and incomes policy has been inflationary. My Department has analysed Professor Lipsey's argument very thoroughly and we reject both his methodology and his conclusions. No doubt the Chancellor may have some remarks to make about that later.

My answer about this kind of accusation is that even if the policy were in ruins we should have to build it up again. We are not attending today the demise of a grand design, but the beginning of a long process of educating people in the use of a new economic weapon which can help them to control their own economic environment. As the White Paper puts it, we are seeking to widen the area of democratic choice". The first thing that hon. Gentlemen opposite would do if they were returned to power, and I hope that we will have this very much in mind as we listen to the arguments and attacks of right hon. and hon. Gentlemen opposite, would be to introduce an incomes policy in one of the various bastard forms that we have had offered to us by the right hon. Member for Bexley (Mr. Heath), the right hon. Member for Barnet and the right hon. Member for Mitcham (Mr. R. Carr). I shall be happy to give details to the House later.

It would be an incomes policy which would fail again, because in none of its forms would it be a prices and incomes policy. Our policy is not in ruins. The 1968 Act has succeeded in the limited task it set itself to achieve—to prevent erosion of the advantages of devaluation by a dangerous rise in unit costs at a crucial turning point in the country's economic situation. Here again, we set the policy an almost superhuman task. We had production expanding after devaluation, giving us a 4 per cent. rise in growth in 1968, with all the extra demands for labour that it has entailed; the strengthening of the bargaining power of unions; import prices rising; and we had a tough Budget to force more of our resources into the export field.

In such a situation we could easily have had a wages spiral that could have forced up unit costs and robbed us of the whole purposes which devaluation was designed to achieve. Instead, as the White Paper shows, the situation was contained with remarkable success. The picture given in the White Paper has been reinforced by the Treasury's latest monthly assessment of the economic situation—the usual sober Treasury document. This points out that in terms of dollars unit labour costs had risen, up to the second quarter of this year, much less than those of our competitors. The bulletin concludes: A broad comparison of the movement of unit labour costs in manufacturing in the United Kingdom with that among major competitive countries overseas suggests that in the autumn of this year much of the relative cost advantage conferred by devaluation remained. Is that a policy in ruins, or a policy vindicated, particularly when, as the Treasury assessment points out, rising earnings have been offset by rising productivity, another of the major aims of the policy? Even the right hon. Member for Mitcham was forced in our debates in March, 1968, to admit: Some of the work of the Board has had valuable results in promoting sensible productivity bargaining …".—[OFFICIAL REPORT, 21st March, 1968; Vol. 761, c. 645.] That was only at the beginning of the breakthrough in making industry more productivity-conscious than ever before. Even my hon. Friends who were the bitterest critics of the 1968 Act admit, I believe, that this new productivity consciousness is one of the most important gains from the policy.

But a policy as stringent as that, backed by such stringent powers, brought severe stresses and strains, just as did the stringent economic strategy of the Government in the post-devaluation period of which the 1968 Act was only a part. When we talk about the stresses and strains caused by a prices and incomes policy, by the stringent statutory powers of the 1968 version, let us remember that stresses and strains were endemic in the very economic situation with which the Government were having to deal and would have been there in any case.

I frankly admit, however, that the stringent use also brought unfairness. It is no part of my case this afternoon to claim that the 1968 prices and incomes policy has worked perfectly and has done exact justice or achieved everything that a prices and incomes policy ought to achieve. It brought unfairness and not least to many employees in the public services.

Hon. Gentlemen opposite who are now arguing and will be arguing during the debate that the prices and incomes policy has broken down will be arguing, as they have done elsewhere, that it broke down first and foremost in the public sector because there was excessive Government leniency to their own employees, or the employees of the public services generally. This is all of a piece with their concept of an incomes policy, one in which the Government clamp down hard on the people under their own control while leaving everyone else to exploit a free-for-all.

But the facts are different. The facts are that many employees in the public service have seen others in private industry get big increases through productivity bargains, or just sheer wages drift, advantages which they have not been able to enjoy. That is why there has been unrest in the public sector. It was because the Government realised that a stringent policy must inevitably bring stresses and strains that they knew it was appropriate only to a stringent economic situation.

That is why, when the 1968 legislation was before Parliament, we agreed to limit its duration to the end of this year. That is why we told my hon. Friends at that time that we hoped that it would be possible to allow the powers to lapse. In fulfilment of that promise the Chancellor announced in his Budget speech that the powers would be allowed to lapse at the end of 1969. Such powers, he said, were … viable only in exceptional circumstances and then as a short-term measure."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1004.] My right hon. Friend added that since the threatened prices-wage spiral following devaluation had not occurred it would be possible to move to much more moderate Part II powers at the end of this year.

Since that time our economic recovery has strengthened steadily and the Government have been able to look further ahead to the future with greater confidence and work out the basis of an enduring long-term policy. The instrument of the long-term policy will, in due course, be the new Commission for Manpower and Industry with terms of reference and powers appropriate to a long-term policy. I shall shortly begin consultations with both sides of industry on the constitution of that new body, its terms of reference and its powers. I assure my hon. Friends that the Government will press ahead with the maximum possible speed to put that legislation before the House.

Mr. Norman Atkinson (Tottenham)

When does my right hon. Friend expect this new Commission to be set up? What time of year will it come into operation?

Mrs. Castle

It is genuinely impossible to give my hon. Friend a date, because, as I have just told the House, I am immediately to start consultations with both sides of industry. I have to listen to the representations of both sides of industry, no doubt modify details of the proposed legislation, and then put the Bill before the House. No doubt hon. Gentlemen opposite will delay it as much as possible. Until the legislation is passed we cannot have an appointed day. But I can assure my hon. Friend that this, as he knows, is part of the legislation that we shall get through this Session, I am sure with the full help and backing of my hon. Friends. In anticipation of that legislation we say, in paragraph 33 of the White Paper: The Government hopes that it will not be necessary to perpetuate these delaying powers in the legislation to set up the C.I.M. I know that some of my hon. Friends are worried by the word "hope"—and I have just heard it repeated. They wonder exactly what it means. I can assure my hon. Friends that such a word is necessary until consultations are complete. But it is the Government's belief that perpetuation of such delaying powers will not be desirable or necessary in the legislation for the C.I.M. Therefore, in this situation the reactivation of Part II powers is, as the Prime Minister told the House during the debate on the Queen's Speech, a "bridging operation".

These powers are needed because, as we are systematically de-escalating our statutory control, it is essential not to escalate the national mood of expansionist euphoria too sharply and prematurely [Interruption.] I am sure that the House will listen with interest to serious contributions from hon. Members. If that happened, in the next few vital months there could be a wages and prices explosion in which those in a strong bargaining position on either side of industry would pre-empt all the fruits of our economic recovery, leaving nothing for the special needs of the low-paid, for lightening the tax burden, or improving the social services which form such a vital part of the standard of living of the very workers whose interests we are discussing.

Of course, hon. Members opposite will vote against these powers, because they do not believe in a prices policy anyhow. Let me remind hon. Members, my hon. Friends in particular, exactly what powers will be available to the Government if the order is passed tonight. Part II of the 1966 Act, which can be activated only by order, has two main aims. First, it enables the Government to require the early warning to Government Departments of proposals to increase pay or prices. An early warning mechanism is essential if the Government are to have any influence at all over price increases or pay settlements and it has formed a very important part of the operation of the policy.

As long as these powers have been there under the 1966 Act, industry has co-operated very fully on a voluntary basis, so fully that it has never been necessary to make an order requiring a statutory notification of pay or price increases. But I have no doubt that if these powers were not there, if Part II today were not to be reactivated, the situation would dramatically change. [HON. MEMBERS: "It would be the same as now."] No, it would not be the same as it is now, because we should not have an early warning system and we should not have early warning powers. [Laughter.] Hon. Members opposite, who do not give a damn about price increases, laugh, but those who are informed about these matters know the far-reaching coverage of the early warning system and what it has meant in modifications or actual rejections of price increases.

For instance, voluntary early warning arrangements cover about 50 per cent. in value of all food and drink. In addition, more than 40 per cent. of foodstuffs are subject to a constant watch by the Ministry of Agriculture, which means that its officials keep the prices of basic foodstuffs, or other foodstuffs which do not lend themselves to the early warning notifications, under constant review. In every case, the arrangements cover the vast bulk of the United Kingdom production of the commodity concerned. When a proposed price increase is notified, it is examined exhaustively in the Ministry of Agriculture and the firm concerned gives the Department complete information about its costs and sales.

Since this information and the discussions at this stage of the prices policy are obviously strictly confidential, much of the success of the Government in influencing prices cannot be spelt out. This has been one of the basic difficulties we have had to face in working with the policy, but it does not mean that the effect on prices has not been very steady and systematic. Indeed, we report the fruits of this action in paragraph 30 of the White Paper when we point out that between March, 1968, and November, 1969, about 18 per cent. of the price increases notified to the Department—and this is only at the stage of notification—were modified or withdrawn after discussion with the Government Departments concerned, therefore not going any further along the prices and incomes chain of control.

Mr. Brian Walden (Birmingham, All Saints)

We are all listening with the greatest attention to my right hon. Friend's informative speech. She has been very courteous in giving way to me. She is now dealing with what for me is a fundamental. She keeps saying that a dramatic effect would take place if Part II were not reactivated with its prices control. I have asked her before, and I now ask again, what will be the case, on her argument, when the bridging arrangements cease.

Mrs. Castle

I am in this very difficult situation. [Laughter.] We on this side of the House will have a serious discussion and ignore hon. Members opposite. I am in the difficulty that at this stage I cannot tell my hon. Friend or the House what will be the exact powers of the new Commission and I therefore cannot help him as I should like. I must ask him—I was about to say "to take me on trust", but perhaps that is too much—at any rate, to accept from me that I am here in a genuine difficulty.

However, I think that my hon. Friend would be the first to realise that, for the reasons I have stated, the next few months are particularly crucial and there is no doubt that if the order is not passed tonight, the collapse of these arrangements is inevitable and inevitable at a moment when the Minister of Agriculture, for instance, will be dealing with a specially heavy load of notifications of price increases, as many food manufacturers like to make their price changes early in the new year. I do not suppose that hon. Members opposite would mind if these arrangements collapsed, but I think that it is a different consideration for my hon. Friends.

But if the order is passed, I give this guarantee to the House, that the arrangements will continue in full effectiveness. I want to give this guarantee because I understand that there has been some concern arising from stories which have appeared that in Appendix 2 of the White Paper there was a list of items coming under the early warning procedure which was withdrawn as a result of my discussions with the C.B.I. This is an important point and I should like to explain.

In our consultations, the C.B.I. said two things. It said that from its point of view this was not an incomes policy, but a prices policy. It used in support of that the argument that at the end of the three months' standstill and review there was nothing to prevent a wages settlement from being exercised retrospectively.

Mr. Kenneth Lewis (Rutland and Stamford)

On a point of order. Will you ask the right hon. Lady to address the House, Mr. Deputy Speaker, and especially hon. Members on this side? We are as concerned in this debate as are her hon. Friends below the Gangway whom she is trying to impress to go into the Lobby tonight.

Mr. Deputy Speaker (Mr. Sydney Irving)

All hon. and right hon. Members must address the Chair direct.

Mrs. Castle

I am addressing you, Mr. Deputy Speaker, and that I shall always do.

I was saying that the C.B.I. made these two points. First, it felt that it was a prices policy and not an incomes policy, because price increases, once forgone, could not be recouped retrospectively, unlike pay settlements. Secondly, it expressed anxiety about the inclusion in what it regarded, and I am presenting it to the House as this, as a White Paper setting out a long-term policy—and certainly it emphasises the long-term approach in the criteria and in other respects, although not in the powers—an early warning list in detail which seemed to the C.B.I. to prejudge what might come out of the discussions about the future of the new C.I.M.

After consideration, we withdrew the list in view of this anxiety, but we told the C.B.I. that only minor modifications in that early warning list could be made at this stage of the policy, and we have said that clearly in the White Paper.

The Act allows a Department up to 30 days to satisfy itself that a pay or price increase is justified, to negotiate modifications, or to refer a proposal to the P.I.B. for more thorough examination. As the House knows, if the Government decide that an examination by the N.B.P.I. is necessary, we shall be able, under the Part II powers, to hold up the pay settlement or price increase for three months, pending the board's report, thus enabling the reasoning of the board's report to be brought to bear on the negotiators, in an attempt to influence the price proposal or the pay settlement. But, at the end of the three months, no further delaying power is available to the Government.

Sir Edward Brown (Bath)

If there is a violation during this three-month period, will the right hon. Lady use the sanctions laid down in Part II of the Act?

Mrs. Castle

Of course, the Government will have to consider what action it considers necessary to take under the powers. This is obviously one reason for this arrangement.

Sir Edward Boyle (Birmingham, Handsworth)

Is the right hon. Lady aware that her answer to the hon. Member for Birmingham, All Saints (Mr. Walden) must strike an unprejudiced listener as absolutely ineffectual? If the reactivation of these powers could have some significant effect on prices and wages during the bridging period, how can she now say, before the discussions with the C.B.I., on her own evidence, have even begun, that it is sensible to give up these powers at the end?

Mrs. Castle

For the reasons which I have spent a considerable amount of time in putting to the House. I am sorry if the right hon. Gentleman does not find them convincing. They are totally convincing to the Government. If they were not, the Government would hardly be putting this proposition to the House tonight, with all the controversy that it entails.

To the Government, it is a totally convincing fact that, if, at the end, we move from the present situation into a situation of no powers at all, no early warning, no notification of price increases and pay settlements, no power for the N.B.P.I. to look at them at a moment when it could influence them, the psychological danger would be that there could be very serious inflationary consequences.

We are saying, yes, we want to move to an educational policy; yes, we want to move to the longer term and a voluntary policy. But, if we are de-escalating stringent powers, the speed at which it is done and the timing of it can be the essence of the whole argument.

Mr. Joel Barnett (Heywood and Royton)

If my right hon. Friend is arguing that the longer-term policy is an educational policy, as she says in paragraph 6 of the White Paper, and if she believes in this longer term prices and incomes policy, why cannot she be more specific about the word "hope" in paragraph 33? If she believes in the longer-term economic policy without compulsory powers, why cannot she specifically say, whatever may result from the consultations, that she does not believe that they will be necessary?

Mrs. Castle

I could not have put it more categorically at this stage, when we are going into consultations. I cannot put it more categorically than to say that the Government believe that the perpetuation of such delaying powers will be neither desirable nor necessary. I am about to go into negotiations, and I must trust that this will satisfy my hon. Friends.

The overwhelming emphasis is on the word "influence" giving the N.B.P.I. a chance to influence a price proposal or a pay settlement. These powers are appropriate and are needed as we move to a policy in which we stress the educational rôle. An educational policy does not consist just of generalised admonition. It consists, as is stated in paragraph 10 of the White Paper, of changing "old institutions and long-established attitudes". It consists of accepting the principle that all those who exercise market power should be accountable to the community for their actions.

I know that what concerns my hon. Friends is the spirit in which these delaying powers over pay settlements will be administered, and I hope that the House will forgive me if I spend a few moments on that. They will be administered in a spirit not so much of imposing solutions as of offering choices to those who are concerned. The central challenge we make in the White Paper is this: if output per worker increases by 3 per cent., most pay settlements need to fall within a range of 2½ per cent. to 4½ per cent. if the aim of greater price stability is to be achieved. Is there anyone in the House who contests this?

We say "most pay settlements" because in the new White Paper, as in the last, we accept that some settlements must come above the normal range if the purposes of the policy are to be fulfilled. We must provide a continuing stimulus for productivity bargaining, and here, as with the other criteria, we have learned from our experience in operating the policy, and we make adaptations in the old criteria and spell out the new and more sophisticated concept of continuing efficiency bargaining rather than once-for-all productivity bargaining. This is a new concept which can and must embrace non-manual as well as manual workers.

Secondly, we make provision for the fact that our planned progress towards equal pay will mean that, in those firms employing a high proportion of women at much lower rates than men, pay settlements may be necessary for these women above the normal range.

It has always been possible to give the low-paid workers increases above the ceiling under the current policy, provided that the increase as a whole for their industry or firm did not exceed the ceiling of 3½ per cent. But this did not enable us to deal as sympathetically as we wanted with those industries where the general level of pay is low, as the N.B.P.I. found in January this year when dealing with farm workers. We found great difficulties under the criteria of the policy, so we have rectified that. The White Paper offers a new deal for the low-paid worker, provided that the higher-paid workers do not use the higher-than-average increases for the low-paid as a justification for demanding similar increases for themselves.

We accept that in those industries where the general pay level is low we can achieve a radical improvement of the position of the low-paid only by settlements above the normal range, and we spell out some examples in the White Paper—agriculture, catering, retail distribution. I see that Mr. Alf Allen, the General Secretary of U.S.D.A.W., has rushed to condemn the White Paper and has said that he will not accept 4½ per cent. for his low-paid workers. I say to him, "Read the White Paper, Alf, before you throw away the best chance you have ever been offered of helping the people in your union."

We do not intend to leave this problem to the hit-and-miss of a free-for-all collective bargaining. We believe that the problem of low pay can be tackled only by a joint Government-union-employer initiative. We need to know more about the incidence of low pay and its causes. We need to help them to raise their earnings by raising their productivity, and my Manpower and Productivity Service will play an active rôle in seeing that the proposals of the N.B.P.I. are followed up.

Mr. Keith Speed (Meriden) rose—

Mrs. Castle

I am sorry, I cannot give way. I always get so many interruptions, and I do not want to take up too much of the time of the House. There will be time to ask questions which the Chancellor of the Exchequer will be able to answer in his winding-up speech.

We need to use the N.B.P.I. and, later, the new Commission to make investigations in depth into cases where low pay is a major problem and to suggest the means by which we can make progress case by case and industry by industry. The words in paragraph 69 of the White Paper are not just empty words, designed to lure my hon. Friends into the Lobby tonight. I have already acted on them. I have drawn up a list of possible references covering sizeable groups which, on the evidence of our new earnings survey, appear to contain a relatively high proportion of low-paid workers.

The list which I have drawn up covers cases in the public as well as the private sector and those whose pay is determined by wages councils as well as by voluntary agreements. I have already written to the T.U.C. and the C.B.I. with these suggestions and I hope that the first references for these investigations in depth can be made with the minimum of delay.

Finally, there are the public services. Once again, we reiterate in the White Paper our belief that public employees are entitled to the same treatment as workers in private industry. Of course, there must be the same emphasis on efficiency, but, equally, there must be fairness. To achieve fairness, we need to give more weight than we have done in the past to comparison with outside industry, comparison with particular jobs where this is appropriate or more generalised comparisons where there are no exact counterparts in private employment. This, too, is a new deal for the public services.

What a different policy this is from that of right hon. and hon. Members opposite. I repeat that, of course, the Opposition believe in an incomes policy. The Leader of the Opposition announced his policy in last year's Budget debate, when he said: I am quite prepared for a tough incomes policy to ensure that costs do not outrun productivity, but it must be achieved by using all the aspects of economic policy in a complete economic context.

An Hon. Member

What did that mean?

Mrs. Castle

Yes, what did the right hon. Gentleman mean? He went on to elaborate what he meant by "a complete economic context". It was—guess it—No. 1, cuts in public expenditure. No. 2 —guess it—reform of trade union law. Thirdly, tariff reductions, and fourthly, dealing with monopoly situations.

That is all rather vague stuff, but on one thing the right hon. Gentleman was emphatically precise. I quote: Above all, the Government have the responsibility to ensure that the vast public sector which is now under their control does not grant wages which are more than productivity will justify. It is for the Government to stand up on this matter and take the action which is necessary in their own Sector."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 307–8.] Incidentally, the right hon. Gentleman made no mention whatever of a prices policy which is, perhaps, not surprising in view of his party's commitment to put up food prices by changing agricultural policy and to have wide, across-the-board taxes on consumption through a value-added tax.

Then there was the right hon. Member for Barnet in the article in the Sunday Express, to which I have already referred. He, too, talked about a threatened wages explosion and the need for an incomes policy. He argued that inflation could not be cured by increased taxation, nor could a credit squeeze solve it without a dramatic and unacceptable upsurge in unemployment and severe long-term damage to our economy. That is fine.

What, then, is the right hon. Gentleman's remedy? He spelled it out thus: What, then,"— he asked— can the Government do? It can take a firm line with its own employees, and instruct nationalised industries to do the same. Once again, there was no mention of a prices policy. Once again, the only immediate and positive step is to hold down pay in the public services, and For the rest of workers the right hon. Gentleman's remedy is spelled out in the article: to curb the power of the trade unions. These are the policies in which the Opposition believe, and that is why they will be voting against the order tonight.

We know the reasons why the Opposition will be voting against the order. I call on my right hon. and hon. Friends to repudiate those policies of the Opposition. My right hon. and hon. Friends are asked tonight to vote for two things. The first is the principles of a productivity, prices and incomes policy on the lines I have outlined. The second is the transitional powers to enable us to pass smoothly to a long-term voluntary policy without losing the momentum of those most valuable educational lessons that we have begun to hammer home.

As we pass smoothly, I am convinced that we shall have with us not only the vast majority of workers, but the trade union movement—

Mr. Stanley Orme (Salford, West)

That is not true.

Mrs. Castle

I say that in full knowledge of the Press statement on my White Paper issued by the General Council of the T.U.C. Indeed, I base my case on that Press statement. It is true that it made sweeping attacks on the decision to reactivate Part II powers—yes, of course it did.

Mr. Orme

That is what it is about.

Mrs. Castle

Perhaps my hon. Friends will listen to me, because I believe that I have an important point.

I believe that it is the last paragraph of that draft statement which is most significant part of all. It reads: The General Council would welcome a longer-term approach that provides a radically different framework from the one into which the Government has hitherto forced an essentially restrictive incomes policy. If this is in fact the Government's intention, it can count on the co-operation of the trade union movement.

Mr. John Mendelson (Penistone)

Will my right hon. Friend give way?

Mrs. Castle

No.

Hon. Members

Give way.

Mrs. Castle

No, I am sorry. My hon. Friend will be able to speak later. I am just coming to the end of my remarks.

It is because it is the Government's intention to move steadily towards that longer-term policy—indeed, have already taken steps along that road—that I confidently call upon my colleagues to vote in the Lobby with me tonight.

5.7 p.m.

Mr. Edward Heath (Bexley)

In her many years in the House, the right hon. Lady the First Secretary has enjoyed considerable popularity and, indeed, from all parts of the House, a great degree of admiration. She has shown great ability and a large amount of courage. I assure her that in the House this afternoon, in all parts, she has our sincere sympathy. She finds herself in an impossible position and I know that she would like to admit it.

It is almost callous of the House to continue with this debate after the right hon. Lady's speech. It would really—[HON. MEMBERS: "No."] Yes, it is callous of the House. [HON. MEMBERS: "Then sit down."] It is obvious that in the educational work to which the right hon. Lady has devoted a considerable amount of her speech, she has a long way to go with her hon. Friends below the Gangway to make any progress at all.

It would be more courteous to the right hon. Lady—because it is obvious that the order does not have a friend in the House, even among many of her colleagues on the Government Front Bench; there are precious few friends—if we abandoned this debate, had a free vote and went out and buried the whole thing once and for all. That cannot happen, however, and so we carry on with this latest series of wrangles, which have been going on since the summer of 1966, in which the Government have shown an obsession with their own particular form of compulsory incomes policy, an obsession which has been with us—I think that both the Chancellor of the Exchequer and his predecessor would agree—at the expense of a great deal of consideration of the rest of economic policy.

The right hon. Lady was kind enough to quote from my speech about general economic policy. I do not question her doing that. I was delighted to hear how well it read still after this time and I found nothing there with which I wish to disagree in the least. Not at all. Nor did I hear that quotation received with derision below the Gangway or above the Gangway—not in the least.

