WAGE SETTLEMENTS AND INFLATION (GOVERNMENT POLICY) (Hansard, 27 June 1972)

§ Q3. Mr. Ashton
asked the Prime Minister whether the public speech of the Chancellor of the Exchequer, at a dinner in the House of Commons on 10th June on the rail dispute represents Government policy.

§ Q5. Mr. Joel Barnett
asked the Prime Minister if the public speech of the Chancellor of the Exchequer in London on 10th June, 1972 on inflation represents Government policy.

§ Q8. Mr. Peter Archer
asked the Prime Minister whether the public speech of the 1186 Chancellor of the Exchequer at Westminster on 10th June on the restriction of wage settlements represents Government policy.

§ Q14. Mr. Meacher
asked the Prime Minister if the public speech made by the Chancellor of the Exchequer at Westminster on 10th June concerning industrial relations represented Government policy.

§ The Prime Minister
Yes, Sir.

§ Mr. Ashton
In that speech the Chancellor said the Government had inherited a situation which was deteriorating fast two years ago. Is that situation now deteriorating faster or slower, when a £600 million balance of payments surplus has been turned into a mini devaluation in two years?

§ The Prime Minister
The hon. Gentleman's remarks are typical of the gross exaggeration which does immense harm to the workers of this country, as well as to everyone else. There is no question about the rate of inflation which existed when we came into office. The Opposition cannot deny the impact of wages on inflation, and the Government have maintained their views about that impact throughout their period of office. We have had success in reducing the rate of inflation, and no good can come to anyone from gross exaggeration of the situation. I do not see what pleasure can be gained by the Opposition from constantly encouraging massive wage increases which are unjustified.

§ Mr. Barnett
The Chancellor of the Exchequer told us that there is nothing wrong with the parity of the £ and that there is nothing wrong with the Government's policies to deal with inflation, and he told us that everything is marvellous, but no one believes him. In these circumstances, are the Government still to persist in policies in which there is no confidence, either at home or abroad?

§ The Prime Minister
The Government will persist in their policy of reducing excessive wage claims. The Labour Party in office tried a statutory wage freeze and then statutory control and found that action bitterly opposed by its own members and the trade unions and ineffective. It certainly has nothing to offer in place of that policy.

§ Mr. Hordern
Is it not rather strange that the Leader of the Opposition and other hon. Gentlemen opposite are constantly referring to the £600 million surplus which they left behind, but completely fail to refer to the £1,500 million of debt which they left?

§ The Prime Minister
Yes, and it is important that the indebtedness has been paid off. But what is even more contradictory is that the Opposition have been urging that the surplus on the balance of payments should be used by expanding the economy. The economy is expanding at a rate of 5 per cent. If the import figures are analysed it will be found that the greater part of imports are manufacturing raw materials and manufacturing fuels and that imports of manufactures have increased by only a comparatively small amount in comparison.

§ Mr. Archer
If, as the Prime Minister told us, he is concerned to reach an accommodation with the trade unions to agree on a policy, does he appreciate that they will not be encouraged in that if at the same time the Chancellor of the Exchequer and the Foreign Secretary are announcing the imposition of a policy on the unions, whether it is agreed or not? Would it not be better for industrial policy announcements to be made by the Minister responsible?

§ The Prime Minister
I have read both the speeches referred to and I know of nothing in them which said that the Government would impose a policy on the trade unions. We have made it clear from the beginning that all the discussions we were having were on questions of voluntary arrangements. Therefore when it was agreed between the TUC and the CBI that they should discuss further conciliation machinery on a voluntary basis, the Government fully agreed and we shall come into the talks at the appropriate time.

§ Mr. Kinsey
As part of that speech referred to arbitration and the use of it, will my right hon. Friend the Prime Minister confirm that this means independent arbitration which takes into consideration the community and consumer interest?

§ The Prime Minister
I have made plain the Government's view to that effect before and also in the talks to the CBI and 1188 the TUC. They recognise the Government's view. We must distinguish between the process of conciliation, which is being dealt with at the moment, and arbitration, which will come to be considered later.

