CHANCELLOR OF THE EXCHEQUER (SPEECH) (Hansard, 23 February 1971)

§ Q1. Mr. John D. Grant
asked the Prime Minister if the public speech by the Chancellor of the Exchequer to the Overseas Bankers' Club at Guildhall on 1st February, 1971, concerning inflation represents the policy of Her Majesty's Government.

§ Q8. Mr. Sheldon
asked the Prime Minister if the public speech made by the Chancellor of the Exchequer on 1st February to the Overseas Bankers' Club in London on economic matters represents the policy of Her Majesty's Government.

§ Q9. Mr. Arthur Davidson
asked the Prime Minister if the public speech of the Chancellor of the Exchequer on 1st February to the Overseas Bankers' Club in London on economic policies represents the policy of Her Majesty's Government.

§ Q11. Mr. John Fraser
asked the Prime Minister if the public speech to overseas bankers made by the Chancellor of the Exchequer in London on 1st February on economic policies represents the policy of Her Majesty's Government.

§ The Prime Minister (Mr. Edward Heath)
Yes, Sir. My right hon. Friend emphasised the need to defeat inflation; and, on the European negotiations, argued that our contribution to the Community budget should not be disproportionate. I am sure that his views command general support.

§ Mr. Grant
The Prime Minister will also be aware that the Chancellor referred to a voluntary incomes policy as not being practicable at present. Does the right hon. Gentleman believe that direct Government action to raise food prices, rents, rates, fares, welfare charges and so on, and to interfere with trade union rights, is calculated to help towards achieving such a policy?

§ The Prime Minister
This matter was debated at considerable length last Thursday, when the particular point raised by the hon. Gentleman was dealt with. The proposals on food prices, which 306 are part of the general agricultural policy, and the rent rebates which we are extending to the private sector as well as to the public sector as part of our housing policy, were among our proposals which we put before the electors. They have also been discussed in the House.

§ Mr. Sheldon
Since the Government cannot hope to reduce inflation by undermining the role of the independent arbitrators, can the right hon. Gentleman tell us whether the Government knew about the latest Civil Service pay award when they decided not to reappoint Professor Clegg?

§ The Prime Minister
That is an entirely different question but I will answer it. We did not know about this award, which was being made by the arbitrator at the time my right hon. Friend informed Professor Clegg of his decision.
I want to make it clear that the general impression given before the Report was published, that there was to be an increase of 20 per cent. for civil servants, was not correct and was unfair to the civil servants concerned. Those recommended to receive between 15 and 20 per cent. constitute no more than 3 per cent. of the staff involved. The remainder have increases from 15 per cent. to nil per cent. The average increase on the wage bill is, I am informed, 8.9 per cent.
I hope that the House will agree that it is of the utmost importance that those who publish wage settlements, through whatever media of communication, should await the Report before they Jo so and should then report it accurately.

§ Mr. Davidson
In his speech, the Chancellor of the Exchequer referred to a statutory incomes policy as "crude, unworkable and unfair". Is the Prime Minister aware that most trade unionists and their families would agree that that was an apt description of the Government's economic policy? Is he aware that that was why 100,000 of them marched in protest on Sunday?

§ The Prime Minister
The statutory wages policy was abandoned by the Labour Government, as announced by the then Chancellor of the Exchequer in his Budget Statement, because it corresponded exactly to the description which the hon. Gentleman has just quoted.

§ Mr. Fraser
The Prime Minister will he aware that the Chancellor of the Exchequer was speaking about inflation. Has the right hon. Gentleman considered the inflationary effects of the abolition of subsidies for commuter rail services in London? Does he propose to put pressure on the private sector, in accordance with what the Chancellor was advocating, to prevent people from getting wage increases to make up for the loss of income when fares go up when subsidies arc taken off?

§ The Prime Minister
It is well known that our policy is that none of these problems can be solved by repeatedly increasing subsidies. It is the burden of taxation on British industry and the consequential weakness which results which has led industry to ask for further and further subsidies, and which has led us into the difficulties of which we have seen an example recently.

§ Sir G. Nabarro
Would my right hon. Friend bear in mind that whereas everybody subscribes to the "desirable end", as the Chancellor of the Exchequer put it, of defeating inflation, it does no good at all for the most highly paid men in the public sector, such as Lord Melchett of the Steel Corporation, to have their salaries increased at this critical time from £16,000 a year to £25,000 a year, this after no fewer than five increases in the price of steel within two years, and all of it dreadfully inflationary?

§ The Prime Minister
I fully recognise the impact of any increase in steel prices, but in my time in the House my hon. Friend has been one of those who have been foremost in emphasising that, if one is to have high quality management in the nationalised industries, it is necessary to pay those appointed salaries corresponding to those in private industry. There is also the point that under all Governments the nationalised industries have had to bring in management from outside, and this only emphasises the importance of the point which I have just mentioned.

Mr. Bob Brown
Yesterday, in response to a point of order raised by my right hon. Friend the Member for Birkenhead (Mr. Dell), the Prime Minister apologised for having misled the House last Thursday. In doing so he mentioned 308 the figure of £10 million. Will he not now concede that he further misled the House yesterday, as in this financial year there is nothing and next year the figure will be only £2 million? Will he now come clean and tell us precisely what this means for the North-East of England?

§ The Prime Minister
The position was exactly as I stated it. I said what the cost would be in a fully effective year, and I said that quite clearly. In any case, that has nothing to do with these four Questions.

§ Mr. Hordern
As the Labour Party gave up all pretence of operating a prices and incomes policy in the six months before the election and as the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) pumped more money into the economy in the three months before the election than he had formerly proposed to put in for the whole year, is it not the plainest hypocrisy on the part of the Labour Party to talk in terms of inflation at all?

§ The Prime Minister
Yes, Sir.

§ Mr. Orme
Is the Prime Minister saying that if an arbitration award affects only a few people, 2 per cent. or 3 per cent., it is all right to pay increases of 15 per cent. or 18 per cent., but that if it is 200,000 postmen, it is not right? Is that the right Hon. Gentleman's new incomes policy?

§ The Prime Minister
That was not what I said, and the hon. Gentleman knows perfectly well that it is not ahe case. The point I am making is that the impression given this morning before the Report was published was that it was a general wage award of 20 per cent. affecting these classes in the Civil Service. That was untrue and unfair to those in the service.

§ Mr. Harold Wilson
The right hon. Gentleman agreed very briefly with his hon. Friend the Member for Horsham (Mr. Hordern) about pumping money into the economy in the second quarter of last year. Has he yet had an opportunity of looking at something to which I directed his attention, the report of the Bank of England that the greater part of the increase in the additional credit supply 309 was created after the second half of June last year?

§ The Prime Minister
I looked at these figures and I cannot agree with the Leader of the Opposition. The situation improved in the second half of June after the return of the Conservative Government, the increase of confidence and the improvement in the gilt-edged market which then followed.