The right hon. Lady made two points I just touch on. She mentioned agricultural prices. She talked a great deal, as has the Chancellor of the Exchequer, about changes in prices without discussing the concomitant changes in social services which they make possible, or, indeed, the impact on the balance of payments as mentioned in the Report of the N.E.D.C. set up by the Government themselves. Nor did she face up to the fact of what will happen when the Government go into Europe, which is their present commitment, when increases in agricultural prices be three or four times as much as any changes in British agricultural prices alone.

She also mentioned the value-added tax. Perhaps the Chancellor of the Exchequer would like to give an undertaking when he winds up tonight, that the Government do not have in mind the introduction of anything in the way of an effective value-added tax. Is the Chancellor of the Exchequer prepared to say that this will be the breaking point on going into Europe? The Prime Minister said that there are advantages to be got from going into Europe. Will the Chancellor of the Exchequer say what advantages are available from a value-added tax which on going into Europe which would not be available to this country in its own fiscal system.

These are points which have got to be taken seriously by the right hon. Lady and not just thrown away in passing at the end of a speech, as she did.

Let me state our attitude to this order. It is now exactly the same as it has been since the Government first introduced the legislation in 1966. We are opposed to the system of compulsion in this order. We voted against it in 1966. We said then that it would lead to State control of prices, wages and dividends. We are proved absolutely right. It was against everything which the Prime Minister himself said in the General Election in 1966, everything he said on the B.B.C.'s forum in which he pledged himself not to do it. Since then we have voted against it. Of course, there are many hon. and right hon. Gentlemen here who, if given the opportunity, would gladly vote against it with us tonight. Of course it led to further compulsion. Part IV of the 1966 Bill was injected in Committee upstairs without the principle ever having been discussed on the Floor of the House. What has happened is that over the years this has proved unacceptable to a free society, and the Government have been progressively forced to abandon these powers of compulsion.

At the same time they claim that their policy has been a success. The hon. Member for Bosworth (Mr. Wyatt), whom I do not see in his place at the moment, but who lets his views be known in other ways, has a point, that if it has been as successful as they make it out to be, why on earth are they abandoning it now? It may be that some hon. and right hon. Gentlemen opposite would like to keep it still. I do not know whether the Chancellor of the Exchequer in his heart of hearts would like to keep it, whether he regards it as having been effective. There are, of course, doubts about how successful it has been. In the White Paper the recent increases in the public services are justified on the basis—the excuse, almost—that they too be made to equal what had been done in the private sector of the economy. The Government realise what has been the criticism about the public sector. The right hon. Lady talked of the new wage spirals without putting the blame for them on the public sector, and it could not be placed on the private sector if the control had been as successful as the Government claim their legislation has been. There again, we get another contradiction in this oversimplified White Paper.

No, they have not been forced to abandon the policy by its success. There is in fact only a very weak, crude effort to justify this in the White Paper itself. They have been forced to abandon the policy because in fact it is unacceptable, and it has done more harm than good.

I was interested when the right hon. Lady said that the Chancellor of the Exchequer would be dealing in more detail tonight with the analysis which has been presented to the Treasury and other Government Departments by the two economists, because surely if he looks at the bottom of page 6 and the table in paragraph 7 he will see it is in the simplest, crudest form which really does not justify the description of economic analysis. It takes no acount of any factors of any kind in the economy, internal or external, whatever, but merely makes a crude statement that this shows the policy has been successful.

In fact this White Paper, like its predecessors on this subject, is a combination of the obvious and the superficial, and this one is a mixture of political claptrap as well. Let me quote just one sentence from paragraph 6: In the consumer boom period up to October 1964 everyone had been encouraged to take rising living standards for granted regardless of whether they had been earned by higher productivity and exports. That is a political judgment and has no relation to economics whatever. It is part of the wonderful world inhabited by the Prime Minister and the right hon. Gentleman the Member for Belper (Mr. George Brown) alone, a wonderful world which began on 15th October, 1964. What on earth does the right hon. Lady, who is responsible for this White Paper, or the Prime Minister himself, think the leaders of the T.U.C. were arguing about all through 1963 and 1964, and obstructing the efforts of my right hon. Friend the Member for Barnet (Mr. Maudling) if it was not precisely about this point—[Interruption.] It was. Yes, with the connivance of the right hon. Gentleman also—if it was not dealing with this whole problem of the relationship between income, prices, dividends and productivity?

I say this seriously to the right hon. Lady. It is time that the White Papers were restored to that degree of accuracy and integrity which in this country we formerly had from such documents.

Now the right hon. Lady casually and very easily dismisses the investigation which has been done by Professor Lipsey and Professor Parkin. We shall be interested to hear what the Chancellor of the Exchequer has to say about it. After his right hon. Friend introduced it in the Queen's Speech one would have thought that in fact if they were to dismiss it there would have been published an analysis for general consideration. It is well known that it has been widely circulated.

The conclusions are extremely interesting. I think I can summarise them fairly by saying that we have a situation in which the incomes policy which the Government have been following since 1966 has had a damaging effect and not a helpful one in achieving their objectives. It is particularly the case when unemployment is above the figure of 1.8 per cent., but when it is below 1.8 it can have a helpful effect on restraining incomes. Now the Chancellor of the Exchequer may take to pieces the methodology of the conclusions, but what it is really doing in statistical form is emphasising what has been said in this House by my right hon. Friend the Member for Mitcham (Mr. R. Carr) and by hon. Gentlemen below the Gangway, and that is, that to operate the policy in this form has certain consequences, namely, that it sours industrial relations, and increases trade union aggressiveness in trade relations, and leads to the election of more extreme union officers, and the result is that wages are pushed up further than they would otherwise have been, and these are the problems and consequences of compulsion which will remain for this country, in my belief, for many years to come.

The Chancellor of the Exchequer (Mr. Roy Jenkins)

The right hon. Gentleman pays much attention to this White Paper, to which I shall refer briefly, but surely he is aware that, whether rightly or wrongly, it does not deal with the compulsory policy but with economic policy and is equally critical. I think, of the methodology of the situation in the early 'sixties and of the situation in the middle 'sixties.

Mr. Heath

I disagree with the right hon. Gentleman's conclusion that it is more critical of the early 1960s. Its conclusion is specifically that, since 1966, this policy has done harm.

Dr. Jeremy Bray (Middlesbrough, West)

The Lipsey-Parkin analysis ended in the second quarter of 1967, so it only had the tiniest element of incomes policy after 1966. In fact, the greater part of the results arose from the application of incomes policy between 1961 and 1966.

Mr. Heath

I will quote from the conclusion: This perverse effect is very noticeable in the most recent periods of 'restraint' since 1966". That was the point I made. I do not extent it any further, but it is an interesting statement and worth considering. I am glad that the Chancellor intends to deal with it.

The order provides for a three-month delay and the House must ask itself why the Government are doing it. Can the whole future of the British economy at this stage depend on it? The Government have promised that they will hardly even use the power. That is not specifically in the White Paper but it is implied and we understand that it has been said by Ministers in their private meetings. So the Government are going through party and parliamentary turmoil for this, a three-months' delay, once again.

Again the Labour Party has been baring its soul. It has been going through the customary agony of Cabinet bickering, party quarrels and talk of defeat. Once again, the right hon. Gentleman the Chief Whip lectures his Members. This week it is not the stinking Tories refusing to bail him out but those skulking Left-wingers trying to do him in. I am sorry that the right hon. Gentleman is not here, and if it is because of indisposition I regret it. I hope that he will be in the Lobby tonight. Although he is absent, I must say that there is not much question of soul about the Chief Whip. His main object is to keep a bit of life in the body before it is finally committed to the deep. To do this, he has had to request his hon. Friends below the Gangway to recollect that they were elected to carry out their undertakings and must therefore support the Government tonight. Of course, he is entitled to say that, and I would endorse it. They were elected to carry out their undertakings, but those undertakings were precisely not to do what is being proposed today.

Then there is the question to which the right hon. Lady addressed herself rather unsuccessfully in answer to one of her hon. Friends—why introduce the order now, with all the turmoil and trouble that it causes, when it is so shortly to be superseded by something else? We understood that it was to be very shortly but she did not care to give an indication.

We are, therefore, led to ask what is that something else which is so shortly going to supersede the order? The blunt answer is that the right hon. Lady does not know. She has not got a clue. Nor have her colleagues, including the Chancellor. If they have not a clue, why cannot she say so? If there are to be consultations about specific proposals with the T.U.C. and C.B.I., quite rightly, why cannot we be told about those proposals, which are to take the place of the order?

In fact, the Government have known for at least 18 months that they were going to have to take action by the end of this month. Once again they have been unprepared. Once again, this is just a stop-gap. It is not a bridge, because a bridge leads somewhere. In fact, no one knows where the order is leading. It is a stop-gap from the end of December. It is characteristic of this dilatory, incompetent Administration.

The truth is quite different. The Government really hope that, with a bit of luck, they will never have to introduce anything at all because they will be saved by the fact that there will be a new Administration after the General Election. Why should the Chancellor lend himself to this? In his Budget statement, he announced a bargain and I think that it was accepted by the House at the time as being a realistic and sensible bargain. The bargain was that the Government would abandon these powers and in return get effective reform of industrial relations. He believed, as I did, that the impact of this on the economy would be such that he would be able to accommodate the collective, free wage bargaining to which we are accustomed. That was clearly his deal and I believed it to be right. It proved a bad bargain.

The Chancellor has not got his industrial reform to improve production and the other things associated with it, such as delivery dates and the rest on which exports depend. He has not got a real incomes policy either. So he has neither of his desiderata with which to satisfy his creditors. For him, it has been a bad bargain.

What is more, the right hon. Gentleman finds himself landed with a spiralling wage-cost inflation which must be causing him and his advisers considerable alarm. I mentioned this point in my speech on the Address. He was careful to avoid dealing with it then. I do not entirely blame him, but it is now being widely discussed here and overseas and he must realise, above everyone else, what the impact must be if the situation continues, as it is likely to do.

The right hon. Gentleman is suffering largely from the impact of the Secretary of State for Employment and Productivity and the Prime Minister in this wage-cost spiral. What about the right hon. Lady? Why does she put herself in this position, which is the most exposed of all those in the Government? She it was who clothed herself in white raimant to lead the crusade for trade union reform. This brought her great admiration in the country. I give her the credit of genuinely believing in it and thinking that she was right. But she did not know her man and he did her wrong. Having bowed down before the trade union leaders, the Prime Minister whipped off the right hon. Lady's white raimant. Now she clings desperately to that last figleaf, the three months' delay.

What about the Prime Minister? For him, the whole operation is, as usual, just a hollow sham. How irritating it must be for him to feel that hon. Members below the Gangway will not take the cue and realise the game that is being played. Do they not realise that he has one objective, quite naturally—to win the forthcoming General Election? There is not much room for him to manoeuvre. He knows, as the Chancellor knows, that the forthcoming Budget will help because it will include concessions. What is worrying the Prime Minister is how much it will help. Is the give-away going to be enough? If it is not going to be enough, because of the Letter of Intent and the I.M.F. watching over the Chancellor's actions, there is only one way to make people feel better and thereby try to get the polls up, and that is to put bigger wages in their pockets.

What the right hon. Gentleman wants is a roaring wage inflation for the next few months with the cover of respectability of the delaying order which he is undertaking not to use. How do we know all this? Because we have seen it happen before and it is described in the White Paper. It happened in the months leading up to the General Election of 1966.

The White Paper deals with the figures on which the election was fought—9, 5, 1. Nine for increases in wages, five for increases in prices and one for increases in production. I give it to the Prime Minister that it was the recipe then for electoral success, and he cashed in on it. But it was a recipe for economic disaster which hit the country on 20th July when he stood at the Dispatch Box and announced the Measures which have been perpetrated since. That is why it will not be the recipe for electoral success next time. The people of this country will always remember the way that they were deceived in the lead up to the 1966 election, and they will always remember the measures of 20th July which followed that General Election—[Interruption.]

I will illustrate the point with figures. On 20th July, 1966—[An HON. MEMBER: "What about the trade figures?"] I am coming to the trade figures. On 20th July, 1966, the Prime Minister said that money incomes had risen by £1,800 million, of which £1,300 million went in wages and salaries, and that we had earned only £600 million in increased production. Therefore, the July measures followed by the compulsory measures in Part IV, were instituted by the Prime Minister. That was when money incomes were rising three times as fast as production.

The Prime Minister (Mr. Harold Wilson)

The right hon. Gentleman said nine times as fast.

Mr. Heath

I said nothing of the sort. I said that the relationship was nine for increases in wages, five for increases in prices, which is nine to five, and one for increases in production. This is 20th July, 1966. The Prime Minister was arguing that money incomes were rising three times as fast as production then and a freeze was necessary. I am quoting the White Paper for the period before the election. At this period in 1969 money incomes are rising four times as fast as production. That is what is going on now in the rate for the second quarter adjusted to an annual rate.

Is it not, therefore, extraordinary that, after an election, when we had the ratio of three to one, the Prime Minister insists on the statutory compulsory powers, but, before the forthcoming election, when the ratio is four times to one, he is apparently prepared to abandon the whole machinery and to come back to this Order with the notification that he will abandon that as well?

There can only be one deduction. In the words of the Prime Minister, "the crucial issue is not the incomes policy, but the next General Election."

In their economic policies the Government have pursued three themes. First, the theme of planning. None of the targets under the National Plan has ever been reached, except that of Government expenditure. The plan was pronounced dead in 1966, and we buried the corpse of the D.E.A. just recently.

The second theme was investment which was to have been the key to growth. The Government promised a 50 per cent. increase between 1964 and 1970. That means £600 million at constant prices. The Government will be hard pushed to get half of that figure. Their investment policy has failed as well. The I.R.C. part of this policy, according to him, has achieved a fundamental reconstruction of British industry. The I.R.C., to take a generous figure, has achieved one per cent. of he total investment in industry in Britain today.

The third theme is the incomes policy. This is now marooned between the long-term failure of compulsion now and the short-term failure of co-operation. We are getting a last splutter of compulsion tonight.

For a time, a short time, there was a fourth theme—the reform of industrial relations. On that the Prime Minister capitulated and the results are clear. We have had the worst strike year in modern British history. Whether we take the number of stoppages, as the Donovan Commission recommended, or the number of days lost, as the Prime Minister likes to emphasise, it is the worst strike year in modern British history, and worse than the last biggest year of Conservative Administration in 1962. What is more, it is clear that it has got worse since the Prime Minister's capitulation last summer.

What is left of the Government's various economic policies, as the Chancellor has rightly emphasised, is to rely on the remaining benefits of devaluation, and these he is loth to see eroded. Today's Financial Times points out that because of dollar inflation there is something left from devaluation in North America, but there is almost nothing left elsewhere. The right hon. Gentleman knows that dollar inflation—[Interruption.] I am quoting the Financial Times. I think that many people now believe from their experience that this is right. I know that is not the view that the Treasury likes to take in its official pronouncements, but in North America there is something left because of dollar inflation, though not so much in Europe.

I make this point because no one should under-estimate the task which still faces this country of establishing a permanently sound basis for its balance of payments. How much the Prime Minister has enjoyed his fun on the balance of payments figures—all those carefully prepared Answers and all those equally carefully prepared supplementaries—[Interruption.]

Let me reassure the Prime Minister. Nobody seeks to deny him his one talking point. But it might have been a little more honest of him to have followed the example of the Chancellor of the Exchequer in his speech on the Address when, talking about myself, he said: I watched him on television when he said in his speech at Brighton that he genuinely welcomed the improvement in our trading and balance of payments position. He gave a good reason for doing so. I believed him."—[OFFICIAL REPORT, 3rd November, 1969; Vol. 790, c. 688.] The Chancellor knows the reason that I gave—namely, that it is only by a surplus on the balance of payments that debt can genuinely be repaid. For my part, the less debt there is hanging around the neck of the next Administration when it comes into power the better I shall be pleased.

The Prime Minister might refresh his memory. I can send him the handouts, if he would like to see them, of all the other speeches in which I have paid tribute to the balance of payments improvement. I have welcomed it realistically, as I do today, but pointing out the problems which still face us.

I should like to put this question to the Prime Minister and to the Chancellor of the Exchequer in view of their well known satisfaction with this position. Will the Prime Minister now resume publication quarterly, which he abandoned in 1966, of the full figures of short-term assistance debt which has been rendered to this country? Will he add to that the figure for the total debt, medium and short-term assistance, which this country has received and the amount which it now owes?

When the Chancellor comes to give the figure for the repayment of the debt, will he show how much has been repaid from surplus balance of payments, how much from the sterling area, and how much from the hot money coming into this country as a result of the high interest rates which are maintained today? They are sources of foreign currency to the Exchequer and to the Bank and they can be used for the repayment of overseas currency if so required. The country ought to know how the debt is being repaid. Is it a genuine repayment or is another debt of a deposit or some other kind being incurred in its place?

At the moment investment and development in this country are being sacrificed on the altar of high interest rates. I believe the reason is that the Government want to attract hot money into this country so that they can declare that they are repaying considerable amounts of overseas debt. If it is not correct the Chancellor of the Exchequer can immediately clear it up by publishing the figures and giving an analysis of the repayments which have been made.

Once again, in order to reassure the Prime Minister, let us all this afternoon unreservedly welcome the improvement in the balance of payments. [Interruption.] If hon. Members want to know all the dates on which I have done that I can give them. I will send them hand-outs and they can see each occasion. The Country remains unimpressed. I can understand that the Prime Minister must be perplexed by this. Why do people remain unimpressed? It is for two reasons. First, they know—what the Prime Minister never mentions—the price which has had to be paid and is still being paid by the people for the achievement of an improvement in the balance of payments.

The price is the devaluation of our currency, a record increase in taxation, a record inflation—with prices rising twice as fast as in the previous period—crisis level interest rates—the highest, for the longest period, in two-and-a-half centuries of peace and war, an unprecedented credit squeeze, half a million unemployed, for the longest period since 1945, controls over prices and incomes, controls over travel expenditure abroad and controls over imports by way of the import deposits scheme. That is the price which has been paid to improve the balance of payments. Every time he emphasises the improvement let the Prime Minister tell the country the price which it has had to pay under his Administration.

To the Chancellor of the Exchequer, at a period when he is presiding over our financial destinies, when the domestic economy is subdued, when stocks are low—I understand that they are declining —when investment, to say the least, is sluggish, and when world trade itself is booming—having doubled its annual increase, I say, is it any surprise that the balance of payments has improved and he has this surplus? He would be honest enough to say that what does surprise him is that it has taken so long after devaluation to get these improvements in the balance of payments.

All is fair in the world of international trade today, but what will be the position when it changes? That is the problem. Everyone knows that American inflation will not continue beyond the early part of next year and that the expansion of trade in consumer goods which we have enjoyed in the American market for a reasonable period will not continue at its present rate. Is he taking into account all these factors in the steps that he is taking to deal with this situation? We have been in a uniquely favourable position since devaluation, with a boom in world trade. As Chancellor the right hon. Gentleman has the responsibility of telling the House and the people exactly what are the real factors which face us in our balance of payments in the future.

The second reason why the British people are not impressed is that they know that the improvement in the balance of payments is not an end in itself; it is the means to an end. Therefore, the question that people ask is: are we going to see the sort of life that we want under an improved balance of payments? This is not unconnected with the order before us tonight. This is part of the way of industrial life which we have had in this country for so long—based on free wage bargaining—and it is this that the Government are asking the House to refuse once again to British industry. The people have now made up their minds that what the benches opposite offer them under the improved balance of payments is not the sort of life that they want.

Later tonight we shall come to another non-event, for no very good purpose. Later in the debate the critics below the Gangway will bark quite harshly, but they will not take any risks when the Division comes. They will not risk their licences. They are thinking too much about the next season, and the chance of getting them back. What is more, they have been told that if, according to the tradition of this House, they follow their voice with their vote, the leader of their party may resign. Resign—him? I beg the right hon. Gentleman's pardon: the right hon. Gentleman resign? Tonight? Bad, bad, bad—but not mad, mad, mad! Not yet. No, they know that they are safe whatever they do, and the Government will go on playing out time in this weary charade just as the country, equally wearily, suffers under this Administration, until the day dawns when the Government's time is exhausted. Then the country, with a gladsome heart, can make a fresh start.

5.45 p.m.

Mr. Brian Walden (Birmingham, All Saints)

A former Prime Minister of this country once said that he was not particularly concerned with what his Government said but he was concerned that they should all say the same thing. In other words—to put it more vulgarly—"Get your story straight". I do not think that even those handful of hon. Members who are enthusiasts for the Government's policy in industrial relations and are enthusiastic supporters of this order could claim that the Government have got their story straight; indeed, what we are being ask to do in reactivating the order depends upon a charitable view of the arguments that were given in justification of it.

I want to start by saying that I think that that is not only a bad thing for the House of Commons but a very bad thing for the Labour Party. The Government have done many fine things. The weakest side—the Mr. Hyde side—of their record is that they got themselves involved in a sham and a pretence which they find it difficult to justify and which discourages their warmest friends and creates exactly that kind of doubt that will do them more damage at an election than an honest admission of a mistake.

A good deal of the trouble in which we now find ourselves depends upon a quite extraordinary account of the events of the last 12 months. I do not want to go through all of them; heaven knows, it was painful enough while it was going on. But the version which is now being put around is, to say the least, unhistoric. I am prepared to see history re-written, but a certain decent interval should be allowed to pass before that is done. If we are to accept a version of events—which, to put it bluntly, is largely nonsensical—any judgment made on the basis of that kind of assessment will necessarily precipitate us into a situation in which we are making policy on the basis of a nonsense.

We have an incorrect analysis. We have arrived at an incorrect judgment. We will not admit what has occurred. Is it therefore surprising that the policy that we get at the end of the day is largely indefensible?

What are the contradictions in this policy? What is the sort of thing that gives me concern? I do not claim to speak for anybody else—least of all for my hon. Friends on the Left of my party. I speak only for myself. What is the sort of thing that worries me about this policy, and what is the sort of question that I have asked to which I have not received a satisfactory answer?—although in my opinion my right hon. Friend the First Secretary made the best effort that I have ever heard her make to come to terms with some of the issues involved in this matter. I only wish that she had made the effort much earlier and in the right place—because the first place for this discussion should have been in the Parliamentary Labour Party. I do not say that in derogation of the House of Commons.

It is this House which will decide policy. But if we are to decide things of this kind which are likely to give rise to serious doubts in our party and in our movement, the proper time to decide them is not a week before we have to vote upon them. I wish that my right hon. Friend had made her speech in the way that she made it a long time ago. However, that is irrelevant. I wanted to pay tribute to what was in all circumstances a very good statement of why the Government are doing it.

Unfortunately, it does not satisfy me, and there are a number of reasons why. I want this question dealt with at much greater length. Is this policy important? Are we being told, "You must go into the Lobby for this order because the restraint on wages and prices which we believe that we can get from it is of the greatest significance to our economic strategy and, therefore, we appeal to you as our followers to back our sincere judgment that, for us, this is decisive"? Is it that, or is it a case of, "Come on, chaps. This thing is such a piddling business and of such total insignificance that we cannot understand why you are all making a fuss about it. Why not just shut up and vote for us?"

Is it important? If it is, why are we taking it in this form? My right hon. Friend has said again and again; since she has talked about it on other issues, how very important it is that there should be certain powers to restrain prices. I can understand that. If she were saying that at the Dispatch Box, I might not agree with her but I could understand her reason for saying that this is part of a tough policy which will restrain prices, and that is why she asks us to vote for it. What I do not understand is all the talk of the tragic consequences and unmentionable horrors in terms of price and wage explosions taking away the hard-earned money which the Chancellor may distribute.