§ Mr. Meacher
As the Chancellor preached wage moderation in that speech, what happy inspiration led the Government last Wednesday deliberately to amend the Finance Bill in Committee by increasing by 10 times stock options available to the most highly-paid executives? The Government are offering to directors stock options totalling up to four times their gross salaries. How can the Government decently ask wage earners for moderation?

§ The Prime Minister
The Financial Secretary has just referred to wage moderation. The increase in wages has been approximately twice the increase in prices—[HON. MEMBERS: "Answer."] I will answer the question and I will do it in my own way. The country requires an improvement in management as much as anything else, and if management is to be encouraged to stay in this country instead of going abroad to take up positions, it must be encouraged in this way.

§ Mr. Frederick Lee
The Prime Minister was telling us about the period when the Labour Government were trying to contain inflation. Will he tell us whether he was trying to help it by leading his party 25 times through the Division Lobby in favour of all those who tried to break through the ceiling?

§ The Prime Minister
We have never accepted the principle of statutory control, and the right hon. Gentleman's Administration abandoned it before they left office. We then saw the results of years of statutory control. The dam burst, and we have seen the consequences ever since.

§ Mr. Edward Short
In the speech to which the Question refers, the Chancellor of the Exchequer trotted out the old parrot cry which the Prime Minister mentioned today and which he mentions every time he opens his mouth—that the major cause of inflation is excessive wage increases. Will the Prime Minister be man enough to admit his own responsibility for inflation? He abolished the Prices and Incomes Board, he abolished 1189 the Land Commission, he put up the price of school meals, he abolished free milk for primary schools and he has en couraged a policy of dear food. He has done nothing about spiralling land prices. All this has been highly inflationary. Is the Prime Minister aware that if he persists with the Housing Finance Bill on 1st October this year, there will be very much bigger wage claims in the next two years?

§ The Prime Minister
In that case they will be equally unjustifiable. Whatever items the right hon. Gentleman cites, he cannot deny that wage increases overall have been twice as much as price increases. They cannot therefore be justified. If he wants to cite particular instances, he must also cite the reduction in individual taxation which has been made in the last two Budgets and he must cite the action taken by the Government on particular items, such as milk and sugar, which has had a direct effect on prices. He must take into account the massive reduction in purchase tax and the halving of SET by the Government. Nothing can be gained for the workers by gross exaggeration of the situation.

§ Mr. Speaker
Mr. Jenkins.

§ Mr. Roy Jenkins
Surely the Prime Minister—

§ Mr. Hugh Jenkins
rose—

§ Mr. Speaker
I apologise. Mr. Roy Jenkins.

§ Mr. Roy Jenkins
Surely the Prime Minister realises that there is grave disquiet both at home and abroad at the prospect, and that this has increased day by day since the announcement last Friday, apart from the period before that? Surely he has some new approach to the problem rather than merely endeavouring to justify everything by quick debating points relating to what happened two years ago.

§ The Prime Minister
I should have thought that the right hon. Gentleman, in his rather more sober mood, would acknowledge that the commentary right across the world has been that Her Majesty's Government took the right action in the situation, and took it speedily and firmly. In that, there was a great contrast with what happened under his predecessor in his own Administration. 1190 As to the impact of inflation, obviously the Government will persist in the policies of dealing with inflation, but what must be accepted is that wages are a vital factor. In fairness to the right hon. Gentleman when he was Chancellor he never ceased to emphasise that. It is impossible for the Opposition to be in any way credible until they are prepared to acknowledge that once again.

§ Mr. Hugh Jenkins
To revert to the question of stock options, is the Prime Minister aware that there is no evidence that in general they go to the most efficient managers? On the contrary, there is some evidence to suggest that gross over-valuation of management is a part of the inefficiency to be found in some of the larger companies which go in for such schemes. Therefore, will the right hon. Gentleman look again at the whole question? If he wants to improve management standards, he will not achieve it by this kind of method.

§ The Prime Minister
The arguments which the hon. Gentleman adduced are very debatable, and I would not accept them in that form. I know that the Opposition have a dogmatic objection to the arrangement, but I ask them to consider seriously the measures which it is necessary to take in order to bring about an improvement in management in this country.