Unlike the Leader of the Opposition, I am not convinced that there will be massive give-aways all over the place. I reserve my judgment on that. We shall see. The Chancellor may distribute great largesse to the public, but it cannot be right to say that we are taking away his chance to do it and that there will be terrible price explosions because there will be, anyway. Some of my hon. Friends would argue that there have been already. We all know the view taken by my hon. Friend the Member for Bosworth (Mr. Wyatt). His view is that there has been no reference to the National Board for Prices and Incomes of any recent wage settlement, that the barriers on wages are down, and that its effect on prices has been substantial. I support my right hon. Friend, because I would not go along with that argument. But what view am I to take of her case when she says, in December, that she will come along, let us say in May, and tell us that the powers can then go, that she will have some other arrangement, and that it will not be statutory if she has her way?

What am I to make of that? What then will she tell us about these great prices and wages explosions? My right hon. Friend knows that we are not arguing about incomes policy or all her many wise statements on the need for some sensible arrangement about productivity, prices and incomes. I do not know about right hon. and hon. Gentlemen opposite, because I regard them as irrelevant in this discussion. But we are arguing about paragraphs 32 and 33, about the statutory powers which my right hon. Friend assured us again today that it is her will and intention to give up. I believe her. I accept her assurance. Not only is it my duty to do so, but I do it because it is right.

But doing that will make a nonsense of her present arguments. I do not know how she will face the question which someone is bound to ask: what now about the great price inflation? Will there not be one? I should love to hear the case then. We shall not have statutory powers, but some other arrangement. I wish my right hon. Friend good luck but, whatever arrangement it is, I cannot feel that it would have greater merit than our abandoning the statutory powers now and going over to what then will be the situation, namely, a voluntary one. I am for the greatest amount of discussion, with committees trying to work out arrangements. However, like all my hon. Friends, I am a little sceptical as to how far this can be decisive. It might have some influence, but it will not have a dramatic influence.

Why is it that we intend to hold wage and price inflation at bay now but that we do not intend to hold it at bay when the bridging arrangement comes to an end in six months' time? What arguments will be used then to disprove those which tire put forward now for keeping the powers? That is a difficulty which I constantly have with the Government. They give me a case on one issue which they repudiate on another. We have all had experience of it. What will they do in six months to repudiate what they tell us today?

I turn to the higher-paid and lower-paid workers, about whom quite justifiably my right hon. Friend makes a weighty statement. She is one of the most skilful advocates in politics. Naturally, she does not give the Parliamentary Labour Party a long talk on matters like the perilous effects of wage inflation. The Leader of the Opposition will have noticed that, when he said that what Governments want before elections is roaring wage inflation, some of my hon. Friends greeted his statement with scepticism.

My right hon. Friend does not say that the policy is designed to produce a hold-down of wages. Naturally, she talks to us about prices. If she gets on to wages at all, she talks about the lower-paid workers. I have heard so much about this sector of the community that I feel that someone ought to make one or two comments. First of all, let us be fair to the Government and to my right hon. Friend. Before this Government came into office, there were lower-paid workers. When my right hon. Friend took over her present responsibilities, there were lower-paid workers. She did not create them. They were always there. It is fair to say, to, that the incomes policy did not create the problem of substantial differentials. However, it has not done much about it. The constant claim that it has is against all the evidence.

When my right hon. Friend says, as she did today, that we must have this policy because it is quite wrong that powerful groups should selfishly pre-empt resources which should be more fairly spread, that is what has happened under the policy. That is exactly the situation now. The policy has penalised the lower-paid, for the obvious reasons that we have heard so many times before that I will not weary my hon. Friends by going through them in detail. There are obvious reasons why the lower-paid are easier to control. It is a point on which the right hon. Gentleman should at some time—not in this debate—gives us his further thoughts.

I think that my right hon. Friend makes a palpable hit on the right hon. Gentleman when she suggests that previous Conservative Governments resorted to the public service and workers under their own control at least to begin—no more than that—an incomes policy. I regard many of the workers in the public service as being amongst the low-paid. It happens that many lower-paid workers are directly or indirectly controlled by the Government. That is one good reason why this policy has operated against the lower-paid.

Another good reason is that God loved ordinary people: he made many of them. Wherever there is an increase for the lower-paid, many people will get it; whereas, when there is an increase for those in a more substantial position in life, it is likely to have less of a total effect. This is one of the facts of life. All this has been true under this policy.

My right hon. Friend says that it will all be different in the future. I mean to be in no way offensive when I say that we have heard that love song before. It is always going to be different. I have heard that again and again and again at successive stages of the policy, both when it was coming forward in the escalatory phase and now when it is in what my right hon. Friend calls the de-escalatory phase. It is always the same song—the lower-paid workers will be substantially benefited.

Indeed, my right hon. Friend could justifiably ask me: is there not some recent evidence that they have been better treated? The answer is: "Yes, by an abandonment of any pretence of a reference of their wage claims to the National Board for Prices and Incomes"—in other words, a voluntary policy: "Let them have it. Do not use the statutory powers which the Government have".

This is why I raise the whole subject. I put this to my right hon. Friend and to the Chancellor, who is to wind up the debate. There is no reason why he should answer it—I am not that important— but if he wishes to deny it I invite him to do so. I will make a prediction about what will happen if the order goes through tonight. The lower-paid workers will not have their increases stopped, because the Government dare not, partly for reasons of social justice and partly because of electoral considerations. The better-paid workers will not take a blind bit of notice of it, anyway, and will walk straight through it.

The 2½-4½ per cent. norm is an insult to the intelligence of the House. It is a purely notional figure. Indeed, we are told that my right hon. Friend the Chancellor did not want it, anyway. He preferred to go for the straightforward 3½ per cent., not that that would have had any relation to reality either, though it would give less trouble. However, he negotiated with my right hon. Friend the Secretary of State and they eventually arrived at this purely notional figure which will have no relation to what happens.

I invite my right hon. Friend the Chancellor to comment on that and to tell us whether he thinks now, as incomes policy slowly goes into its twilight, that he has the strength to hold back the really powerful unions, as we have not been able to do in the recent past, and that he has the nerve to deny increases to the lower paid.

Mr. Alexander W. Lyon (York)

My hon. Friend is always persuasive. Perhaps he can persuade me of this little point. When the lower-paid workers have broken through the incomes policy and it is destroyed, does he assert that in the free-for-all that will ensue the lower-paid workers will do better than they did under incomes policy?

Mr. Walden

That is a very good question. I will give a direct answer and then comment on it. The direct answer is that I think that they will. [An HON. MEMBER: "They never did before."] One of my hon. Friends says that they never did before, but that is not accurate. What my hon. Friend said in effect was that under the completely free bargaining system many people were underpaid. In any case, the system was not completely free. Historically we had developed all sorts of things, but the system was never completely free.

The terms "higher paid" and "lower paid" are not in some ways as precise and descriptive. What we developed were workers who palpably were paid less than their skill, experience and contribution merited, even at market rates. That is what we mean when we talk about the lower paid.

I tell my hon. Friend the Member for York (Mr. Alexander W. Lyon) frankly that I think that that situation will stop, for a perfectly straightforward reason—I give this to hon. Members opposite, especially one of them, for what it is worth—because of the power of market forces. I think that these will operate in the situation that we are now in and that they will produce a situation in which lower-paid workers will get increases.

I said that I would first give an answer and then make a comment. I will give this to my hon. Friend. He asked me for now and I answered him for now. I do not think that it is a satisfactory situation for the increases and economic strength of the lower-paid workers—indeed, not only the lower-paid workers but those who are not organised and those who are in some other way disadvantaged in the scramble —to be for ever, or indeed for a long period, dependent on the forces of the market.

This is why I am a believer in incomes policy—voluntary incomes policy. That makes sense. I have never denied that. I suspect that some of my hon. Friends do not want what is called a free-for-all for that very reason. My hon. Friend asked me what would happen now. I tell him, but I say that the good side of the White Paper is those proposals that will lead towards a development of a rational, voluntary policy.

On that subject I will say one further word to my hon. Friend, who is a well-known sceptic and also a very good friend of mine. Of course a voluntary policy is not neat and it is not precise; we shall get cheated on it and not everyone will observe it as we should like to see it observed. But there are disadvantages either way. The chaos, the heartache, and the trouble, that we have had from the statutory policy make the other gamble worthwhile.

Mr. Alexander W. Lyon

I concede immediately to my hon. Friend that for us in politics it would be so much easier to have a voluntary incomes policy, but it is pie in the sky to think that it will be better for the lower-paid workers. The advance of technology is bound to hit the lower-paid worker and the unskilled worker far harder than the more technologically advanced.

Mr. Walden

My hon. Friend knows that I never avoid an argument. However, I do not want to go too deeply into this question, because I want to revert to another question. In speaking of the advance of technology, he probably under-estimates the effect of the advance of technology of the composition of the work force. There will be a very substantial change there, too.

One of the most encouraging things is that many categories of workers that we have traditionally regarded as being lower paid will have the kind of work that they do—and, in some cases, even their very job—transformed by technological development. However, I must not pursue that point too far, though I am always glad to give way to my hon. Friend.

I return to the order, which seeks to continue the incomes policy. I have stated a number of contradictions that I see in arguments that have been advanced. The Chancellor will no doubt seek to answer these points. My right hon. Friend is a hawk on incomes policy. People at the Treasury tend to be hawks, at least while they are there. They become dove-ish later.

I ask my right hon. Friend seriously —not to score a cheap debating point; he knows me better than that—to look at the sort of statement he makes about it and the sort of statements that others make about it; the sort of thing that is said to this group of Members and the sort of thing that is said to the other group of Members; the hotchpotch of contradictory assertions about its importance, about its relativity to wages, about its operation upon prices, about the length of time for which it is likely to go on, about what is likely to succeed it, about how that operation from what we have got now to its successor will be carried out; about the timing of this in relation to the Budget, and about the predictions as to what the situation in terms of inflation will be this summer. If he does, my right hon. Friend will not find it hard to realise how difficult it is to understand exactly what message the Government wish to convey. I am certain that what my right hon. Friend says tonight will be lucid, clear, and hawkish, but he will still need to resolve in some other way the inherent contradictions which have grown up in and around this policy.

I cannot vote for the Government. I regret that, but I cannot do so. Many of my hon. Friends whose conscience, and experience are not less than mine, and in many cases are greater, will vote for the Government. Many of them will be unhappy about doing so, but I respect their decision as they will respect mine. We have been promised that this is the last time. It had better be, because this exercise cannot be gone through again. I do not claim to speak for all my hon. Friends. Indeed, I do not speak for anybody but myself. My judgment is that we are at the end of our tether on statutory policy.

If my right hon. Friend asks whether I concede his difficulties, the answer is "Yes". If he asks whether I concede his achievements, again my answer is "Yes". I think that his achievements are remarkable, and I dissent from the Leader of the Opposition. The right hon. Gentleman cannot simply brush away not only the improvements in the balance of payments but the improvement in the level of internal credit. He cannot brush away our present policies in relation to a number of things and say that this is of no consequence and no significance in view of the price paid. I suggest that even taking into account the price paid, my right hon. Friend's achievements are remarkable.

If my right hon. Friend could ask the final question, which is the decisive one, whether I will allow him room to move in terms of economic management, without all this fuss, without keeping him out of his Department, without wearying my colleagues, without abstaining from voting, and so on, my answer is simply that he should use the monetary means which are working very well at the moment. That is the answer.

Mr. Frank Hooley (Sheffield, Heeley)

High Toryism.

Mr. Walden

My hon. Friend says that that is high Toryism. In fact it is economic commonsense, and I shall tell my hon. Friend the difference between my view and the view held on the benches opposite. I believe that we are going into a situation in which we shall have a substantial surplus on the balance of payments, and growth. In that situation we shall be able to distribute resources more equally. We shall be able to expend more on the things on which we wish to expend the money, mainly the social services, and those things which advantage those who are in need.

We shall be able to do all that, and in those circumstances it is wrong to say that there is something wrong, or Toryish, or bizarre, or unfashionable, about monetary policy. Monetary policy is an excellent way of controlling the economy. The reason why some of my hon. Friends object to monetary policy is the reason why, in the past, I have sometimes objected to such a policy. I object when it is operated in a deflationary situation, in a situation in which growth is slow, or in a situation in which unemployment is very high. In those circumstances its operation is almost inevitably bound to be unfair. It is, of course, sometimes unavoidable. I am prepared to face that. Sometimes one has to bite into a sour apple, but it is not palatable then, and it has bad effects, and my party has condemned it.

To suggest that monetary policy is not decisive, indeed, to pretend that it is not monetary policy which has brought us to where we are in terms of a surplus on the balance of payments, is nonsense. I hope that my hon. Friends will not swallow all this nonsense about the I.R.C., a prices and incomes policy, and so on.

What has put us where we are is devaluation and the Chancellor's monetary policy. That is what has created the surplus. This is essentially the reason why I do not believe in continuing an irrevelant, irritating sham order which is no more than a gesture, rather than going over to the policy which we shall be operating before the next Election, and which I believe will survive for many years.

I say to my right hon. Friend, "Do not do this again. Do not get yourself into a situation where, instead of working on the genuine merits of what you have done, instead of building upon the great achievements of the Government, you underrate our intelligence and the intelligence of the country and depend on a gesture, a sham and hollow nonsense."

6.16 p.m.

Mr. Enoch Powell (Wolverhampton, South-West)

The speech of the hon. Member for Birmingham, All Saints (Mr. Walden) was a plea for the abandonment of pretence. So also will my own speech be, for I believe that this is a subject on which there has for much too long been much too much pretence.

The situation of the right hon. Lady this afternoon was not so much that she had an embarrassing task, or a difficult task, as an impossible one. She was asking the House to support the order on the ground that if it were not made a number of serious consequences would follow. The right hon. Lady has described how if an all-clear was given over the whole front a number of manufacturers would want to take advantage of it, and there would be a renewed inflationary spiral. The Prime Minister has talked of the use of powers in particularly blatant cases". cases highly provocative to the generality of the trade union movement". At the same time, and almost in the same breath, the right hon. Lady has forecast—not for the distant future, but in a matter of months—a new dispensation, which will render all this unnecessary, so that it will be possible, and she expects, to revoke these compulsory powers in the course of first enacting it.

The House is therefore bound to ask what is this extraordinary revolution which is foreshadowed in the months immediately ahead? We know from the Government themselves that the long-term policy which they envisage requires that "old institutions and long-established attitudes" should be "changed". They evidently have not been changed yet, or this order would not be necessary. Yet presumably this change, this revolution, this blinding light upon the road to Damascus, is going to happen in the next few months, except that Saul did not know it was going to happen, whereas the Government know it is going to happen this Session.

We are left asking of what nature it can be. Rather, we are told what the new legislation, what the new dispensation will be. The secret is going to be the establishment of a new board: or, rather, not a new board, but an amalgamation of two old boards. This is the only known prospective measure; yet it is to change the entire attitude of those who bargain about wages, those who fix prices, and make it possible to turn over from the old dispensation to the new.

This is not the first time that the present Government or any Government have sought a respite for a few months by inventing a new institution or refurbishing an old institution to do for them what they cannot do for themselves, to invent for them what they cannot invent themselves, and to imagine for them what they find it impossible to imagine.

The fact is that the Government have got themselves stuck with an absurdity, out from under which it is indispensable for them, one way or another, to crawl—I have used a less elegant expression than "de-escalate"—in the months before the General Election. They have decided —it does not look as though their decision has been tactically very successful—that the process, undignified any how, will be slightly less undignified if it is accomplished in two stages, and this represents the first stage.

But an absurdity it is, and an absurdity it remains, with which they are stuck, whether they get out of it by a transitional process or, as many hon. Members opposite wish and we on this side of the House recommend, it is dropped at once. The nonsense, the absurdity, to which I refer is what is known as "a" or "the" —I am never quite sure whether it is the definite or indefinite article which is appropriate—prices and incomes policy.

It seems to me important in debating this subject to define the sense in which that term is being used, because there is a sense in which all economic policy is concerned with prices and incomes. Most economic policies either directly aim at, of take account of, the desirability of avoiding or minimising inflation Therefore, if we are using the term in that broad sense, there is nothing to debate about. But the expression "prices and incomes policy' has acquired—and we are using it in this specific sense, of course, in this debate—a perfectly precise meaning. It means a policy which seeks to attain certain results, such as the avoidance or reduction of the rate of inflation, not by general measures but by operating directly, by influence or by compulsion, upon individual prices and wages. It is the conception that if all individual prices and wages are fixed and determined in a particular way, a certain sum total or general result will follow. That is the essence of any prices or incomes policy in the sense in which we are debating it—the attempt to restrain or prevent inflation by operating separately upon all prices and wages as they are fixed.

This process obviously would in any case present enormous, if not insurmountable, technical and administrative difficulties. It implies upon the part of Government virtual omniscience and ubiquity, since wherever a price or wage is being changed, there—promptly and infallibly, for the process to succeed—the right degree of influence or compulsion must be brought to bear.

But that is much the lesser part of the inherent difficulty—I would say the inherent impossibility—of a prices and incomes policy. The essential impossibility is to define the way in which individual prices and incomes have to behave in such a manner that anyone can apply the policy in practice. The policy starts from a truism which, like all truisms, is true. That is that, if the total of all incomes rises faster than output, there will be inflation. Sure enough, if output rises at 3 per cent. and the total of incomes rises at 6 per cent., we shall have approximately 3 per cent. inflation. Unfortunately, this undeniable truth does not enable anyone to know how any particular wage or price should behave so that, in conjunction with the behaviour of all the other wages and prices during the same period, the desired result of a total outturn of 3 per cent, and not 6 per cent. would be produced.

In any change in a wage—and I shall concentrate, purely for the purposes of illustration, upon wages, though the same arguments apply to prices—one can distinguish three distinct elements. One element is the relative change in that wage in relation to other wages. Clearly such change must be going on all the time. The constant change in the pattern of economic activity must be reflected in changes in the relativity of wages between one occupation and another, one employment and another. If these relativities were rigid, the economy would seize up. I do not believe any hon. Member denies that it is essential to the working of an economy which any of us would envisage that there should be continuous and appropriate changes in the relativity between one wage and another. So that is one element in every change in a wage—an alteration in its relativity.

The second element divides in turn into two. This is the part which is shared with all other wage changes—the general rise in wages. This we can only detect ex post facto. It is only after the end of the year, or whatever the period may be, when the statisticians have got it worked out and corrected it and corrected it again, that we can say there was a general rise of wages in such-and-such a period of so much per cent. We can then sub-divide that element into two parts. We can say that part of it corresponded with the total increase in output and was therefore not inflationary. We can also say that the remainder, the excess, was inflationary.

So in any wage increase we can distinguish these three elements: the relative element, the element of general increase which corresponds to increase in total output, and the element of general increase which is inflationary.

The heart of the difficulty is that none of these can be quantified in advance. We can quantify them only after the event, often long after the event. No one knows. When a wage is altered, how far the alteration corresponds to a genuine change in the relative supply and demand for that service as compared with others. Let us suppose that a wage increase is negotiated—willing employers, willing employees—at 10 per cent. At that moment no one knows what part of that 10 per cent. increase—which may be the first increase for two or three years, which may or may not be accompanied by alterations in productivity, in methods —represents a genuine change in relativity which is right and proper as part of the working of the economy. By the same token, no one knows either what are the other two elements in that one change. We do not know what the increase in output will be during the current period. It is all very well for the Government to say, "We estimate it at 3½ per cent." In practice, it varies between 1½ or 1 per cent. and as high as 5 or 6 per cent., a degree of error which can vitiate any policy founded upon one particular figure.

Worst of all, only at the end of the day can we disentangle the inflationary element in that 10 per cent. wage increase, if there be any at all. It is no use coming back a year later and saying, "Inflation that year was 5 per cent., so if that wage increase had been 5 and not 10 per cent., and all other increases had been 5 per cent. less, there would have been no inflation". That is true, but only after the event can it be known.

Mr. James Dickens (Lewisham, West)

In 1968, the index of retail prices rose by about 5 per cent. Is the right hon. Gentleman aware that the component parts making up that rise were, for example, import prices 1.7 per cent., net expenditure after taxation 1.8 per cent., and money wages were only part of general domestic costs at 1.4 per cent.? The right hon. Gentleman must try to avoid the error of arguing that money wage increases are a major factor in inflation per se.

Mr. Powell

The hon. Gentleman will recognise that output and income are two aspects of one and the same thing. However, it so happens that I was about to advert to the year 1968–69 in the course of my argument, a year when there was a dramatic illustration of the point which I am making.

The Government themselves—this was disclosed more or less accidentally, I think, in the Defence White Paper of February, 1968—based their own estimates and calculations on the assumption that the national income in money terms would rise by 11½ per cent. in the year 1968–69, of which they then estimated that only 4 per cent. would represent real increase in output. They themselves, therefore, were expecting, were estimating and were calculating upon a rate of inflation of 7½ per cent.— slightly larger, I think, than in fact happened. Yet at the very same moment they were commending to industry and to the trade unions a policy which purported to be based upon the assumption that there would be no inflation at all and that, therefore, the only increases which could be permitted would be non-inflationary increases, either relative or corresponding to the increase in output. The whole notion of a policy which can so determine individual prices and wages that the sum total after the event proves to have been identical with the rate of increase of real output is an inconceivable operation. This is reflected in the fact that the instructions for carrying it out in one White Paper after another are perfectly general. They remain at the level of generality because there is no means of getting across from the general but empty propositions to the actual decisions which would require to be taken or to be imposed.

There has been a great change in the Government's financial policy in the last two years. It is a change which coincided, not accidentally, I think, with the arrival at the Treasury of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). Since then, partly under external pressure but partly, I believe, in accordance with his own beliefs, we have heard a great deal from him about control of the net borrowing requirement, and about control of domestic credit expansion. The basis of his policy has been that, unless the net borrowing requirement is correctly handled by the Government, and unless domestic credit expansion is rightly controlled, there will be inflation, and nothing else can prevent it. So we have the admission from the right hon. Gentleman the Chancellor of the Exchequer that during the very months when he and his colleagues were commending to the country a prices and incomes policy—and a statutory, compulsory prices and incomes policy, at that—as a means of preventing inflation, his predecessor was actually causing inflation, and causing it on a grand scale, by failing to control those two significant variables upon which our foreign creditors eventually insisted that we concentrate.

In fact, the Government have been using a prices and incomes policy not as an economic instrument—it is not an economic instrument because it is not intelligible and is not applicable—but as a political instrument. They have been using it as a guilt transfer mechanism, as a means of transferring to the public at large the blame for the consequences of what they themselves were doing or in the past had failed to do. In this White Paper, we still see the same use being made of the prices and incomes policy. At the top of page 9, it is said: Whether it"— that is, the policy— succeeds depends not just on what the Government does, but on what choices individual men and women make". That statement is complete humbug. The choices of individual men and women are not in play in the fixing of prices and wages. If there is a general increase of demand of 5 per cent., it is not open to any individual man or woman to say, "I will not play on this. I shall so behave that I influence the movement of wages and prices." It is not possible for either the individual employee or a group of employees to say, "This is the price or the wage according to supply and demand at the moment for this type of labour or that article, but I have been reading the White Paper, and I shall insist on taking 2½ per cent. or 3½ per cent. less".

It is an absurdity. There is no reality in the notion of individual men and women deciding whether there shall be inflationary or non-inflationary wage increases. They are caught up as individual men and women—of course they are—both in the real economic forces to which the hon. Member for All Saints referred and in the monetary forces unleashed and only partly controlled by the Government themselves. The Government's purpose is to transfer the responsibility and the blame for their failure to control inflation to the ordinary men and women of this country on one side or the other of industry. So we come upon the only efficient aspect of a prices and incomes policy, namely, as a political device between the Government and the governed, and not as an economic instrument.

We must not take refuge in the belief, we must not lay to ourselves the flattering unction, that there is a world of difference between a compulsory and a voluntary incomes policy. Exactly the same reasons which make a compulsory incomes policy inconceivable make a voluntary incomes policy, if possible, more inconceivable. If it is impossible for a Government, with all their resources, to predict and prescribe in advance how myriads of prices should so alter that, added together, they produce a specific result, it must be impossible for people by themselves to guess it; and, if it were possible, by the utmost stretch of compulsion, to make every price and income so vary that they fitted together in the required manner, how could one imagine that result if the situation were one of "Take it or leave it", in which one interpretation of the policy was followed by one set of people and another interpretation by another? A voluntary prices and incomes policy is just one stage more inconceivable than a statutory or compulsory prices and incomes policy.

I do not believe that either we in this country or the government or economists of any other country have succeded in isolating and defining all the causes of inflation satisfactorily. I believe that we have identified some of them. I am sure that the Chancellor is right when he says that the manner in which a Government finances its net borrowing requirement is one of the factors. When he says that the movement of domestic credit is one of the factors I am sure that he is right; but I am not sure what is the right definition of domestic credit for this purpose. I am not sure that these are the only factors; but even if we are right in defining these as two of the major factors, we are still far from understanding, if we ever shall, how a Government can so precisely control them that it produces the object, in terms of stability of wages and prices, at which it is aiming. This is a subject upon which in all countries, in all parties, the humility of no more than partial knowledge is enjoined upon us. But, just because we cannot fully measure or define the causes of inflation, just because the Government are only exercising a very crude form of management when they operate upon their net borrowing requirement and the expansion of domestic credit, we have no excuse, on either side of the House, for concealing either our ignorance or our unwillingness to use the instruments that we believe are effective and appropriate by parading a policy intended to be carried out by other people, a policy on which they are given remarkably little instruction and guidance, a policy which is ultimately undefinable and unintelligible.

It is a deception practised by the politicians upon the people. It is one of those pretences which it is high time we on both sides of the House should allow to be dropped. We might as well make a start upon that resolve tonight by throwing out this Motion.

6.43 p.m.

Mr. Douglas Houghton (Sowerby)

The House has listened to three major Opposition speeches—one from the Leader of the Opposition, another from the "grey Shadow" Leader of the Opposition, the right hon. Member for Wolverhampton, South-West (Mr. Powell) and one from an embryo Leader of the Opposition, the hon. Member for Birmingham, All Saints (Mr. Walden). Perhaps it will not be inappropriate for me to speak in support of the Government before other Opposition spokesmen spring to their feet, on both sides of the House. The Leader of the Opposition spoke for a long time, enjoyed himself for quite a lot of it, embarrassed some of us by his intimate knowledge of women's clothing, and at the end of his speech had nothing to say except "drop it". That is precisely what the right hon. Member for Wolverhampton, South-West said.

We do not look these days to the Leader of the Opposition for expositions of constructive Opposition policy. There is far too little of it in these difficult times. Merely to make as much mischief as possible for a Government and stir up as much trouble between the Government and their supporters is not a very noble rôle for a responsible Leader of the Opposition.

The proposal to renew this order was not sprung upon us. It was announced to the House as long ago as the Chancellor's Budget Statement. It was renewed in the Gracious Speech and the Debate on the Address. It has been before the House for a long time. The Chancellor announced the Government's intention to ask the House to do this before the terms of the Letter of Intent to the I.M.F. were finalised and before it was signed. Hon. Members on both sides who feel that this may have been thrust on the House just before Christmas should remember that we have had quite a lot of time to think about it.

Mr. Heath

Let me assure the right hon. Gentleman that we have made no complaint that this was being thrust upon the House. The Chancellor announced it in his Budget when he announced the industrial reforms, as well as the abandonment of the powers.

Mr. Houghton

I was referring to a comment made by my hon. Friend the Member for Birmingham, All Saints.

There are three groups of hon. and right hon. Gentlemen on this subject. There are those who have opposed this form of prices and incomes policy from the beginning and all along; there are those who supported it to begin with but who are now doubtful about renewing it even for a limited period and for a limited purpose; and there are those—I include myself here—who have supported this policy from the beginning and support renewal now. I moved the very first Motion at the T.U.C. on an incomes policy. I got short shrift 16 years ago, but I have watched events since and seen how the acknowledgement of some regulation of increases in wages and incomes has become an almost indispensable part of any rational economic policy.

This policy has been justified, with all its imperfections and injustices, although much that has been said in criticism is true. There is nothing scientific about wage fixation anyway. The prices and incomes policy may have smoothed out some anomalies which might have existed under a free negotiation system, but it may also have created others. It is very much a blunt weapon to use in a situation in which refinement is so difficult.

From personal knowledge I deny much of the criticism that has been made of this policy in relation to the lower-paid worker. It has never been possible for employers, whether Government or private, to bestow on lower-paid workers, increases of pay without counting the cost in repercussions and relativities and without negotiation. I do not know any sensible employer, certainly no Government Department, who would say, even o lower-paid workers: "This is what we shall give you, come what may, and we do not care whether you like it, or your unions like it or whether other people are content with it." This cannot be done in wage fixing and negotiation. Anyone who has moved in this area realises how sensitive the trade union movement and workers are to relativities. In some ways they are the curse of wage fixing. When one does something to improve the position of a deserving group, others say. "If they are going to have it, we want it, too."

Mr. Orme

We all do.

Mr. Houghton

I know all the aspects of this, but it does not make life any easier in wage regulation.

In the public sector the Government have, in negotiations, increased the earnings of lower-paid workers in advance of increases given to higher-paid workers, sometimes by giving to them at a different time, sometimes by giving higher increases at the same time. I have been in public service all my life and for more than 30 years I was responsible for negotiations on wages and salaries over a very large area. Although not directly connected with it now, I have been watching what has been happening in the sector which I know so well.

Not all the criticism by the Opposition of the position of the lower-paid worker can be laid against the prices and incomes policy. I think that very little of it can. I do not think that by itself it has worsened the position of lower-paid workers. Nor do I believe that even differentially it has put them at a disadvantage.

The simple issue in today's debate—although the speeches have gone so wide over the whole field of economic policy —is whether we should renew Part II of the 1966 Act for a while longer. That is the issue. Formally, not even the White Paper is before the House at the moment. What we shall vote upon tonight is whether the Government's proposal to approve the order shall be passed. We must consider whether the end of this month—a few days time—would be a suitable time to drop Part II.

One may say that it has been imperfect in operation and that it may not have achieved all the results hoped for. Much else may have been wrong with it, but the question is whether we think this is the moment to accept the plea of the two right hon. Gentlemen who have spoken from the Benches opposite that it should be dropped at the end of the month. They say that we should drop it and put nothing in its place. I believe that that would be giving entirely the wrong message at home and abroad on our attitude towards the underlying trend of sharp increases in earnings at the present time.

When we criticise a particular weapon in the assorted armoury of economic policy and Budgetary strategy, I remind the House that the Conservative Party was strongly against continuing the £50 limit on overseas travel allowance to which the Chancellor stuck firmly in his recent speech in the House. The Opposition were also against the Chancellor's proposition to introduce a new Bill to renew the import deposits at a slightly lower rate. They have opposed separately each proposal the Government have brought forward as part of the collective attack upon inflationary trends in the economy. We must therefore appraise the Opposition's present attitude to the order in the light of what has gone before.

I must also remind some of my hon. Friends that if they vote against the Order—or do not give it support—they will be failing to give the Government their support on one item of a series of economic measures which they have supported in the past, and it seems to me that it would be difficult for Government supporters to be so discriminatory over which of the economic measures they will support and which they will not support when they have been so closely associated for so long in their mutual support.

It would be unwise to drop Part II at the end of the month because at the moment—I think the right hon. Member for Wolverhampton, South-West (Mr. Powell) referred to this a few minutes ago —there is a sharp upward trend in earnings, which one reads about now in economic comment. It was referred to in the the Economist of 15th November; the Deputy Leader of the Opposition was reported on it in the The Times Business Section of 19th November; it was referred to in the Financial Times of 13th December and in the Economist on 13th December. At the beginning of the article in the Economist of 13th December—and I do not know whether this is appropriate to some of my hon. Friends —we read: When you're wounded, and left on Afghanistan's plains, And the women come out to cut up what remains, Just roll to your rifle, and blow out your brains. And go to your God like a soldier. If the cap fits anybody he is welcome to it.

In The Times Business News on 19th November, the Deputy Leader of the Opposition is reported as having said: Let no one be under any illusion. We are facing such an explosion now. He was referring to a wage explosion, and he continued: Yet the Government seem deliberately to have given up any attempt to control this situation. Their incomes policy is in ruins; the prospect for prices is a very gloomy one. I should have expected the Deputy Leader of the Opposition to come to the House this afternoon and commend the Government for at least a good try to do something about it in the next six months.

To the question why it is important to keep the power, if after a very short time it is proposed to drop it, my answer is that the intervening period may be the most crucial. If the trend is sharply upwards now, one has to deal with that trend now. It is not enough to say "Let it go; let it drop, because nothing much can happen in the next few months and we can go forward with our more comprehensive machinery for dealing with prices and incomes later." One has to deal with an emergency situation—and I believe that it is little short of that—by what emergency action is at hand and in this case it is the renewal of Part II of the 1966 Act.

Mr. William Molloy (Ealing, North)

Is my right hon. Friend being fair to the Leader of the Opposition? The Director-General of the C.B.I. claims that investment in British industry is falling because of the Government policy of price control holding down prices, while the Tory Party, with, I take it, the approval of the Leader of the Opposition uses political advertisements claiming that because of Government policy prices are rising.

Mr. Houghton

It is not part of my job to get the Leader of the Opposition out of his dilemma, still less need I be fair to him in his dilemma. I can quite understand that he is in one. There is nothing in what he said this afternoon to show that he understood the particular problem with which the Government are dealing now. The two things together semed to me to provide a considerable case for going on with the reactivation of Part II They are, first, the economic desirability of doing so, and, second, the desirability—indeed, the essential need —for the Government to avoid a further political retreat. To combine economic misjudgment with a further political retreat would be very damaging to the Government's prestige and for the future of their economic policy, because if people do not have faith in the Government they cannot have faith in their economic policy. What will distress our supporters is the divisions on our benches this afternoon.

The real debate is between some of my hon. Friends and others of my hon. Friends, because we know where the Opposition stand. They have been against us all the time. They have never believed in the policy—at least, they have never voted for it. Therefore, we can wash them out of the discussion. Nothing they can say will help us to cope with the situation. I thought at one time that the Leader of the Opposition would be so rude to some of my hon. Friends that he would close the ranks on these benches, but he skilfully moved away from any attempt to do that.

When wage increases are now running at a rate which will possibly inject £3,000 million a year extra into consuming power, it is not the moment to play fast and loose with any power that one possesses to try to curb them. The estimate that earnings are running at about 7 per cent. above what they were at this time last year is something which my right hon. Friend the Chancellor cannot face with equanimity. He will have his room for manoeuvre, his economic and budgetary strategy, eroded before his very eyes if this trend continues. He will not have the freedom he wishes to have at the time of the introduction of his Budget, because what he would otherwise have wanted to do will have been forestalled by unregulated rises in income, with all the economic consequences of that in inflationary tendencies. The Economist said the other day that if this were to continue it would be flabbergasting, which is an extreme word to use.

Mr. Orme

If this is the case, is it not happening now with the prices and incomes policy? All the Government are asking for is a reactivation of the same policy. Are there not other measures that need to be taken to deal with the situation? What is the difference between now and early January?

Mr. Houghton

My hon. Friend has not told us what other measures could be taken. He may do if he catches your eye, Mr. Speaker. My hon. Friend the Member for Birmingham, All Saints (Mr. Walden) said, "Use the monetary policy, which is the most effective", as if it were not being used already. It is a matter of judgment as to how far one can use one particular method of controlling the economy, how far one can push it without harmful consequences in one direction or another. I think that keeping the balance, having some sort of coherence, preserving the harmony of one's controlling operations, is the skill, talent and judgment required of a Chancellor of the Exchequer.

I would say that if the order is dropped my right hon. Friend the Chancellor will have nothing. My hon. Friend the Member for Salford, West (Mr. Orme) asks why since the Government have the powers of Part II now, the upward trend of earnings is not being checked by the policy the Government want to continue. It is true that so far this upward trend has not been checked, as I think it should have been, by the use of the powers the Government already have. But if, because they have not used them effectively up to this moment, they drop them altogether, they lose any chance of using them in the next crucial few months. It may be that the Government will find it imperative, however distasteful and however difficult, to use the powers which the order will give them for the next few months.

I come finally to the further question which has been asked. My right hon. Friend the Prime Minister described this as a bridging operation. I am not at all surprised that some hon. Members on both sides have said, "We know where the bridge starts from—it starts from here. But where does it end?" The right hon. Member for Wolverhampton, South-West made great play with what was apparently on the other side of the bridge. It was not a new board, he said, but two old boards brought together, and so on. One can be sarcastic and derisory about these things, but when the Government have announced that they are devoting themselves to finding, in consultation with all concerned, an alternative method of dealing with the situation by a merger of the Prices and Incomes Board and the Monopolies Commission, however they do it, I am prepared to wait for them to try to produce the result of their endeavours.

If they then come forward with something that enables these powers to be dispensed with, all to the good. But if they come forward with something that does not look convincing, obviously the Government and the House will have to address themselves afresh to a situation which might be of considerable difficulty. But I am prepared to take that on trust for the short time that remains. I hope that my hon. Friends will be prepared to do the same.

That, I think, is the case for what the Government propose to do. I know that it will not carry conviction wholly on this side of the House, and probably none at all on the other. But I suppose that that is the nature of politics today. However convincing a case, however strong it may be, it is still the duty of the Opposition to oppose it. That is what the public outside are sick of. They cannot understand why good things should be opposed on the theoretical, constitutional ground that it is the Opposition's duty to oppose the Government. However, that is not my concern at present.

I believe that the Government have a case. I think that it should be supported, and I shall greatly regret it if at the end of the day the Government do not have a substantial majority of the House behind them.

7.8 p.m.

Sir Edward Brown (Bath)

Those of us who served on the Committee considering the first Prices and Incomes Act forecast that we should have a series of Orders such as the Order before us. We now have our second, precisely because the dam has burst. The right hon. Member for Sowerby (Mr. Houghton) asked why Part II has to be reactivated. It is because the dam has been breached, leaving the Government faced with a serious situation, and the possibility that they must take legal sanctions against somebody, though they have refused to do so. As a result of the 1966 Act and its reactivation since industrial relations are now worse than they have been at any time in our history —and that is making quite a statement.

The following workers have passed through the dam very comfortably: the miners, with a 10 per cent. increase; the dustmen, with a 16 per cent. Increase; the exhibition stand fitters, with a 16.3 per cent. increase; and British Leyland clerical staff, with increases of from 8 per cent. to 14.4 per cent. B.E.A. and B.O.A.C. engineering workers had an increase of 30s. a week from 1st September this year. These have not been referred to the Board. There was an agreement which provided for an increase of 15 per cent. for English Clay workers. Motor vehicle retailing and repair workers had a 19.4 per cent. increase, and agricultural workers had a 15s. a week increase. Government industrial workers have had increases of from 3.3 to 12.4 per cent., and local authority manual workers, numbering 680,000. have had increases ranging from 15s. to 37s. a week, which are percentage increases ranging from 5.6 to 12.9 per cent. That is what has happened to the 3½ per cent. norm.

Hon. Members on both sides of the House have never ceased to express their repugnance and disgust with the prices and incomes policy. I think that we should never have had talked about the prices policy but simply about the incomes policy. The Labour Party has condemned its continuance. The T.U.C. has condemned it and union conferences throughout the year have instructed the Labour Party to oppose it in the House. Over many years of toil and sweat we have built up a system of free collective bargaining about which in past years the right hon. Lady has been very eloquent, and it is a sad reflection that today by the order she is doing her best to produce not growth, but chaos in industrial relations.

"Long-term transitional change to a voluntary system" was the expression which she used this afternoon. I should like to quote from some of the statements she has made to show the dilemma in which the Labour Party finds itself. Speaking at Bolton on 17th September, 1966, on the introduction of the policy the right hon. Lady said: Economic planning in a democratic Socialist economy cannot operate successfully if wage-fixing is left either to the arbitrary decision of a wage-stop or to the accidents of unco-ordinated sectional bargaining. This sentence was not written 16 days ago but 16 years ago. It was written by a group of left-wing Members of Parliament who outlined in a pamphlet 'Keeping Left' their remedy for the same sort of economic crisis which plagued Britain then as plagues us now. The members of that group were named by the right hon. Lady and they were the Secretary of State for Social Security, the hon. Member for Poplar (Mr. Mikardo) and the right hon. Lady, among others. They had no doubt that in a planned society incomes must be planned along with everything else. We called it 'socialisation of the wages sector' and declared that, to make it happen we needed the recognition by the trades union movement that wages in any industry are no longer the business only of employers and the workers in that industry but of the whole nation.' That is still the issue today…it will call for something much more imaginative than the methods of collective bargaining based on the principle of what the market will bear. But I don't believe we can get Socialism without it. That is a condemnation of the whole of the policy which is being continued today.

In Election Forum on 10th March, the Prime Minister said: 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. As to the idea of freezing all wage claims, salary claims, I suppose, dividends, rents?… I think this would be monstrously unfair". He followed this in a broadcast on the B.B.C. programme "24 Hours" on 6th October, 1966, when asked by Mr. Harris: When the powers of the Act come to an end in August. Prime Minister, won't there have to be a continuation of them? by saying: In terms of legislative powers, no…we hope to use the next few months for working out the criteria for voluntary restraint to relate incomes of all kinds, not just wages, to productivity. One could go on quoting example after example of Ministers denying what would happen but of which we see the results today.

I ask the right hon. Lady to examine Part II and its true function. The right hon. Member for Belper (Mr. George Brown) clearly expressed it when, in Committee in 1966, he said: What Part II of the Bill does is not to stop anyone negotiating. It does not stop anyone doing what he wants to do at the end of the day. It does not stop anyone settling negotiations. What it does is call upon people to notify what they are proposing, and, if asked to do so, to stand still for a limited period while someone other than themselves, using a set of criteria agreed upon, tests what it is that they are proposing to do. At the end of the day, they are free to go and do it, but they will at least have been called upon to justify it and the country can check, test and judge how far they are taking the national interest into account in what they are doing. That is all that Part II does. It is all that Clause 6 leads into."— [OFFICIAL REPORT, Standing Committee B, 2nd August, 1966; c. 279–80.] This was the then Minister talking about the voluntary notification and what we have in Part II is a penal sanction applied at the end of it. Hon. Members opposite know it and we know it. The sanction has never been applied and because it has never been applied, claims have gone through without screening and without investigation because Ministers cannot face up to putting anybody in court. The net result is that we have this wretched order pushed through the House year after year. The right hon. Lady and her friends will not only have forfeited the loyalty of hon. Members opposite, who are being dragooned and pushed into the Lobby tonight, or who will be abstaining and sitting on their bottoms, but, and more significantly, she has forfeited the loyalties of millions of trade union workers, who will be saying so in no uncertain fashion when the next Election comes.

Who is kidding whom? The Prime Minister is running around the country making great speeches about the balance of payments while the right hon. Lady is telling the workers that they cannot have any more. But wage claims are still going through and still we see prices rise—and I fully agree with my right hon. Friend the Leader of the Opposition that prices are rising.

The right hon. Lady and her friends should take their scrap of paper away and in its place, in what little time there is left to the Government, they should bring in an industrial relations Bill which would give the country a sense of purpose, not bring in scraps of paper which have no relevance in our time and our age.

7.16 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

My right hon. Friend the Member for Sowerby (Mr. Houghton) made a very good defence of the Government, but I am not certain that he convinced himself by his speech. He certainly did not convince me. There was one interesting point in his speech on which I should like to comment.

He said that we needed this bridging operation, the reactivation of Part II, because we were in an emergency situation—at least, he used the term "emergency"—and said that there was a great danger of a wages and prices explosion. We have had the policy since 1966 and two Bills and an order have continued it. Yet, after two and a half years we are in an emergency situation.

If we are in an emergency situation after two and a half years of the policy, what sort of situation shall we be in in three months' time? I could not follow the logic of my right hon. Friend's argument. If it is an emergency now after two and a half years, how can we get rid of the emergency and make certain that we have an entirely new policy without any powers at the end of the bridging period? My right hon. Friend has revealed that the argument does not have a great deal of content. I say that with due respect to my right hon. Friend whose opinions I greatly value and whom I regard as one of the finest hon. Members in the House.

I should like to say why my hon. Friends and I oppose the order. First, we think that the order is totally unnecessary. Economically, it does not add up to a row of beans. Secondly, we particularly oppose the order at this time because the Labour and trade union movement almost unanimously throughout the country has stated categorically that it does not wish this policy to continue.

It is quite possible that we can ignore the views of the Trades Union Congress. We could ignore the views of the national executive of the Labour Party. We can ignore the decisions of the Labour Party conference. We can ignore the decision of trade union conference after trade union conference. It is quite possible that we can do this. But my hon. Friends and I are not prepared to ignore the views of workers throughout the country who fought hard to elect a Labour Government in 1964 and in 1966.

My right hon. Friend the Member for Sowerby made a point in a rather different way concerning something which was stated at a meeting which I attended. My right hon. Friend said that the reactivation of Part II was clearly raised during the Budget debate but that at that time no one opposed it. For the benefit of my right hon. Friend, I would say that we were so busy opposing the penal clauses in the other White Paper "In Place of Strife", which was before us that we considered that, at that stage, the reactivation of Part II was a rather minimal matter, because we had to put the whole of our energies to stop the Labour movement being split right down the middle by the so-called White Paper, "In Place of Strife". That was why, at that stage, the question of Part II rather slid in under the door without everybody noticing that this was involved in the package at that moment. We were horrified at what the results of "In Place of Strife" would be.

The matter was not overlooked because in June I made the point at the conference of my union, the A.S.W., that many representations were being made to the Government against the reactivation of Part II. After the Budget speech, when the whole question was again being discussed, time and time again my hon. Friends argued against the reactivation of Part II. It was not, therefore, a question of its being overlooked in the Budget debate. Much more was involved. My hon. Friends and I are opposed to the reintroduction of Part II precisely because not only is it unnecessary, but, as I said at the outset, it is against the wishes and the desires of the trade union and Labour movement.

We have been described in the Press as rebels. In this debate I do not consider myself a rebel at all. If there are any rebels in the party, I would say that they were 21 members of the Cabinet who seem to have forgotten the desires of the Labour movement outside.

What are those desires? A resolution was passed at the Labour Party conference in 1968, not merely saying that it did not want the reintroduction of Part II. It said that it wanted the repeal of the Prices and Incomes Act. That was in 1968. Again, at this year's conference, there were two resolutions, one by Jarrow, which had a different economic strategy—in fact, the economic strategy that my hon. Friends and I have been putting forward consistently for the last three or four years. That resolution was carried. It stated that there should be a genuinely voluntary incomes policy.

In addition, a resolution was passed from the Transport and General Workers' Union which underlined the whole point that we wanted no further legislation that would in any way hamper the trade union position. That meant no statutory powers.

There was a national executive committee meeting this morning. A resolution was put down and was hastily withdrawn. I do not know what went on at the national executive committee, but there was really no need for the national executive even to discuss such a resolution, because the position of the national executive is clearly on record.

Let me quote a letter which has been sent by the General Secretary of the party which is included in the amended version of "Agenda for a Generation", a document which was discussed and passed at the party conference. The letter quotes my hon. Friend the Member for Leicester, North-East (Mr. Bradley), who was speaking on behalf of the Executive Committee. Harry Nicholas, the General Secretary of the party, draws attention to what my hon. Friend said. I quote: During the week at Brighton there was a number of misunderstandings about the section relating to prices and incomes policy. The National Executive Committee has now considered this document again and feels that it should continue to circulate as a statement of policy approved by the conference. We would, however, draw attention to the fact that Mr. Tom Bradley, M.P., speaking on behalf of the National Executive Committee, said on the subject of incomes policy: 'The resolution talks about "a genuinely voluntary incomes policy". Well, the National Executive Council has no quarrel with that. In our statement, however, we call for in effective incomes policy too. This does not mean—emphatically it does not mean—that we wish to fetter the trade union movement of this country with statutory restrictions'. That was sent out by the General Secretary of the Labour Party. I know that there have been other quotations from "Agenda for a Generation". The part which I have just read was not quoted, but that is the interpretation of the conference statement concerning incomes.

It has been said that this is a bridging operation. In paragraph 33, page 12, of the White Paper, the word "hopes" is used. This point was put this afternoon to my right hon. Friend the First Secretary, who said that she was in a bit of difficulty about this. She could not say why. She could not give us a categorical assurance that there would not be any powers but said that the Government hoped and believed that there would not be any powers.

The Guardian, in its editorial today, makes the very point concerning this question. The Guardian clearly points out that there are no guarantees whatever. Some of the arguments which I have heard from some of my right hon. and hon. Friends concerning this matter do not give me any confidence that they genuinely believe in a voluntary policy. Some of the arguments which I have heard lead me to the opposite conclusion, that they believe in a statutory incomes policy and in the fixing of incomes in that way. As I said earlier, economically, it does not add up to a row of beans.

I should like to give just two examples of what I mean. This is the Report of the Prices and Incomes Board in July, 1968. Remember, this report came out after the most stringent period when there was a much closer control than there has been since. What did the report, on page 67, say? It said this: Even so, they are of considerable interest. From the employment/income equation, it appears that incomes policy has on the average reduced the rate of rise by rather less than 1 per cent. in those years when it has been in operation. That is what it says.

What does the T.U.C.'s "Economic Review 1969" say on precisely this point? It says this: The implication is that incomes policy has had the effect of restraining the rise in total costs by about one half of one per cent. a year, or about a sixth of what would otherwise have happened. It goes on to say: From one point of view it can be argued that this was a small return for the effort which the Government and the T.U.C. have put into developing incomes policy in the last four years. I would have said that it was a small return for the agony, the anguish, my hon. Friends and my party have gone through for this policy. It is high time that this policy was dropped, and dropped once and for all.

We are being asked tonight to support an order which, incidentally, is not to be in operation for three months but, clearly, is for one year. That should be remembered. That has not been pointed out in this debate. We are not being asked merely to accept something for three months. At the other end of the three months there may be something of which we do not know. Therefore, we are being asked tonight to vote for continuation, in a modified form, of this policy for one year. That is what it says. [Interruption.] My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) may or may not agree with it. Some of my hon. Friends and I do not agree with it. The T.U.C. does not agree with it. The Labour Party does not agree with it. I am certainly not prepared, and neither are my hon. Friends, to support this in the Lobby.

We have heard a lot this evening about the low-paid workers. There are all sorts of categories of low-paid workers. I will give an example of what a low-paid worker is. Last week a group of building trade operatives, maintenance workers, working in the National Health Service, came to see me here in the House. They came to see me because I am a member of the Amalgamated Society of Woodworkers. They felt that I, as an A.S.W. member, might be able to help them. I got them an interview with the Minister of Health. I myself was amazed when I discovered that for a 40-hour week a highly-skilled joiner who spent seven years learning his trade, who supplies his own tools, was earning £16 8s. 3d. gross pay and, if he was single, was going home after taxation and other stoppages, with £12 a week. Labourers in fact get £1 a week less. I said to those lads, "Why do you stay in that job?". They said, "We like working for the National Health Service. We feel we are doing a good job on hehalf of people less fortunate than ourselves". What has this policy done to help them?

Remember, these were people who were caught by the builder's penny. Do not talk to me about that, because when I meet building workers in the pubs in Liverpool they tell me what they think about the Government's policy. The people who were caught by the builder's penny were not the people out on the big jobs. The people who were caught by it were those working for the local authorities, those working for the National Health Service—the lowest paid workers in the building industry. Those on the big jobs were able to earn income in other ways. So under this policy the low-paid worker has remained low paid. We have not helped them one bit, and they no longer believe us when we come along with a White Paper and say, "That is in the past. That is all in the past. In future it is going to be different".

They do not believe us any more. I have had telegrams pouring in from the Merseyside area from building workers. Incidentally, I had one from Huyton, Kirkby, and District Trades Council[Laughter.]—and I also had one from the Huyton branch of the Amalgamated Society of Woodworkers. I can understand that, because I am a member of that branch. But the telegrams have poured in, and they have said, "Stand firm, and fight against the reactivisation of Part II". They are not doing that because they do not understand it. They understand it because of the builder's penny very well indeed. They are sophisticated to the extent that they have been on the receiving end of the policy.

Of course, we have been told that we need the policy to deal with prices. Well, I should like them to see a list of the prices we have actually controlled. Of price increases notified, 18 per cent. have been held back, but that means that 82 per cent. have not been held back. That is a very simple calculation, but it is true. Those who have been getting increases in their rents, those who have been getting increases continually in that direction, and other directions, are not very enthusiastic about the operation of this policy.

As far as we are concerned, we are not going into the Lobby—I am not, anyway, and I am sure that many of my hon. Friends are not—with hon. Gentlemen on the other side. I will tell why —for the reasons that my right hon. Friend the Member for Sowerby (Mr. Houghton) made clear: the Opposition are irrelevant; they are only involved in opposing this policy in the way they are, purely for party political game. [HON. MEMBERS: "That is not fair."] That is why we are not going to play. I say openly, that we hope that tonight the Government will lose by our people abstaining, but we are not going to help the Conservatives in the way they wish us to, for the reasons they want us to. We are fighting our own battle in our own way on our own ground, and it is not the ground of hon. and right hon. Members opposite. But we could not accept this policy.

I am going to conclude with a quotation from Nye Bevan. In his book, "In Place of Fear", about political leadership, Nye Bevan said this: The first function of a political leader is advocacy. It is he who must articulate the wants, the frustrations and the aspirations of the masses. Their hearts must be moved by his words, and so his words must be attuned to their loyalties. If he speaks in the old false categories they listen art first and nod their heads, for they hear a familiar echo from the past. But, if he persists, they begin to appreciate that he is no longer with them. He is not their representative any longer in the true meaning of that much abused term. The workers are hearing an echo from the past, and the great promises that were held out by the co-called incomes policy. They have not been fulfilled in the terms in which Nye Bevan spoke. So the Government are no longer giving them the leadership they want on this question, and I hope that my right hon. Friends will drop this policy, and drop it now.

7.40 p.m.

Mr. Richard Wainwright (Colne Valley)

The hon. Member for Liverpool, Walton (Mr. Heffer) has explained that he will not be in the Opposition Lobby tonight because he refuses to keep company with the hon. Members who will be in that Lobby. Liberal Members of Parliament have almost nightly experience of this dilemma as to whose company they shall keep in the Lobby, and from time to time it causes us revulsion. I point out to the hon. Member for Walton that we shall not be voting tonight on a Conservative Motion —there is no question of being associated with the Conservatives in support of any verbiage of theirs—but on a straightforward Government proposition, and I do not understand why he should feel so sensitive about going into the Opposition Lobby.

The hon. Member for Walton also said, quite correctly, that the order for which the Secretary of State seeks approval is expressed to last throughout the whole of 1970. But Section 20 of the Prices and Incomes Act, 1966, which the order reactivates, expressly empowers the Secretary of State to vary or revoke by a subsequent order any previous order she has made. Since the duration of these powers is an important matter, we should be told the Secretary of State's intentions. Does she intend to revoke or supplant the order when the Commission for Industry and Manpower and the other new machinery gets off the ground?

The most depressing aspect of the debate has been the incredible coyness of the Government about the "promised land" of the C.I.M. The Government's only possible tactics for establishing unity behind them and below the Gangway would have been to explain in detail how worth while the C.I.M. will be and how justified will be the trek through the desert for three or four months to reach it.

But there has been an extraordinary silence, for which the Secretary of State gave an unconvincing explanation, about what is to follow as to prices and incomes and pay bargaining in about four months' time. For the House to be left in such ignorance brings Parliament into disrepute among our fellow citizens, who do not expect the House of Commons to live and work from hand to mouth. They expect hon. Members to be given an idea of future strategy, at least for a few months ahead. It is humiliating for Members of Parliament to have to report to their constituencies that both Government and Opposition parties came away from the House absolutely in the dark about the future for April or May next year.

The order takes us back for nearly three and a half years to the Prices and Incomes Bill, Mark I, in the form in which it received a Second Reading in the House, before the Measures of 20th July, 1966. After three and a half years of turbulent and intense experience of prices and incomes legislation, we are being asked to go back to what was at that time excusable as a hasty attempt to fill the empty armoury on this subject left by the outgoing Conservative Government.

One of the incidental benefits of prices and incomes legislation has been the remarkable amount of information on pay and pay bargaining which has been uncovered by the N.B.P.I. We have at least a sum of knowledge to the credit of the policy, yet that knowledge is not being used to adapt incomes legislation for the ensuing, and in the Government's eyes very important, few months ahead. We are simply being taken back to the earliest version of the Government's incomes legislation.

The Government do not appear to have learnt that the statutory restraint of pay is most damaging to the delicate plant of consent, and that for every month during which compulsory statutory powers continue to exist the possibility of general consent for a voluntary policy will be correspondingly lessened.

When the Government speak of the invaluable effect of educating public opinion about pay claims and their effects, they overlook the fact that prices and incomes legislation not only acts as an amplifier to get across to the public some of the useful lessons which have been learnt, but also amplifies to the public all the clangers that are dropped on this subject. Every time an extortionate advance either in prices or wages is secured, against the interests of the community, by a strong group which can apply pressure—and there have been many in the last few months—the news is amplified loudly to the interested public.

Mr. J. Bruce-Gardyne (South Angus)

The hon. Member has referred to the effect on opinion at home of the advances that get through. Would not he agree that the effect is even more dramatic on opinion abroad? At a time when the Government were trying to wrestle with an unprecedented deficit, every time the so-called norm was exceeded, people abroad assumed that the worst had happened and that the flood gates had been opened.

Mr. Wainwright

I am more concerned with the education of public opinion at home, on which I think a body such as the N.B.P.I. could do a good job if it were allowed to work in a proper context.

It is humiliating to have to revert to the earliest and most primitive version of prices and incomes legislation. There is an attempt to cover this up by posing, in paragraph 10 of the White Paper, two quite unreal and invalid alternatives. The White Paper tells us that we are faced with a choice between only two alternative approaches: On the one hand we can choose to plan the rise in incomes so that it does not endanger exports and the investment on which productivity, high real earnings and a high level of employment depend. On the other, we can claim the right to extort whatever increases in incomes we can get individually regardless of the consequences. Those are two unreal alternatives. The history of the last three years has shown that the Government cannot plan rises in incomes; they can go only by guess and by God and hope to get somewhere near the mark, but have rarely done so.

The other alternative is equally unreal. There is no question of going back to a complete free-for-all, a complete jungle in which devil takes the hindmost and everybody struggles for the utmost that they can get. This is just not on.

There is another way open, which my hon. Friends and I would describe in this way. We can build with Government help an effective and up-to-date set of structures for pay negotiation, within which the parties can be left to bargain freely. The structure would contain restraint for those groups who have special monopoly power in any part of the market for goods and labour, and it would contain official support for those groups which are inadequately organised and which over the years have been quite unable to stick up effectively for themselves.

This would require, first, the extension of the Restrictive Trade Practices Act to the trade unions, who would be called upon to vindicate to the Monopolies Commission, or its equivalent, their position in the labour market. Any groups which were likely to be able to exert the kind of extortionate pressure to which the White Paper refers would be subject to the vigilance of the Monopolies Commission. I wish that was the Government's view, but, alas, it is not.

Secondly, there should, in our view, be something more needed for the low paid than simply assistance in negotiations. It is high time that the adult able-bodied low-paid worker had a statutory minimum earnings level. We are not convinced, either by the Report of the National Board for Prices and Incomes or by the Government's comment upon it, that this is either impossible or enormously costly. Indeed, the White Paper acknowledges that the problem of the low paid is not as difficult as had at one time been thought. The White Paper acknowledges that most of the low paid are scattered throughout industry in which very often other pay levels are quite high. This makes it easier to apply minimum earnings than if some of our great industries had a huge concentration of low paid people, where a sudden jerk in the minimum legal earnings would cause industrial dislocation. The discovery that the low paid are scattered pretty well throughout British industry is a bull point for a minimum earnings policy.

It will be necessary for the Government to take some lead in preparing the way for a more extensive use of local and plant settlements, particularly by providing for elected works councils in all substantial work places. This is the way to censor undue sectional claims. There could be no healthier discipline in any large works for dealing with any undue sectional pay claim than for it to go through the mill of an elected works council representing all the other sections of employment in that works.

Lastly, on the prices side, we believe that any board charged with seeking information about prices and trying to do something about them should have substantial powers for recommending tariff reductions. No threat to anybody trying to profiteer, to get an extravagant margin, can compare in strength with the threat that they may be exposed to a lot of foreign competition. We regret that this Government have been unwilling to use the threat of tariff reduction against the very people whom they often accuse —perhaps rightly—of making extortionate prices in a difficult economic situation.

We find it difficult to understand the reason for this reversion to a primitive form of incomes policy at this time, particularly as we are not told where it is to lead and what is to happen next. For lack of any other information, our guess is that the order is intended, either by the Department or possibly by Ministers themselves, to make sure that after the election is over, after the voting has been done, there remains machinery for reviving in its full austerity the prices and incomes standstill.

7.54 p.m.

Mr. Raphael Tuck (Watford)

So the declaration of intent signed by my right hon. Friend the Member for Belper (Mr. George Brown) and by both sides of industry, management and workers, was all hypocrisy? Was it nothing but high-sounding phrases—merely a facade? I do not believe that it was. I believe that, at least on our side, it was real and sincere. We recognised then, and many of us recognise now, that we must have a prices and incomes policy to prevent the fatal spiral which goes on, and has gone on for years now, with disastrous consequences for the lower paid workers, for those with fixed incomes, for pensioners and others in that category, besides having a serious effect upon our balance of payments and making us unable to pay our way.

I have come here from a sick-bed to plead with my hon. Friends, whose views I know and respect though I disagree with them, not to do something tonight for which they may be sorry for the rest of their lives. I am asking them to think again.

My hon. Friends the Members for Birmingham, All Saints (Mr. Walden) and for Liverpool, Walton (Mr. Heller), who are not here now, placed reliance upon a voluntary incomes policy. Of course, we should like to see a voluntary incomes policy. We tried a voluntary incomes policy, but the stark fact remains that it did not work. It did not work because—I say this with great regret—people were more concerned with personal short term gains than the long term interests of the nation.

Wages and prices rose. We did not want them to rise. I would remind my hon. Friends that wages rose faster than prices. Indeed, the right hon. Gentleman the Leader of the Opposition acknowledged tonight that wages rose faster than prices, but both rose. The ethos of our community could thus be summed up in the two words, "I want". There appears to be no concern whatsoever for the welfare of the community.

The reason why the Government had to impose compulsory features was that a voluntary system did not work. It is no use blaming the Government or my right hon. Friend the First Secretary of State. If any one feels for the unions, she does. She has been trying to ride the two horses of prices and incomes and to hold them back for all she is worth during the time that she has been in office. She has been doing it to the best of her ability. She succeeded to a certain extent, but those horses have proved too strong for her. I wish that there were 12 Barbara Castles in the Government.

My hon. Friends must surely realise that unless we have a prices and incomes policy we are doomed. We are now, at last, paying our way. This in no small measure is due to our prices and incomes policy. Of course it is due to financial Measures, but it is also due to our prices and incomes policy.

I appreciate that we have not had the success that we wanted. I should have liked to see a complete freeze. Prices have risen, but not as much as they would have risen had we not achieved a prices and incomes policy.

We have been told, and the figures have shown, that often we have not done what we should have done. I do not agree with the removal of the ceiling on dividends. That was entirely wrong. But the Government are not paragons of virtue. They have not always been right. However, unless restraint is practised, we shall lose all the advantages that we have most painfully gained in the past few years.

I am sure that the Labour Party is genuinely concerned for the unions. The Tories are not. They say that they are concerned. They have been weeping crocodile tears and saying that the unions are not getting as much as they should, that we are stopping them from collective bargaining and reaping the rewards that they should reap.

Yet, in Watford last week, the hon. Member for Worcester (Mr. Peter Walker) said: One cannot help but be worried by the industrial disputes and the way wage increases are now being given. Prices will soar next year as a result…and the Government may gamble on an Election in spring before this increase. The Conservatives would bring in trade union reform. He is against the increases and the way that they have been given to the workers. He will bring in trade union reform. If —heaven forbid!—the Tories ever came back there would be a holocaust. Prices and directors' salaries would soar; wages would be frozen. The hon. Member for Bath (Sir E. Brown) proved that this evening. He said, "I do not want a prices policy but I want an incomes policy." Of course the Tories want an incomes policy. They want prices to soar, in a free-for-all, and directors' salaries to soar—

Mr. John Page (Harrow, West)

I am not the hon. Member for Bath, but I can assure the hon. Gentleman that that is not what he said. He said that he thought the whole of the prices and incomes policy was stupid, but that the prices part of it was most stupid.

Mr. Tuck

I stand corrected, if the hon. Member is right, but I am sure that I heard him say that he was not against a prices policy but was against an incomes policy. We shall be able to read what he said in HANSARD tomorrow and if I am wrong I apologise.

I say that under a Conservative Government prices would soar, directors' salaries would soar, and wages would be frozen. We can remember the days when the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) was in office. He froze wages, but prices and dividends went sky high.

The Tories have promised trade legislation in "Fair Deal At Work". I warn my hon. Friends that that sort of fair deal at work will be child's play if the Tories get back. It is nothing more than a smoke-screen. There will be harsh, repressive legislation—as harsh as the Trade Disputes Act 1927, or even the legislation such as exists in Greece today, making strikes illegal. I would not be surprised at that. My hon. Friends should realise that this is what they are asking for if they vote against the Government tonight. I beg them, for the sake of the country and for the sake of the unions whose interests they represent, to think again.

8.3 p.m.

Mr. Kenneth Lewis (Rutland and Stamford)

This is a continuing debate that goes back for many years. Those who have been involved in it may imagine that it is never-ending. There have been debates on prices and incomes policies not merely in this Parliament, under this Goverment, but—under other titles—in other Parliaments, under other Governments. I have always taken the view that a Government, of whatever complexion, must settle with the fact that if they want growth and seek specifically to run the economy at as high a level as possible, while maintaining very high employment, at some time or other they must put on the brakes. We can call this a prices and incomes policy or something else, but that is what has to be done. It may be done compulsorily or voluntarily. In this Parliament we have now seen it working at both the compulsory and voluntary level.

During the nights in Committee upstairs when we discussed the first Bill I repeatedly expressed the view that a compulsory prices and incomes policy was not acceptable—that it could not be implemented. I said that a voluntary prices and incomes policy was desirable. I now take quite the opposite view. I have come to the conclusion that we cannot have a voluntary policy, despite what hon. Members opposite say. The hon. Member for Liverpool, Walton (Mr. Heller) and the hon. Member for Leicester, North-East (Mr. Bradley) have said that they believe that the trade union movement would support a voluntary incomes policy. Yet the trade unions have not given any indication that they will support a voluntary policy for dealing with strikes.

I suggest that the policy as put forward by the right hon. Lady the Chief Secretary this afternoon, when she asked for our support for the proposal before the House, is in reality a voluntary one. Does the hon. Member for Walton or any of his hon. Friends really think that the right hon. Lady will use the sanctions behind this order? My hon. Friend the Member for Bath (Sir E. Brown) put this question directly to the hon. Lady, and she gave no indication that she would use the sanctions behind the order. She might just as well have said to the Parliamentary Labour Party upstairs: "You can pass this order tonight. You have no worries, because I shall not bring in the compulsion that stands behind it." Hon. Members opposite know that this is so. The hon. Member for Birmingham, All Saints (Mr. Walden)—who made a brilliant speech—has said that for the first time he will not vote with the Government. I am in the position of having to say that for almost the first time on prices and incomes—not quite the first—I shall vote with my hon. and right hon. Friends on this matter because I do not believe that this policy is any longer tenable.

I cannot understand why so much fuss is being made about it by hon. Members below the Gangway opposite. They must realise that the policy is a pure charade. The White Paper indicates that it is a charade. Whether it has any value as a public relations exercise I do not know but I am certain that at no time within the next few months will the right hon. Lady try to bring this policy into effect on the wages front.

Mr. Eddie Griffiths (Sheffield, Bright-side)

The hon. Gentleman describes this order as trivial, and a charade. Yet, as I understand it, the Opposition have put out a three-line Whip this evening, although on issues such as Vietnam and Biafra the Opposition have officially abstained.

Mr. Lewis

I do not think that that is relevant. There is a good reason for a three-line Whip in this case. There is no particular reason why the Opposition should support anything that has become a nonsense.

It has become a nonsense because of the Government themselves. There are at least two reasons why this policy is not any longer acceptable. First, the right hon. Lady gave in to the trade unions on "In Place of Strife". She thus made it impossible for herself to persuade the unions to accept any proposals that she would ever bring forward again on prices and incomes. They knew that she had been defeated. I do not blame the right hon. Lady entirely for that defeat. The Prime Minister was partly responsible, as were other members of the Cabinet. I believe that the right hon. Lady wanted to take a tough line with the unions when she was putting her proposals to the House in connection with "In Place of Strife". She was defeated in the Cabinet.

Having been defeated on that issue she is not now in a position—whatever happens about the order tonight—to restrain any of the large unions in the next few months. She cannot do it, and she will not do it.

The second reason why this policy is no longer tenable is that there have been so many rises in wages in the last few months that go beyond the 4½ per cent. limit that it makes the whole policy a nonsense right from the start.

I know that the right hon. Lady said, as have other hon. Members, that these rises have gone to the lower-paid workers. Any excuse for a settlement which has shot through the incomes policy is better than none. However, let us consider the people who have received rises in the last few months.

Post Office engineers received 7 per cent., and they are not particularly lower-paid workers. People employed in the exhibition industry received a 16 per cent. increase, and they are among the highest paid of workers. London firemen received 17 per cent., and they certainly cannot be included among lower-paid workers. Coal-mining surface workers, on the other hand, are among the lower paid, but when one considers the building industry, apart from certain sections of it where there is a small number of lower-paid workers, those employed in it are pretty highly paid. They all benefited.

The increases which have gone well beyond the norm are not related to the lower-paid workers. If anyone suggested that lower-paid workers were to receive increases in the next few weeks, what would happen? Hon. Members know that some of the greatest capitalists in society seeking increases, without regard to the lower-paid workers, are the big unions. They are always concerned with maintaining differentials. As soon as a lower-paid worker is given a rise in order to bring him nearer his higher-paid brethren, a request comes from the union concerned asking that the differential should be maintained.

I do not believe that the prices and incomes policy as represented by this order can be accepted by anyone as realistic. It is an attempt to put a public relations gloss on a policy which the Government started many years ago and have kept on too long. In our first debate on a Prices and Incomes Bill, I said that I thought that such a policy could run for a minimum length of time and that, if it went on too long, it would run into the sand. This has gone on much longer than anyone anticipated.

I accept that it worked when the hardest part of the policy was in operation and we had the squeeze. There was then, I believe, a marginal effect on wages. But we have heard no mention of the fact that the people who have maintained the prices and incomes policy most of all are the employers. The voluntary restrictions on dividends can remain voluntary because no one has attempted to break through on this front. Almost every commercial and industrial concern has supported the Government by dividend restraint. Their reward has been a knock from the Chancellor of the Exchequer in every Budget. They have been squeezed at the banks. They have been restricted in their credit. They have been told that their investment allowances were to stop and that the Government were providing investment grants as the Government saw fit. All that has happened to industry as a result of supporting the Government is that, as the months have gone by, it has been beaten more and more by the biggest stick that the Government could find.

The Government do not really wish to keep down prices. It would be a tragedy for the Chancellor if they did. That would lead to rampaging inflation, as everyone knows. The Government say that they are setting up a procedure to vet prices and that there can be a 30-day standstill. At the same time, they have the selective employment tax, which is putting up the very prices which the right hon. Lady is trying to cut back. She challenged my hon. Friend on the value-added tax, but there is no more diabolical tax on the cost of living than the selective employment tax.

In many ways, I am very sad to see that this policy apparently has not provided any credibility. I still think that we have to try again in the future. I am certain that no Government can allow a situation to arise where those who are most powerful, be they in industry or in the unions, take the swag while the rest lag behind. I would not give up the attempt, but I would say to hon. Gentlemen below the Gangway that, if they really believe in a voluntary incomes policy, it is they who must educate their friends in the trade union movement to realise that. Inasmuch as the unions are involved with the Government and industry in running our economy, they cannot opt out.

In a few weeks from now, the right hon. Lady is to bring in her Industrial Relations Bill. That will provide a host of advantages for the unions. I understand that she will ask of them no obligations. It is impossible to get employer co-operation on that basis. The best advice that I can give her is to take a leaf out of our policy. She must re-strengthen her Ministry which, through no fault of her own, has been weakened under her direction. It must be provided with the kind of influence that it used to have before the Prime Minister and other Ministers in the Cabinet interfered. Above all, when the right hon. Lady brings forward her Bill, she must recognise what my right hon. and hon. Friends have recognised for some time. If the trade unions are to be given advantages, we must ask of them certain obligations.

Some of us believe that the trade unions will not be ready to accept those obligations. That is why we have to make sure that the law is made such that those obligations are written into it.

8.19 p.m.

Mr. Norman Atkinson (Tottenham)

The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) is a unique animal among hon. Members opposite. It is obvious why he holds the position that he holds. He speaks of trade unions being given "advantages", but he should recognise that trade unions were formed, and developed in the way that they have developed, because workers exist in a generally hostile society. For the hon. Gentleman to talk about advantages is to get the matter out of perspective.

Similarly, what basis is there for the arrogant assumption that some workers are taking more than their share and are exploiting their bargaining position? The hon. Gentleman is as bad as the hon. Member for Bath (Sir E. Brown), who accused my right hon. Friend of lacking the guts to take the dustmen, the teachers and the nurses to court. It is asserted that the policy has failed because there has not been a long string of workers appearing in court. This is all based on the assumption that workers either are responsible for increased prices or are taking from society something to which they are not entitled.

My right hon. Friend the First Secretary of State spoke about the creation of the new Commission. I hope that my right hon. Friend the Chancellor will be most explicit and tell us on what date it is expected that the Commission will be established. I guess that the legislation will be through by about July, on which basis we can expect that the Commission will be set up during the Summer Recess. On such an assumption, at least we shall know the length of the bridge. At that time we shall have some understanding of the Commission's purpose and its likely constituent parts. When it is established, we shall understand what possibilities there are of its undertaking the jobs which have been undertaken by Mr. George Woodock.

It is not often that the House has the chance to debate an issue on which hon. Members are divided according to the class interests they represent. It has been demonstrated today that there is a class difference between the two sides, and to some extent there is a difference between hon. Members on this side, arising from the origin of the interests which hon. Members represent. Underlying all comments of hon. Members opposite is the fact that they represent the interests of banks, financial interests generally, traders, manufacturers, and so on.

Therefore, it is not surprising that the argument of hon. Members opposite against the continuation of these powers arises from their hatred of any intervention in the pricing system. Their objections have nothing to do with the control of wages. Their objection to the order and to the continuation of the policy is not that the Government should not be taking these powers to intervene in the fixing of wages.

It is no accident that those of us on this side belong to a party which is called the "Labour" Party and that many of us are active in trade unions. It is logical for us to take a stand against any intervention in the fixing of wages and right that we should argue for intervention in the price-fixing mechanism. We argue the case for free wage bargaining and for there being price restraint controlled by Government. We believe, in other words, in price restraint and free wage bargaining.

Many hon. Members may suggest that this is illogical, but events in the last three or four months have proved the opposite. There is now ample evidence that wages by themselves are by no means responsible for price increases. The latest figures suggest that wages represent about 1½ per cent. of the price increases which occurred last year.

Mr. Dudley Smith (Warwick and Leamington)

The big increase occurred through devaluation and other measures such as S.E.T.

Mr. Atkinson

This is where I part company from those of my colleagues, notably my hon. Friend the Member for Birmingham, All Saints (Mr. Walden), who argue that monetary methods should be used to manage the economy. The only people who suffer from the use of such methods are workers generally and lower-paid workers in particular.

I want to deal with the argument that free collective bargaining in wages between management and workers can operate at the same time as free price ceilings operate. My right hon. Friend the Secretary of State presented her case ably. She undoubtedly speaks as a Socialist, but unfortunately her conclusions are orthodox Conservative conclusions, often expressed by many of the theorists supported by hon. Members opposite. We have to argue our case against that background.

We do not oppose the order because the policy failed in some degree during the last few months in that it was not as effective as it should have been. We oppose the order because the policy is wrong in principle. We oppose the principle of the policy stated by my right hon. Friend this afternoon. This is the position which my hon. Friends and I have taken over the whole of this year.

Mr. Heffer

For three years.

Mr. Atkinson

This year particularly, in opposing the part of the policy spelled out in the White Paper.

This policy may be a reasonable method of demand management from the point of view of those who advocate its implementation, but I return to the question of principle. We are arguing for a much faster rate of growth and for the creation of additional wealth. Beyond that, we are arguing for a much more equitable distribution of the additional wealth produced. That is the second reason why we oppose this policy in principle. It cannot fulfil that purpose. In fact, the opposite is the case.

I take up the assumption by hon. Members on both sides of the House that somehow or other a fixed global amount should be distributed throughout the country for all wage earners. We challenge that very concept. We are not talking about having a fixed global amount for wages and trying to get some sort of equitable distribution within that amount. That is not our purpose. Our job is to take more for the workers' share. It is therefore not an argument about trying to get an equitable distribution between one group of workers and another. The real issue is getting a transfer of wealth, and therefore enlarging the amount which is available for workers generally.

If we look at what has happened in society in recent years, and certainly in the post-war years, we see that the rich have become measurably richer. The difference between rich and poor becomes more marked as inflation accelerates, because, by the very nature of capitalism, that must happen. Inflation itself is against the interests of workers. It is helpful to those who derive their income from unearned sources.

The reason why inflation is advantageous to the people represented by hon. Gentlemen opposite is that periodically those who own property can reassess the value of it. As inflation pushes up prices and values generally, the people represented by hon. Gentlemen opposite reassess the value of their property and their interests, and in that way they have given themselves a bonanza in the post-war years. Their wealth has increased as inflation has increased.

Those who own property are able adequately to protect themselves against inflation. The worker who has to spend his wages weekly, and does not own property, is unable to make any effort to offset the effects of inflation. The burden of it therefore falls upon the wage earner. He bears the brunt of this inflationary process. This has been part of the whole business of the rich getting richer, and this is why we argue for the redistribution of wealth, for enlarging the amount that is available for wages.

One further reason why we condemn the policy suggested in the reactivation of Part II is that it operates against the redistribution of wealth. It is designed to maintain the existing share differential between wages and income from other sources. We oppose this principle because it is wrong politically.

In trying to pursue some sort of interventionist policy in the price system the Government have failed for many reasons. One of the most important is that they were warned off the course by the CBI., by the City, and by various other interests. They were warned not to interfere in the price system. They were threatened with dire consequences if they did not heed that advice.

This is where Mr. Allen of U.S.D.A.W. is correct in saying that we cannot accept the policy if we are concerned about lower-paid workers—and let us consider his shop workers as being lower paid. Yet it is not possible to increase the wages of shop workers unless the Government are prepared to assist. When shopworkers' wages are increased, it is necessary for the Government to intervene to stop the price of goods from being increased at the same time, and to do this they must challenge property As part of the whole process of the redistribution of wealth the Government must take direct action against property and commercial interests. They must take action against those who own and control the rents of the shops in the High Street, because this is the only way of putting up shopworkers' wages whilst avoiding price increases at the same time. Therefore, it is part of our argument that the Government should intervene in the whole business of property rent and not leave their intervention at council housing and the rest. They should start to intervene in the City and with those who own property and who have gained great wealth from the ownership of property since the end of the war. Whatever statistics are examined, adequate proof is there that the greatest contributory factor to our inflationary process since the end of the war has been the price or rent of property. We have to look at this in order to pursue the argument for the redistribution of wealth which the Government claim is part of their policy.

I take another argument used by the Government and by right hon. and hon. Members opposite. This is—on the whole question of control of wages and having a global amount—that many of the workers in the motor industry have exploited their bargaining power. But large sections of them have only kept pace with the cost of living over the last thirty years. There are people in the industry who are actually worse off than they were 30 years ago. I think that there is now suffiicent on the record to prove the point.

The workers in Fords particularly—an American employer—are only just keeping pace with the cost of living and therefore could not in any circumstances be accused of exploiting their bargaining position, for they are taking no more from the economy than they were 30 years ago. [HON. MEMBERS: "Nonsense."] The record is there for all to see. The facts are not challenged by the Government and they are in possession of the evidence I have submitted to them. One could go throughout much of the industry on this theme and refute the argument that trade unions have used their bargaining power to take from the economy more than that to which their workers are entitled. It is nonsense to, argue otherwise.

It is also evidence in support of our case that it is possible to negotiate wage increases against price ceilings, which is. part of the case for redistribution of wealth. It is possible to have free wage bargaining without pushing up prices, and, again in the motor industry, I quote the example of Rootes. Large increases were negotiated on behalf of Rootes workers which have not been reflected in, the prices now being charged for their products. The firm has been able to do this successfully.

There is thus the possibility of negotiating wages in this way so that the employer must concede wage advances at the expense of something else. It could well be at the expense of undistributed dividends or by having to increase capacity in order to produce that much more to pay for the increases conceded. But that is all part of the redistributive process and it is part of the argument for our case.

But there are also many differentials which are not clearly seen when we talk about the lower levels. There are lower-paid workers in the car industry and there is injustice in the industry. In the new year, Ford workers will be trying to negotiate increases of up to £10 or £11 a week. They have made the application and the employers are to reply on 24th January, when they will make an offer. It is expected that their offer to begin with will be £5 or £6 a week. But the workers will reject it as derisory, for they are asking for double that amount. It will be the first major test of the policy which we have heard argued.

Mr. Terence L. Higgins (Worthing)

What will that be in percentage terms?

Mr. Atkinson

It could be up to 31 or 32 per cent., because Ford workers are arguing for parity with Rootes workers. Output and productivity at Ford are far higher per man than at Rootes or the British Leyland organisation. Ford workers have the best productivity figures anywhere in the motor industry, yet they are the lowest paid. They have a good case for parity with the Midlands. The average Ford wage is about £22 10s. a week at the moment, compared with the Rootes average and the average in the Midlands of £34. That gives some idea of the amounts of money being considered.

On every count, there is absolute justification for that increase. In relation to car workers generally, Ford workers are under-paid and low-paid. Whatever element there is in the policy for low-paid workers, the workers at Ford must on any standard be included in that category, and the Government ought to assist the process of lifting their rates up to those obtainable elsewhere in the industry. Whatever analysis be made of the car industry, Ford workers are entitled to the same sort of wages as obtain in in the Midlands, wages which have been gained as a result of piece-work conditions and so forth in that part of the country.

In putting our case as we do today, we are not just arguing that the policy has failed, that it has not been applied, that it has some weaknesses or contradictions. That is not our case. Our case is that it is wrong in principle. The policy is designed to shore up an economic strategy with which we basically disagree. The issues of the rate of growth and the redistributive element in our economy are fundamental issues for us, and we reject the whole business of wage restraint because it is against the interests of those whom we represent. That is our basic position. It is a political opposition. We are not talking about the maladministration of a policy or fag-ends of argument of that kind. We are talking about fundamental principles. Because we have that basic objecting to the principles being taken on board by a Labour Government, we are resolute in our opposition to the policy.

8.43 p.m.

Mr. John Page (Harrow, West)

I have heard every speech in the debate. The thread running through all of them has been the question: why have the Government presented this order for approval? The most interesting speech came from the right hon. Gentleman the Member for Sowerby (Mr. Houghton), who bravely, and with magnanimity, after his victory over the Government earlier in the summer, tried to support his right hon. Friend the First Secretary of State and her right hon. Friends. After pushing his way through arguments which he presented with little confidence, the right hon. Gentleman showed a sudden spark of fire at the end of his speech when he said that the reason his hon. Friends must support the Government today is that, if they were forced to withdraw the order and Part II of the Act lapsed, it would be a disastrous political defeat for the Government and would take all credibility from them.

In that speech a most distinguished figure in the Parliamentary Labour Party gave party politics as his reason for supporting the Government. The right hon. Lady's attitude to the prices and incomes policy seems to be like that of an obsessive punter who bought a list of tips on going to a race meeting. Incidentally, I think that she must have bought them from her right hon. Friend the Member for Sowerby at the T.U.C. conference in 1955. She has backed a horse that has been tipped in each race and each time it has been a loser. Now, clutching her lucky rabbit's foot or whatever, she is plunging for the last time on the list of horses. I fear that this too is likely to be another loser.

Who are the Government trying to impress by introducing this order and giving another 12 months' life to Part II. Is it the trade unions? In her speech the right hon. Lady said that in passing the order tonight the Government would have the support of the whole trade union movement—a remark not received with universal acclamation by her hon. Friends. This order is anathema to the trade unions. Is she doing it to improve her relations with the employers? The answer is is "No". They do not want the order, because they know that the whole of their industrial relations over the last few years have been bedevilled by the Government's prices and incomes policy. It has made negotiations at factory level, and the general atmosphere in industrial relations, very much worse.

Could it he that the Government are trying to impress the International Monetary Fund? I do not believe that this was a good runner earlier in the year when it was given as one of the reasons why Labour backbenchers should support the Government. It was said that a commitment had been given to the I.M.F. but I do not believe it was, and it cannot be considered significant now. Is it an appeal over the heads of all parts of industry and the international financial world to the general public? Is it something which the public wants even though politicians do not? Is this another of those …unpopular things we are doing because we know it is right even though people do not understand it"? This does not stand up either. I looked through the list of items on the opinion polls recently. The nearest I could get to this affair would be the attitude towards strikes.

About six weeks ago, 53 per cent. favoured legislation and only 28 per cent. were satisfied with the new T.U.C. intervention plan. It is interesting how in every instance that has come before the country in the last six months the Government have gone out of their way to oppose public opinion. It must be a kind of a death wish.

I did not pick out these items selectively. I picked them out as they came in the list of Gallup Poll summaries in the Library. They showed that 84 per cent. of the public were against hanging; the public was against the two-tier post; against the trade ban on Rhodesia and against entry to the Common Market. My point is that this is another example of the Government going against public opinion for no apparent reason. We must decide why.

I think that the answer is contained in the famour paragraph 33 of the new White Paper—a White Paper of inordinate length with very little meat. That paragraph says: The Government hopes that it will not be necessary to perpetuate these delaying powers in the legislation to set up the C.I.M. The Government have not given any undertaking today that statutory powers will not be introduced in the new legislation. Part II is being kept alive and will be kept alive through the summer until, during the June-July "sunny" period when, with a view to an October election, the unpleasant powers contained in the order will be dropped. An innocent and friendly industrial relations Bill, full of "goodies", will then be introduced.

Then, in the unlikely event of the Labour Party winning the next election, the Government could soon afterwards come back again with new and stronger statutory powers. They would then use as the basis of their argument, "We kept Part II and warned in paragraph 33 that that might be done". That, I think, is the reason.

There are figures which prove no benefit whatever can come out of the order. I remind my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis), who said that the powers had not been used recently, that less than 10 days ago a standstill was imposed on the new claim of the National Union of Bank Employees. That standstill can last for about the next three months, admittedly as a maximum. The powers were used recently, and against a union which is not very popular with the Government and not very strong.

There must be a moral to all this. It is no use my trying to point the moral to the Government Front Bench, but I hope that it will be taken up by my own Front Bench. The moral to be learnt from this prices and incomes dispute is that once one starts on the slippery slope of a prices and incomes policy, one eventually becomes entangled in its statutory effects.

If the Government continue to be a large employer with ultimate responsibility for nationalised industries and pay in hospitals and so on, the next Conservative Government will be under pressure to do something about it.

The answer is for my right hon. and hon. Friends, as soon as they next take office, to begin a strong process of denationalisation in order to avoid slipping into the trap. Once they have divested themselves of responsibility for a large number of employees for whom they are now ultimately responsible, they can then become good employers and pay the teachers and the nurses what they deserve. They will then cease to be the worst employer in almost every respect.

8.55 p.m.

Mr. Alexander W. Lyon (York)

I come to this debate rather as Mark Anthony in "Julius Caesar" came to the Forum. I come anxious and willing to embrace an old friend in the compulsory prices and incomes policy and I find that he has been done to death, and as I stand mourning his death I find that, around, the murderers are wiping their daggers on the white shroud of the White Paper in which the body has been lain.

There is no question but that the compulsory prices and incomes policy is dead; we have finished with it; and I far one bemoan the fact. I am alone with my hon. Friend the Member for Bosworth (Mr. Wyatt) and one or two other hon. Members in bemoaning the fact. But I say it frankly, and I do not think that there is any point in pretending otherwise.

I therefore come straight to the point which is put to me by some of those hon. Members who for so long have sought to bring about the death of this old friend, and in particular to the noble Brutus himself, for if my hon. Friend the Member for Birmingham, All Saints (Mr. Walden) has now joined in the execution squad, I have to answer his question: granted that it is dead, why not bury it tonight?

Mr. Walden

Corpses smell.

Mr. Lyon

Why wait for the obsequies to take place in another three or four months?

The answer is that it is all very well for us to say that the policy is dead, that it will not be pursued as a live real being for the next four months; but there is still something to be said for the reputation which this good Caesar gained in the period of his life, and it is the reputation which will linger on in the mythology of wage bargaining for the next few months and the next few years.

That is what my right hon. Friend the First Secretary means when she says in her White Paper that what we now have to look forward to is a long-term educational effect. There is no such possibility as a voluntary prices and incomes policy, which has been espoused by some of my hon. Friends. 1 was not here at the happy birth of the prices and incomes policy, but I delighted in its birth and I hoped that the voluntary policy would work, but it did not.

It did not because when the pressure is on and when those who wish for higher wage agreements have the strength to get them and when there is no legal impediment to their getting them, in the end they will get them. That is not to be assuaged by any kind of talk of a voluntary policy. But it is true that the kind of wage negotiations which will go on in future are bound to be settled in the context of our experience over the last three-and-a-half years. There is bound to be some residue which will go forth of the good that came from the prices and incomes policy, namely, the major good that came out of it, the fact that productivity became an essential element in wage bargaining. This will go on for some time, although I think that it will be a declining asset. It will be like Christianity without the Church. The essence of the policy will remain for a while, but as one gets further and further away from the death of the creator we shall have less and less effect from it, but we shall have some effect.

If we say to the country tonight that the House rejects the policy, when the Government have set their face in favour of continuing it for another four months, the traumatic effect of a defeat on this issue will be such as to kill even that residue of mythology—I would prefer to call it atmosphere—that will be left from the pries and incomes policy. It would be as if to say to all those whose claims are in the pipeline, all those who are waiting, "We can forget about prices and incomes policy. It is finished. The House has voted against the Government. They have been defeated on this." Whether or not we went to the country, whether or not my right hon. Friend the Prime Minister handed in his seals of office, is irrelevant on this issue. They would say, "The past is dead. Now we go forward in a new, changed situation".

I think that it will take some time before that begins to dawn. If we pass the order tonight, I do not believe, any more than does my hon. Friend the Member for All Saints, that it will mean that the Government will try to use their powers under the order.

I take up for my final few minutes a question which for me is much more interesting and has not been raised by anyone in the debate: where are we going from here? My hon. Friend the Member for All Saints asked, "If we have a bridge, what is at the other end of the bridge?" That is the landing place, but where do we go along the road from there. My hon. Friends from the Tribune group would say that they would never have started from that point, and therefore we cannot ask them, because they want a completely different policy. But we must take the policy which the Government are pursuing. Where will they go without the prices and incomes policy?

I have always supported that policy on the basis of its redistributive effect. In my view, this was the most Socialist policy of all. I said in November, 1966, that the importance of the prices and incomes policy was not in a deflationary situation, in which it was then being applied, but in a reflationary situation where there would be more assets to be distributed amongst working people, and it was a question how one wanted to distribute the increases. As long as we could have had some power to redistribute, I wanted to preserve the prices and incomes policy.

I recognise that that has now gone and that we cannot hope to have a redistributive policy for a prices and incomes policy. The Government have never laid much stress on that, as some of my hon. Friends have complained. They have relied on the policy as part of economic management, part of demand management. With what are they left? They are left with Budgetary policy, which was used in 1968 in a much greater dose than has been used since the war. The result was almost negligible in terms of demand management. The last Budget, significantly less than the 1968 Budget, was nevertheless considerable by comparison with its predecessors. It has had a greater demand effect, but no one can suppose that it would alone have achieved the situation we have today, precisely because the people who operate within the economy have found ways of circumventing Budgetary control as a method of demand management.

So my right hon. Friend the Chancellor has turned to control of money supply. My hon. Friend the Member for All Saints says, "Lay it all on the table. This is all we have in demand management. Use that. Never mind about anything else." If my hon. Friend thinks that they can circumvent Budgetary control of demand, I believe that it will not be long before they find a way of circumventing the method of controlling money supply.

At the moment, it is by no means a refined instrument. It is a very blunt instrument. No one has yet seen how people will circumvent about the only way—at least, the major way—of controlling demand by money supply through the banks. There will, however, be ways of circumventing it. There are other sources of credit. They will be progressively used and gradually we shall have a declining value for control by money supply. In the end, therefore, we may be left with stultified instruments both of Budgetary control and of money supply.

My major charge against that attitude, which is shared not only by my hon. Friend but by some of my hon. Friends who are closer physically to me than is my hon. Friend, is that this is a general blanket power. One cannot be sure that when one exercises money supply as a method of checking demand, it will operate in specific areas in which one wants to damp down demand but will not operate in areas in which one wants to increase demand.

In addition, it will affect investment. It affects the general buoyancy of the economy. Therefore, if we have to rely on this almost alone, with no help from the prices and incomes policy, a much more selective instrument, in my view we shall put ourselves in real danger in the future in hoping to check the general upsurge of the economy.

9.07 p.m.

Mr. Robert Carr (Mitcham)

From the very beginning, in the summer of 1966, when the Government were foolish and wrongheaded enough to embark on a statutory incomes policy, we have said consistently that it would not work and that to the extent that it did work, it would be unfair in its operation. We have forecast over and over again that the Government would be driven to take more and more compulsion over a wider and wider field to get less and less result. For those reasons, we have opposed at every stage the statutory incomes and prices policy, just as we shall oppose this stage tonight.

We have been consistent in our opposition and we have been consistently right. We have seen the Government clambering painfully up the ladder of compulsion and now we see them tumbling down it, only to stop, strangely enough, on the bottom rung of the ladder. There they still are stuck. We forecast again that they will not be able to stay where they are. They will either have to climb up the ladder of compulsion again or they will have to get right off it.

That is what is worrying so many of the hon. Friends of the First Secretary and the Chancellor of the Exchequer. As the hon. Member for Birmingham, All Saints (Mr. Walden) said, they cannot get a straight answer to this question. The same group of hon. Members cannot always get the same answer from the Government. That is one of the reasons for the uncertainty and the lack of success of the Government in so many of their dealings. That is one of the reasons why this debate is remarkable, because never can there have been more fuss about nothing—which is what I believe it to be —than has preceded this debate.

In figurative Parliamentary terms, hon. Members opposite have been treated not to the Whip but to the cat. They have even been threatened with having to write their election addresses on Christmas Day. The motto they have been given to guide them tonight and the theme which the country is receiving from the Government is, "My party, wrong or wrong."

And what for? On the one hand we are told by the Prime Minister, and by the right hon. Lady, that this policy is vital and that if she does not get these puny powers tonight chaos will break loose, the dam will burst. What is she doing with this dam? She is sticking her finger in the hole while the water flows over the top. On the one hand we are told that it is vital, and on the other hand the Prime Minister and the right hon. Lady are hastening to assure people that, of course, these powers will not be used, and that they are only temporary.

If the Prime Minister was correctly reported, he said to the Labour Party yesterday that at least they will never be used except in the most blatant cases. Like what? What are the blatant cases? The teachers? The nurses? The eight draughtsmen in a Scottish factory we remember a year or two ago? Are those the blatant cases? [An HON. MEMBER: "Bank clerks?"] The bank clerks? They may be argued as being a blatant case. We must all of us ask, as the hon. Member for Birmingham. All Saints asked, is this a policy or is it not?

The right hon. Member for Sowerby (Mr. Houghton)—I was sorry I was not here to hear him, but I am sure that I have been correctly informed of the gist of what he said apparently is in favour of this being a policy, and he would like something done about it; he is worried about wage increases. In other words, I assume that he believes in the need for these powers and the need for their use. I am glad to hear the right hon. Gentleman say "Yes". What does he say to the Prime Minister, who is so busy assuring the other half or the other nine-tenths of the Labour Party that of course these powers are only temporary and will never be used? I believe what the Prime Minister said to the nine-tenths of the Labour Party, and I believe, like my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis), that this order is a charade and that in real terms it is nothing but a cock-and-bull story.

One thing is certain, that the passing of this order tonight will not make the welfare of our economy one whit better six months from now. If it has any effect at all it is bound to make it worse, rather than better.

The right hon. Lady never answered the question, never really attempted to answer the question, as to what will happen in a few months' time. Why will there be chaos, as she says, if she does not get these powers tonight. But then, apparently, everything in the garden will be lovely—when she gives them up in a few months' time? There has been no attempt from the Government to answer that. Perhaps the Chancellor, when I have finished, will be able to give us some answer. I hope he can because at the moment there is no answer to that vital question. I do not think there really is an answer to it.

If this Order is important at all I am sure that its importance is purely symbolic. The only question is, of what is it symbolic? Here there seem to me to be two possibilities. First of all, it may be symbolic as a matter of confidence, to satisfy the International Monetary Fund that the Government are still earnest in their intentions. We remember the Prime Minister telling the country in October, 1964, "You cannot go cap in hand to the central bankers of Europe and maintain your freedom", but since then the Prime Minister has gone on hands and knees to every banker he can find anywhere in the world. He has become so addicted that he is a founder member of "Borrowers Anonymous". And we have surrendered our freedom to the International Monetary Fund.

I was interested to read a report in the Daily Telegraph today of what the Chancellor is said to have said to the Parliamentary Labour Party yesterday, and if he is wrongly reported no doubt he will take the opportunity of saying so in a few moments.

According to this report, he told his party meeting that if he thought it right not to go ahead with reactivation he would tell the International Monetary Fund that that was so. It is interesting that he thinks it necessary to go to tell the International Monetary Fund. But he has not done so, and the International Monetary Fund and its senior officers are not fools. They can see at least as well as we can that the order is a farce and that the incomes policy is a sham which has done harm rather than good.

I do not believe that this is the symbolic reason for the importance of the order, and so I turn to what I conceive to be the only other possibility of this order having great symbolic importance, and that is simply to bolster the status and to save the face of the right hon. Lady the First Secretary. She was sold down the river by her colleagues last summer; so, to make amends, she must be supported now, however wrong, however irrelevant her policy may be. That is a high price for this House and the Labour Party to pay for chivalry.

Her speech today—and her White Paper—was surely one of the most remarkable features of this remarkable debate. She lectured, she theorised and enthused as if she had discovered some wonderful new panacea. She even gave the impression of really believing in the nonsense she was talking, as if she had not been awake and looking round her at the life of the world in the last three-and-a-half years. All that she was talking about today was not new at all. It has been tried for the last three-and-a-half years and has failed, and she has been in charge of it, watching it fail—I was about to say encouraging it to fail—during the last 18 months. The policy has failed economically and in terms of fairness and social justice about which the right hon. Lady romanced perhaps more than about anything else.

Apparently, so she said today, these evil effects, which to be fair to her she admitted, are because this great policy has been brutalised. But from tonight onwards it will be humanised, and all in the garden will be lovely and all the economic and social benefits will flow. Those who are credible may believe it if they like, but I do not think many will.

Why should we be compelled to press on with a policy which has been such a disastrous failure in almost every respect? Before we vote, we might do well to look at the record. First, let us look at the record of how the latest phase of the incomes policy has worked over the last 18 months. Let us recall what the Chancellor of the Exchequer laid down as the requirement for the statutory incomes policy from March, 1968, to the month which is just ending. He said: …its main feature will be a ceiling of 31 per cent. on increases…". What facts are disclosed in the superficial information in the White Paper? From April to December, 1968, hourly wage rates rose by 4.5 per cent. and earnings by 7.9 per cent. From January to September, 1969, hourly wage rates rose by 4.3 per cent. and earnings by 6.6 per cent. In September this year, settlements of wage rates, not earnings, averaged over 6 per cent. In October, settlements of wage rates averaged about 8½ per cent. So much for the 3½ per cent. ceiling.

Perhaps we shall be told that these great excesses over the ceiling were all due to "copper-bottomed" productivity agreements. The Chancellor of the Exchequer had something to say about that, too, in his Budget Speech: There will be an exception to the ceiling for productivity agreements—stringently tested —which raise productivity sufficiently to justify a pay increase above 3½ per cent."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 264.] "Stringently tested" were the operative words.

What have we had? We have had 10 per cent. for the miners, 16 per cent. for the dustmen, 16 per cent. for the exhibition stand fitters, and so on, as exampled so well by my hon. Friend the Member for Bath (Sir E. Brown). Were all these stringently tested for productivity? Of course not, and both the right hon. Gentleman and the right hon. Lady know that they were not. The whole thing was a sham, a farce.

There is now accumulating evidence that in important individual settlements the operation, or the attempted operation, of the statutory incomes policy is forcing settlements to higher levels than would have been the case had they been left to free collective bargaining.

I will give the House two examples—[Interruption.] I am concerned with the merits of the policy from the point of view of the national economy, which I thought were the merits which the Government Front Bench were trying to present to the House and to the country.

The first example concerns the exhibition workers. The increase finally accepted by the D.E.P. in September was higher than that first voluntarily agreed by collective bargaining between the employers and the unions but disallowed by the D.E.P. at that time. There is a higher increase resulting from the statutory incomes policy.

Let us look at the still current case of the British Road Services drivers. Had they been left as free agents, there is little doubt that the top management of B.R.S. would have settled that claim for 15s. That was all that the unions were asking for in the first place. But under this policy they were not left as free agents; they were not allowed to settle in the normal way. So now B.R.S. has had to offer not 15s. a week, but £3 a week. That is the statutory incomes policy in action.

I ask the House to look at another test laid down, not this time by the Chancellor but by his right hon. Friend, the Deputy Leader of the House, when he was Secretary of State for Economic Affairs. On 21st March, 1968, in the Budget debate, the right hon. Gentleman told the House: It is, moreover, a necessary condition of the economic adjustment which we have to make that incomes should rise more slowly than the cost of living over the next year."—[OFFICIAL REPORT, 21st March, 1968; Vol-761, c. 622.] That was a necessary condition. That certainly was incomes policy with a vengeance. That was a planned reduction in the standard of living and that, rightly, put anger and fear into the hearts of hon. Members on both sides of the House and people outside as well. But they need not have worried, because it never happened, as the figures in the White Paper show. So again, if we apply that test, the whole thing is a farce.

It is not only in this last 18 months phase that the policy has failed. It has failed just as much over the whole period since its introduction. I ask the House to look at paragraph 11 of the White Paper, because there the Government define 'what they claim from the beginning to have been the three objectives of the statutory prices and incomes policy. Those three objectives are: to keep prices more stable than in the past; to achieve faster growth in the real standard of living; to get a more rational and fair relationship between the incomes of various groups, and in particular to improve the position of low paid workers. Let us see how the policy has worked out under each of those three objectives chosen by the Government as the test for their policy.

The first is to keep prices more stable than in the past. The reverse has happened. In the six years prior to 1964, under a Conservative Government and with no statutory prices and incomes policy, the average increase in prices was 2.5 per cent. per year. In the five years since 1964, under a Labour Government, the average increase in prices has been 4.7 per year—almost double. And the right hon. Lady has the affrontery to tell us that we have no prices policy.

Let us forget the first one-and-a-half years of the Labour Government and take the following 3½ years—the period during which we have had this wonderful prices and incomes policy. In those years the price increase has also been about 4½ per cent. a year on average, and the price increase in 1968 alone was 6.2 per cent—the highest since there was last a Labour Government, almost 20 years ago. If the Chancellor says that it was because of devaluation, that is true —but that was the first devaluation since there was last a Labour Government, 20 years ago.

Let the right hon. Lady accuse us as she likes of having no prices policy. I have said before and I say again that my right hon. Friend's action in abolishing resale price maintenance did more than her precious policies will do in a decade to keep prices down. The test of a prices policy is not what is said but what is achieved.

I pass to the second objective of the prices and incomes policy—"to achieve faster growth in the real standard of living." What has happened? The standard of living, measured in terms of personal, after-tax income at constant prices, rose on average by 3 per cent. per year between 1951 and 1964. It has risen only 1.5 per cent. per year, on average, between 1964 and 1968. Under a Conservative Government there was half the rise in prices and double the rate of increase in the standard of living. That is the comparison between the two Governments—and when we were in power there was no statutory prices and incomes policy.

If we take the case of the man who earns the average industrial wage, after allowing for the increased tax that he is paying and the rise in prices, we find that he is worse off, in terms of purchasing power, than he was in 1964.

I pass to the third objective laid down by the Government in their White Paper— to get a more rational and fair relationship between incomes of various groups, and in particular to improve the position of low paid workers. Who believes that a statutory prices and incomes policy has helped to achieve this? It may be true, as the hon. Member for Birmingham, All Saints (Mr. Walden) said, that the problem was there before. The prices and incomes policy may not have created the problem, but where is there any evidence of any kind to suggest that it has alleviated the problem? Such evidence as there is tends to suggest that it has made it somewhat worse. It is false to claim that it has made it better.

On all the three tests laid down by the Government themselves, the statutory prices and incomes policy has failed, and has failed miserably.

But there was a fourth test, which is not now mentioned by the Government but about which we heard quite a lot when this policy was "new-and-all". That was to provide an alternative to higher unemployment. That claim was often made. At Blackpool on 5th September, 1966—two months after it started —the Prime Minister proclaimed that his Government's incomes policy was "our only guarantee against unemployment". Let us look at the record. In 13 years of Tory Government unemployment exceeded 500,000 in only nine months out of the 156 months that we were in power. Under the Labour Government and under this policy, it has exceeded 500,000 in 27 out of the last 28 months. The unemployment levels in November of this year and November, 1967, both incomes policy years, were the highest November totals since 1940.

That is the final and most disgraceful idiocy of all about this policy, especially in the light of the recent researches by Professor Lipsey and Mr. Parkin of Essex University which give a strong indication that at the high levels of unemployment deliberately operated by this Government, a statutory prices and incomes policy makes matters worse rather than better. If it had any justification at all it was only at the lower levels of unemployment operated under the Tory Government.

I repeat my right hon. Friend's request to the Chancellor of the Exchequer to deal with the Lipsey paper. It is the only serious attempt of which I know to analyse these matters in this way. What is in the White Paper is the most specious and superficial stuff that one could possibly imagine. Surely the House must agree with the hon. Member for All Saints that what is in the White Paper is hardly a historical record of what has happened. If the right hon. Gentleman disagrees with the Lipsey analysis or thinks it inadequate, let him promise that the Government will undertake a proper research and publish the results so that we may know the truth as far as it can be determined.

All the evidence proves that the statutory prices and incomes policy has been a failure. It is a myth and a folly. Unfortunately it is not just a joke folly. It is a damaging and dangerous folly and it is inflammatory. It encourages militancy. It does not work fairly. It has had little, if any, effect. The weak have suffered. The strong have got away with it. It has made responsible union leaders' jobs more difficult when they should have been made easier. It has played into the hands of those who want to make trouble and to get things by force. The policy has not brought about the just society about which the right hon. Lady talks so romantically. It has encouraged the "get-it-by-force" society. It will be one of the Government's most evil legacies to the country. It is a poisonous radioactivity which will contaminate our society for a long time to come.

The Government threatened anti-strike laws based, in our view wrongly, on penal sanctions and Ministerial intervention. They said that those laws were vital in the national interest, yet they ran away when they met sectional opposition. Similarly we have always believed that a statutory incomes policy was wrong in principle and practice. We have said so and have backed our opinion with our votes. But if, like the Government, one believes that statutory control of wages is right and necessary, it must be carried through with firmness and consistency. That is just what the Government have failed to do. They give in to the strong. They yield to force. They clamp down only occasionally on those whom they judge to be relatively weak, like bank clerks, teachers and nurses.

"Irresponsibility pays" is the message that the Government are encouraging to be broadcast throughout the country. Teachers who go on strike in breach of agreement deserve to be condemned, but, as matters are at the moment, which of us can put our hands on our hearts and censure them and tell them that they will do better rather than worse if they chuck their present methods and return to the responsible use of their constitutional bargaining machinery? Until we can say that in good faith to the teachers, the nurses, and everybody else, standards of responsibility, as well as standards of living, will slide into further decline. So the Government policy will go on stimulating industrial strife, rather than putting peace and order in place of strife.

The Government's own policies are a direct cause of the alarmingly worsening strike record from which we are suffering. I put it to the Chancellor that his economic policies will bring us into an economic situation where things are more likely to get worse than to get better in this respect. Wages are exploding upwards. At the same time, a severe monetary policy is pressing the economy downwards, with a considerable time lag between cause and effect. The effects of the Chancellor's unprecedented monetary squeeze cannot yet be predicted with certainty. With this collision between upward and downward forces in the economy, the inevitable casualties are bound to be investment, on the one hand, and industrial peace on the other.

In conclusion, I return to where I began and ask about the reason for the order. In view of the evidence of failure in the past, and worse than failure; in view of the lack of the slightest reason to expect anything better in the future, why do we have the order tonight? Why, above all, is there this build-up of hysterical urgency that we have seen?

I suggested at the beginning two symbolic reasons, and I left the House with the feeling that only one of them was tenable. The only other reason put forward by the Government with any rationality is that this is a bridging operation. But a bridge to what? A bridge to a voluntary policy? If so, it is a strange way of getting there, since both T.U.C. and the C.B.I. are in bitter opposition to it. A bridge, perhaps, to a permanent policy? Or is it a temporary policy, whether voluntary or compulsory?

The evidence of the White Paper on this point is extremely confusing, and I hope that the Chancellor of the Exchequer will make it less confusing. Paragraph 3, on page 5 states that, a productivity, prices and incomes policy must continue to play a key role…". That sounds pretty permanent.

Paragraph 29 on page 12 states, in justifying the need for the powers contained in the order, that these powers will enable the Government to require early warning of proposed pay and price increases. Such notification is essential to the operation of any prices and incomes policy". That sounds pretty compulsory.

Paragraph 32 on page 12 states that the purpose of the powers in the order is to enable the Government to delay…implementation while they inquire and have reports made. That also sounds permanent and compulsory.

The evidence so far from the White Paper—[Interruption.] The chief Whip says, "Twenty-five minutes". He may like to 14 now that at the very beginning of today I asked for half-an-hour; and I rose at ten minutes past nine.

Paragraph 33 on page 12 says: The Government hopes that it will not be necessary to perpetuate these delaying powers in the legislation…". Which is it? You pay your money and you take your choice. What the House wants to know from the Chancellor is: which is it? Is it permanent or temporary, voluntary or compulsory, or which mixture of the two?

Where does this bridge lead to? All that we know is that it leads to the land of the C.I.M. That should be enough to excite us and to give us hope. The Government do not yet know what the C.I.M. is. They are thinking hard, and I suppose they must not be disturbed. Perhaps the right hon. Lady has had a vision about it, but if so the children must not yet be told.

The bridge leads to the land of the C.I.M.—Castles in Mid-air? Perhaps, after all, in that realm of madness lies the real mystery behind this order, because we are experiencing a classic example of the old adage that those whom the gods wish to destroy, they first make mad.

9.40 p.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins)

In the 30-minute long dirge of despair by the right hon. Member for Mitcham (Mr. R. Carr) I failed to detect a single constructive suggestion for dealing either with the prices and incomes policy or with the more general economic policy. I shall in the course of the fairly limited time remaining to me, come back to some of the points made by the right hon. Gentleman, and some of the points raised by the right hon. Member for Bexley (Mr. Heath), but I want, first, to deal with the suggestions made by one or two of my hon. Friends, notably my hon. Friend the Member for Watford (Mr. Raphael Tuck), and by one or two other hon. Members at various stages in this dispute, that there is inequity in our treatment of dividends and wages, that dividends are being treated more leniently.

That really will not bear examination. In the first place, dividends and wages are not directly comparable animals, partly for reasons which put dividends at a disadvantage, partly for another reason which puts them at an advantage. Wages, broadly speaking, at least in our post-war economic climate, can never go down. Dividends most certainly can. There were 716 decreases in the 18 months to this September, and in both 1967 and 1968 the aggregate of dividend payments was lower than in either 1965 or 1966. There is no question whether they rose enough to keep pace with the rise in the cost of living. They actually fell in money terms. Indeed, if one looks at the whole picture from 1964 to this year, one sees that dividends may have risen over the whole period at an annual rate of about 2 per cent., against an average earnings increase of 6 per cent. a year. I have do doubt that in 1970 at least there will continue to be many restraining influences on dividends, and that the average rate of increase will be slow, a good deal slower than that of average earnings.

There is, however, another respect in which dividends are different from wages, and this time it is favourable to the shareholder. Dividend restraint cannot effect the total profitability of either an individual company, or the company sector as a whole. It does not, therefore, in the short run have much effect on share values, and share values can be more important to the purchasing power of a shareholder than his actual dividend income.

There are two points to be made here. First, this underlines the undesirability of detailed dividend control of the individual company for more than a strictly limited period. It may leave some companies with more resources than they need, and others with less. It tends to gum up the capital market, and may prompt takeovers which have no industrial justification. The second point is that if the shareholder's purchasing power is to be measured by the value of his portfolio, no one can possibly argue that the recent past has been a good year for shareholders. Just under a year ago the Financial Times index was 520. Today it is 390. It will be a long crawl back, and on no basis does the argument that we have treated dividends or capital better than wages begin to stand up.

I turn to the central issue before us this evening. It is the question why, and whether, we need to modify the delaying powers of Part II in the transitional phase to a wholly voluntary incomes policy. We are mostly, certainly on this side of the House, agreed that a voluntary policy is the desirable goal to be achieved as quickly as possible. I think that that goes for all of my hon. Friends who have spoken in this debate, though my hon. Friend the Member for Birmingham, All Saints (Mr. Walden), in his most persuasive speech, did not advance many arguments in favour even of a voluntary incomes policy. I thought that, as is the case with someone who uses logic with brilliant precision, he tended at a certain stage to go too far in his pursuit of a simple answer to all our problems.

I believe that monetary policy has had a great deal to do with the improvement in our position in the past year. My hon. Friend's view that it has everything to do with it, that it has alone solved our problems, that it alone can deal with our problems in future, seems to me exaggerated. I believe that it has been monetary policy buttressing or buttressed by fiscal policy and the prices and incomes policy which has enabled us to achieve the results which we have achieved and not monetary policy on its own. I believe that he is carrying a good idea to an excessive conclusion when he tries to argue that case.

I have said that on this side of the House we fully agree about the desirability of a voluntary policy. The position opposite appears to me to be more obscure. Our dispute attracts more attention because we have the responsibility. We have to put the order forward. We have to say precisely what we are going to do. The differences on the other side seem to me more fundamental. No one could have stressed more strongly than the right hon. Member for Barnet (Mr. Maudling), when he was Chancellor of the Exchequer, the central importance of an incomes policy. I do not believe that he is someone who says and believes different things when he is out of office than when in office. On 13th November, 1963, he said: For our domestic economy to remain sound I come back once again to what seems to me to be the one fundamental necessity —not even a fundamental necessity but the fundamental necessity— —a rational incomes policy."—[OFFICIAL REPORT, 13th November, 1963; Vol. 684, c. 208.] In the 1964 Budget Statement, he said: It is a fact from which there is no escape that if we wish to achieve steady and sustained economic growth we must between us agree upon an effective incomes policy."—[OFFICIAL REPORT, 14th April, 1964; Vol. 693, c. 263.] No doubt the right hon Member for Enfield, West (Mr Iain Macleod) anticipates, as he occasionally does, the direction of my thought No doubt the right hon Member for Barnet will say that he always meant a wholly voluntary policy.

Then we had the right hon Member for Wolverhampton, South-West (Mr. Powell). He spoke today. He also spoke last Saturday afternoon. It is agreeable to have him speaking on the same subject both outside and inside the House in one week. He shared responsibility in 1963, even it not in 1964. What did he say on Saturday? He said: Thirdly, a voluntary prices and incomes policy is as impracticable as a compulsory one, and more absurd. What was his solution? A general reduction of demand, concentrated admittedly, on Government expenditure. If there is to be any logic in what he is saying, not presumably compensated for elsewhere, a general reduction in demand. In other words, a more deflationary economy in which wages and prices can safely be left to find their own level. Just how deflationary that would have to be I leave it to the House to judge, but recent experience, in America, for example, shows that this involves very heavy unemployment.

Where do the rest of the Opposition stand? To judge from the speech of the right hon. Member for Mitcham, it is somewhere between Barnet and Wolverhampton—without either the sense of responsibility of the right hon. Member for Barnet or the reckless logic of the right hon. Member for Wolverhampton, South-West.

The Leader of the Opposition made what was to me a bewildering speech. He attacked the Government and, in particular, my right hon. Friend the Prime Minister for seeking to initiate a wage inflation between now and the next election. I can think of easier ways of doing that than introducing this order. The right hon. Gentleman did this upon the basis of some pretty spurious figures. The logic of his position would have been to demand a much stronger prices and incomes policy and not to urge his party to vote against the order. He gave no indication whatever of his policy, and instead tried to lead off into a general economic debate. I shall return briefly to that part of his speech at the end of what I have to say. I hope that the right hon. Gentleman steers a straighter course to Tasmania than he did here this afternoon.

We believe that a prices and incomes policy is and will continue to be necessary. We believe that the incomes policy must be put on a wholly voluntary basis as soon as is safely practicable, but in the transition from the stronger powers of the 1968 legislation we need the modified powers of Part II. That we have always made clear. It is not a sudden decision on the part of the Government. It was announced firmly in my Budget speech, and reiterated by my right hon. Friend in the spring of last year.

No one can prove exactly what the effect of the prices and incomes policy has been over the past 18 months, or over any other period. It is not in the nature of the subject for exact proof to be possible. I discount fairly heavily—this was referred to by both right hon. Gentlemen speaking from the Front Bench opposite —the view that the work of Professor Lipsey and Mr. Parkin proves that the effect has been non-existent or even perverse. It is an interesting study, but the right hon. Gentlemen are putting upon it execessive weight at the present time. It is an unpublished work. It cannot be published by the Government, for they do not own the copyright; it depends entirely on these academic gentlemen. I hope very much that they will publish it, and that, when published, it will be—it has not been yet the subject of considerable academic scrutiny and discussion, for there is considerable doubt about its methodology.

What the study appears to prove, if it proves anything, is that only Sir Stafford Cripps was really effective getting a wage restraint policy, that the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) was not successful, and neither were a lot of others, too. I suggest that there are a great many variables involved in the equation, and it is extremely difficult, certainly comparing what happened in the economy 20 years ago with what has happened today, to make any clear deductions. I do not for a moment believe that these two distinguished academic gentlemen would believe that their interesting essay should have put upon it, without any further discussion, the weight which the two right hon. Gentlemen opposite endeavoured to put upon it today.

My own belief is that the prices and incomes policy has greatly helped to preserve our competitive position over the post-devaluation period. Price increases were inevitably heavy after devaluation. This is the nature of devaluation; it has never been denied by me, and I should never seek to deny it. There were also indirect tax increases to secure the switch of resources to the balance of payments. But in some ways it is a remarkable fact that, despite this, price increases in this country, with a 14 per cent. devaluation, have been no greater over the period since the beginning of 1968 than in the United States, without devaluation, the country with a tradition of the greatest price stability in the 1950s and 1960s.

The right hon. Gentleman the Leader of the Opposition said that some part of our devaluation advantage remained in relation to the United States but that all of it had gone in relation to Europe. If I may say to the right hon. Gentleman, that was a gross exaggeration, a derogatory exaggeration and something of a typical exaggeration. Our price advantage is wholly preserved in relation to the United States and is largely preserved in relation both to the European area and the rest of the world as a whole. I do not believe that would have been done without the policy which my right hon. Friend the First Secretary has carried out during the past two years.

As to the future, the key question is how do we reconcile the need for a small remaining reserve measure of compulsion now, with the intention and desire, which certainly exists, to move later to a fully voluntary system? There is no illogicality about this, unless we believe that something which is right at one time is always right at another time, and that is not so in politics or history.

I can give three good reasons. In the past few weeks we have had a considerable advance in the payment of the low paid in the public sector. In itself that is a good thing, but not if everyone follows suit, if we merely have an increase in the private level and no change in relativity. It is therefore particularly desirable that we should maintain certain powers for this reason.

Secondly, we inevitably had two years of severe price inflation, not damaging to our competitive position because of what has been happening to other people. I do not believe that society can or should live comfortably with 5 per cent. a year inflation for long. Nor is there any reason why it should. The effects of devaluation which were bound to be there for two years are now dying away. I am not giving away any secrets when I say that I am not planning another 1968 style Budget.

We should now be able to look forward to a greatly reduced rate of price increase. We could break the price-inflation psychology but not if we have a wage or price explosion. This is another reason why it was necessary to preserve effective transitional control over the next few months. There is still our competitive position. The United States has been acting hard on the anti-inflation rôle—not much has happened so far but it could happen and nothing could be worse than that we should go on inflating when other people are stopping. There is therefore no illogicality about regarding a phase of modified control as being a necessary transition period to a voluntary policy.

In my last three minutes I wish, following the remarks of the right hon. Gentleman the Leader of the Opposition, who devoted the main part of his speech to this, to turn to somewhat wider economic matters. He announced in a pained way that he had been accused of not welcoming the trade improvement. He then proceeded to welcome it. I did not feel overwhelmed by his warmth. I was a little reminded of O'Connell's remark that Peel's smile was like the silver plate on a coffin. He immediately went on to a whole series of qualifications, perhaps the principal one of which was that we were merely floating up on a wave of bouyant world trade.

It is a most extraordinary theory that buoyant world trade on its own solves all our problems. If this were so, no one's balance of payments position could change, everyone else would be perfectly all right. The position is at present that during this period of buoyant world trade, so far in this year we have very slightly improved our share. That has been the first time for decades past—in complete contrast with previous times of buoyant world trade. It has been precisely in previous times of buoyant world trade that we have most lost our relative position.

In 1963–64 when the right hon. Gentleman was President of the Board of Trade world trade grew by 16 per cent., our exports by 5 per cent. We lost 1 per cent. of the share in that year alone, the worst performance since the previous year of buoyant world trade, which was 1959–60. Of course it is the case that if world trade turns down that would present problems for us, but less prob-

lems than if we had not got our economy and our balance of payments position on a much more secure basis in the past nine months or year.

I believe that the prices and incomes policy has been necessary to achieve that; I believe that this order which we are asking the House to approve tonight is necessary to continue our position and I ask the House to support me.

Question put:—

The House divided: Ayes 289, Noes 261.

Division No. 40.]	AYES	[10.0 p.m.
Abse, Leo	Diamond, Rt. Hn. John	Howie, W.
Albu, Austen	Dobson, Ray	Hoy, Rt. Hn. James
Alldritt, Walter	Doig, Peter	Huckfield, Leslie
Alien, Scholcfield	Dunn, James A.	Hughes, Rt. Hn. Cledwyn (Anglesey)
Archer, Peter (R'wley Regis & Tipt'n)	Dunnett, Jack	Hughes, Hector (Aberdeen, N.)
Armstrong, Ernest	Dunwoody, Mrs. Gwyneth (Exeter)	Hunter, Adam
Ashley, Jack	Dunwoody, Dr. John (F'th & C'b'e)	Hynd, John
Ashton, Joe (Bassetlaw)	Eadie, Alex	Jackson, Colin (B'h'se & Spenb'gh)
Bacon, Rt, Hn, Alice	Edelman, Maurice	Janner, Sir Barnett
Bagier, Gordon A. T.	Edwards, Robert (Bilston)	Jay, Rt. Hn. Douglas
Barnes, Michael	Edwards, William (Merioneth)	Jeger, George (Goole)
Barnett, Joel	Ellis, John	Jeger, Mrs. Lcna(H'b'n&St.P 'cras, S.)
Baxter, William	English, Michael	Jenkins, Rt. Hn. Roy (Stechford)
Beaney, Alan	Ennals, David	Johnson, Carol (Lewisham, S.)
Bence, Cyril	Ensor, David	Johnson, James (K'ston-on-Hull, W.)
Benn, Rt. Hn. Anthony Wedgwood	Evans, Albert (Islington, S.W.)	Jones, Dan (Burnley)
Bennett, James (G'gow, Bridgeton)	Evans, Fred (Caerphilly)	Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Binns, John	Faulds, Andrew	Jones, J. Idwal (Wrexham)
Bishop, E. S.	Fernyhough, E.	Jones, T. Alec (Rhondda, West)
Blenkinsop, Arthur	Finch, Harold	Kelley, Richard
Boston, Terence	Fitch, Alan (Wigan)	Kenyon, Clifford
Bottomley, Rt. Hn. Arthur	Fitt, Gerard (Belfast, W.)	Lawson, George
Boyden, James	Fletcher, Rt. Hn. Sir Eric(Islington,E.)	Leadbitter, Ted
Bradley, Tom	Foley, Maurice	Ledger, Ron
Bray, Dr. Jeremy	Ford, Ben	Lee, Rt. Hn. Frederick (Newton)
Brooks, Edwin	Forrester, John	Lee, Rt. Hn. Jennie (Cannock)
Broughton, Sir Alfred	Fowler, Gerry	Lestor, Miss Joan
Brown, Rt. Hn. George (Belper)	Fraser, John (Norwood)	Lever, Rt. Hn. Harold (Cheetham)
Brown, Hugh D. (G'gow, Provan)	Freeson, Reginald	Lewis, Ron Harold (Carlisle)
Brown,Bob(N'c'tle-upon-Tyne,W.)	Galpern, Sir Myer	Lomas, Kenneth
Brown, R. W. (Shoreditch & F'bury)	Gardner, Tony	Loughlin, Charles
Buchan, Norman	Garrett, W. E.	Luard, Evan
Buchanan, Richard (G'gow, Sp'burn)	Ginsburg, David	Lyon, Alexander W. (York)
Butler, Herbert (Hackney, C.)	Golding, John	Lyons, Edward (Bradford, E.)
Butler, Mrs, Joyce (Wood Green)	Gordon Walker, Rt. Hn, P. C.	Mabon, Dr. J. Dickson
Callaghan, Rt. Hn. James	Gray, Dr. Hugh (Yarmouth)	McBride, Neil
Cant, R. B.	Greenwood, Rt. Hn. Anthony	McCann, John
Carmichael, Neil	Gregory, Arnold	MacColl, James
Castle, Rt. Hn. Barbara	Grey, Charles (Durham)	MacDermot, Niall
Chapman, Donald	Griffiths, Eddie (Brightside)	Macdonald, A. H.
Coe, Denis	Griffiths, Rt. Hn. James (Llanelly)	McElhone, Frank
Coleman, Donald	Gunter, Rt. Hn. R, J.	McGuire, Michael
Conlan, Bernard	Hamilton, James (Bothwell)	McKay, Mrs. Margaret
Corbet, Mrs. Freda	Hamilton, William (Fife, W.)	Mackenzie, Gregor (Rutherglen)
Crawshaw, Richard	Hamling, William	Mackie, John
Cronin, John	Harnnan, William	Mackintosh, John P,
Crosland, Rt. Hn. Anthony	Harper, Joseph	Maclennan, Robert
Dalyell, Tam	Harrison, Walter (Wakefield)	MacMillan, Malcolm (Western Isles)
Darling, Rt. Hn. George	Hart, Rt. Hn. Judith	McMillan, Tom (Glasgow, C.)
Davidson, Arthur (Accrington)	Haseldine, Norman	McNamara, J. Kevin
Davies, E Hudson (Conway)	Hattersley, Roy	MacPherson, Malcolm
Davies, G. Elfed (Rhondda, E.)	Hazell, Bert	Mahon, Simon (Bootle)
Davies, Dr. Ernest (Stretford)	Healey, Rt. Hn. Denis	Mallalieu, E. L. (Brigg)
Davies, Rt. Hn. Harold (Leek)	Henig, Stanley	Mallalieu,J.P.W.(Huddersfield,E.)
Davies, lfor (Gower)	Hilton, W. S.	Manuel, Archie
de Freitas, Rt. Hn. Sir Geoffrey	Hobden, Dennis	Mapp, Charles
Delargy, H. J.	Hooley, Frank	Marks, Kenneth
Dell, Edmund	Houghton, Rt. Hn. Douglas	Marquand, David
Dempsey, James	Howarth, Robert (Bolton, E.)	Marsh, Rt. Hn. Richard
Dewar, Donald	Howell, Denis (Small Heath)	Mason, Rt. Hn. Roy
Maxwell, Robert	Price, William (Rugby)	Swain, Thomas
Mayhew, Christopher	Probert, Arthur	Taverne, Dick
Mellish, Rt. Hn. Robert	Pursey, Cmdr. Harry	Thomas, Rt. Hn. George
Millan, Bruce	Randall, Harry	Thomson, Rt. Hn. George
Miller, Dr. M. S.	Rankin, John	Thornton, Ernest
Milne, Edward (Blyth)	Rees, Merlyn	Tinn, James
Mitclhell, R. C. (S'th'pton, Test)	Rhodes, Geoffrey	Tomney, Frank
Molloy, William	Richard, Ivor	Tuck, Raphael
Morgan, Elystan (Cardiganshire)	Roberts, Albert (Normanton)	Urwin, T. W.
Morris, Alfred (Wythenshawe)	Roberts, Rt. Hn. Goronwy	Varley, Eric G.
Morris, Charles R. (Openshaw)	Roberts, Gwilym (Bedfordshire, S.)	Wainwright, Edwin (Dearne Valley)
Morris, John (Aberavon)	Robinson, Rt. Hn. Kenneth(St.P'c'as)	Walker, Harold (Doncaster)
Moyle, Roland	Rodgers, William (Stockton)	Wallace, George
Mulley, Rt. Hn. Frederick	Roebuck, Roy	Watkins, David (Consett)
Murray, Albert	Rogers, George (Kensington, N.)	Watkins, Tudor (Brecon &' Radnor)
Noel-Baker, Rt. Hn. Philip	Rose, Paul	Weitzman, David
Oakes, Gordon	Ross, Rt. Hn. William	Wellbeloved, James
Ogden, Eric	Rowlands, E.	Wells, William (Walsall, N.)
O'Halloran, Michael	Shaw, Arnold (llford, S.)	Whitaker, Ben
O'Malley, Brian	Sheldon, Robert	White, Mrs. Eirene
Oram, Albert E.	Shinwell, Rt. Hn. E.	Whitlock, William
Orbach, Maurice	Shore, Rt. Hn. Peter (Stepney)	Wilkins, W. A.
Oswald, Thomas	Short, Rt. Hn. Edward(N,c'tle-u-Tyne)	Willey, Rt. Hn. Frederick
Owen, Dr. David (Plymouth, S'tn)	Short Mrs. Renée (W'hampton,N.E.)	Williams, Alan (Swansea, W.)
Owen, Will (Morpeth)	Silkin, Rt. Hn. John (Deptford)	Williams, Alan Lee (Homchurch)
Padley, Walter	Silkin, Hn. S. C. (Dulwich)	Williams, Mrs. Shirley (Hitchin)
Page, Derek (King's Lynn)	Silverman, Julius	Williams, W. T. (Warrington)
Palmer, Arthur	Skeffington, Arthur	Willis, Rt. Hn. George
Pannell, Rt. Hn. Charles	Slater, Joseph	Wilson, Rt. Hn. Harold (Huyton)
Parker, John (Dagenham)	Small, William	Wilson, William (Coventry, S.)
Parkyn, Brian (Bedford)	Snow, Julian	Winnick, David
pavitt, Laurence	Spriggs, Leslie	Woodburn, Rt. Hn. A.
		Woof Robert
Pearson, Arthur (Pontypridd)	Steele, Thomas (Dunbartonshire, W.)	wyatt, Woodrow
Peart, Rt. Hn. Fred	Stewart, Rt. Hn. Michael
Pentland, Norman
Perry, Ernest G. (Battersea, S.)	Stonehouse, Rt. Hn. John	TELLERS FOR THE NOES:
Prentice, Rt. Hn. Reg	Strauss, Rt. Hn. G. R.	Mr. J. D. Concannon and
Price, Christopher (Perry Barr)	Summer-skill, Hn. Dr. Shirley	Mr. Ioan L. Evans.
NOES
Alison, Michael (Barkston Ash)	Channon, H. P, G.	Grant, Anthony
Allason, James (Hemel Hempstead)	Chataway, Christopher	Grant-Ferris, Sir Robert
Amery, Rt. Hn. Julian	Chichester-Clark, R.	Gresham Cooke, R.
Archer Jeffrey (Louth)	Clegg, Walter	Grieve, Percy
Astor John	Cooke, Robert	Griffiths, Eldon (Bury St. Edmunds)
Atkins Humphrey (M't'n & M'd n)	Cooper-Key, Sir Neill	Grimond, Rt. Hn. J.
Awdry, Daniel	Cordle, John	Gurden, Harold
Baker Kenneth (Acton)	Corfield, F. V.	Hall, John (Wycombe)
Baker, w. H. K. (Banff)	Costain, A. P.	Hall-Davis, A. G. F.
Ralniel Lord	Craddock, Sir Beresford (Spelthorne)	Hamilton, Lord (Fermanagh)
Barber, Rt. Hn. Anthony	Crouch, David	Hamilton, Michael (Salisbury)
Bateford Brian	Crowder, F. P.	Harris, Frederic (Croydon, N.W.)
Beamish, Col. Sir Tufton	Dalkeith, Earl of	Harrison, Brian (Maldon)
Bell, Ronald	Dance, James	Harrison, Col. Sir Harwood (Eye)
Bennett, Sir Frederic (Torquay)	Davidson, James(Aberdeenshire, W.)	Harvey, Sir Arthur Vere
	Dean, Paul	Harvie Anderson, Miss
Bennett, Dr. Reginald (Gos. & Fhm)	Deedes, Rt. Hn. W. F. (Ashford)	Hastings, Stephen
Berry, Hn. Anthony	Digby, Simon Wingfield	Hawkins, Paul
Biffen, John	Dodds-Parker, Douglas	Hay, John
Biggs-Davison, John	Doughty, Charles	Heald, Rt. Hn. Sir Lionel
Birch, Rt. Hn. Nigel	Douglas-Home, Rt. Hn. Sir Alec	Heath, Rt. Hn. Edward
Black, Sir Cyril	Drayson, G. B.	Heseltine, Michael
Blaker, Peter	Eden, Sir John	Higgins, Terence L.
Boardman, Tom (Leicester, S.W.)	Elliot, Capt. Walter (Carshalton)	Hlley, Joseph
Body, Richard	Emery, Peter	Hill, J. E. B.
Bossom, Sir Clive	Errlngton, Sir Eric	Hirst, Geoffrey
Boyd-Carpenter, Rt. Hn. John	Ewing, Mrs. Winifred	Hogg, Rt. Hn. Quintin
Boyle, Rt. Hn. Sir Edward	Eyre, Reginald	Hooson, Emlyn
Brewis, John	Farr, John	Hordern, Peter
Brinton, Sir Tatton	Fisher, Nigel	Hornby, Richard
Bromley-Davenport, Lt. -Col. SirW alter	Fletcher-Cooke, Charles	Howell, David (Guildford)
Brown, Sir Edward (Bath)	Fortescue, Tim	Hunt, John
Bruce-Gardyne, J.	Foster, Sir John	Hutchison, Michael Clark
Bryan, Paul	Fraser,Rt. Hn. Hugh (St'fford & Stone)	Iremonger, T. L.
Buchanan-Smith, Allck (Angus,N&M)	Fry, Peter	Irvine, Bryant Godman (Rye)
Buck, Antony (Colchester)	Galbraith, Hn. T. G.	Jenkin, Patrick (Woodford)
Bullus, Sir Eric	Gibson-Watt, David	Jennings, J. C. (Burton)
Burden, F. A.	Gilmour, Ian (Norfolk, C.)	Johnson Smith, G. (E. Grinstead)
Campbell, B. (Oldham, W.)	Gilmour, Sir John (Fife, E.)	Johnston, Russell (Inverness)
Campbell, Gordon (Moray & Nairn)	Glyn, Sir Richard	Jones, Arthur (Northants, S.)
Carlisle, Mark	Goodhart, Philip	Jopling, Michael
Carr, Rt. Hn. Robert	Goodhew, Victor	Joseph, Rt. Hn. Sir Keith
Cary, sir Robert	Gower, Raymond	Kaberry, Sir Donald

Kerby, Capt. Henry	Murton, Oscar	Sinclair, Sir George
Kershaw, Anthony	Nabarro, Sir Gerald	Smith, Dudley (W'wlck & L'mington)
Kimball, Marcus	Neave, Airey	Smith, John (London & W'minster)
Kirk, Peter	Nicholls, Sir Harmar	Speed, Keith
Kitson, Timothy	Noble, Rt. Hn. Michael	Stainton, Keith
Knight, Mrs. Jill	Norwood, Christopher	Steel, David (Roxburgh)
Lambton, Viscount	Nott, John	Stodart, Anthony
Lancaster, Col. C. G.	Onslow, Cranley	Stoddart-Scott, Col. Sir M.
Lane, David	Orr, Capt. L. P. S.	Summers, Sir Spencer
Langford Holt, Sir John	Orr-Ewing, Sir Ian	Tapsell, Peter
Lawler, Wallace	Osborn, John (Hallam)	Taylor, Sir Charles (Eastbourne)
Legge-Bourke, Sir Harry	Page, Graham (Crosby)	Taylor, Edward M.(G'gow,Cathcart)
Lewis, Kenneth(Rutland)	Page, John (Harrow, W.)	Taylor, Frank (Moss Side)
Lloyd, Ian (P'tsm'th, Langstone)	Pardoe, John	Temple, John M.
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)	Pearson, Sir Frank (Clitheroe)	Thatcher, Mrs. Margaret
Lloyd, Rt Hn. Selwyn (Wirral)	Peel, John	Thorpe, Rt. Hn. Jeremy
Longden, Gilbert
Lubbock, Eric	Percival, Ian	Tilney, John
McAdden, Sir Stephen	Peyton, John	Turton, Rt. Hn. R. H.
MacArthur, Ian	Pike, Miss Mervyn	van Straubenzee, W, R.
Mackenzie, Alasdair(Ross&Crom'ty)	Pink, R. Bonner	Vaughan-Morgan, Rt. Hn. Sir John
	Pounder, Rafton	Vickers, Dame Joan
Maclean, Sir Fitzroy	Powell, Rt. Hn. J. Enoch	Waddington, David
Macleod, Rt. Hn. lain	Price, David (Eastleigh)	Wainwright, Richard (Colne Valley)
McMaster, Stanley
Macmillan, Maurice (Farnham)	Prior, J. M. L.	Walker, Peter (Worcester)
McNair-Wilson, Michael	Pym, Francis	Walker-Smith, Rt. Hn. Sir Derek
McNair-Wilson, Patrick (NewForest)	Quennell, Miss J M.	Wall, Patrick
Maddan, Martin	Ramsden, Rt. Hn. James	Walters, Dennis
Marples, Rt. Hn. Ernest	Rawlinson, Rt. Hn. Sir Peter	Ward, Christopher (Swindon)
Marten, Neil	Renton, Rt. Hn. Sir David	Ward, Dame Irene (Tynemouth)
Maude, Angus	Rhys Williams, Sir Brandon	Weatherill, Bernard
Maudling, Rt. Hn. Reginald	Ridley, Hn. Nicholas	Wells, John (Maidstone)
Mawby, Ray	Ridsdale, Julian	Whitelaw, Rt. Hn. William
Maxwell-Hyslon, R. J.	Rippon, Rt. Hn. Geoffrey	Wiggin, A. W.
Maydon, Lt.-Cmdr. S. L. C.	Robson Brown, Sir William	Williams, Donald (Dudley)
Mills, Peter(Torrington)	Rodgers, Sir John (Sevenoake)	Wilson, Geoffrey (Truro)
Mills, Stratton (Belfast,N.)	Rossi, Hugh (Hornsey)	Wolrige-Gordon, Patrick
		Wood, Rt. Hn. Richard
Miscampbell, Norman	Royle, Anthony	Woodnurt, Mark
Mitchell, David (Basingstoke)	Russell, Sir Ronald	Worsley, Marcus
Monro, Hector	St. John-Stevas, Norman	Wright, Esmond
Montgomery, Fergus	Sandys, Rt. Hn. D.	Wylie, N. R.
Morgan, Geraint (Denbigh)	Scott, Nicholas	Younger, Hn. George
Morgan-Giles, Rear-Adm.	Scott-Hopkins, James
Morrison, Charles (Devizes)	Sharpies, Richard	TELLERS FOR THE AYES:
Mott-Radclyffe, Sir Charles	Shaw, Michael (Sc'b'gh & Whitby)	Mr. R. W. Elliott and
Munro-Lucas-Tooth, Sir Hugh	Silvester, Frederick	Mr. Jasper More.

Resolved, That the Prices and Incomes Act, 1966 (Continuation of Part II) Order 1969, a draft of which was laid before this House on 8th December, be approved.