HC Deb 27 February 1973 vol 851 cc1433-55

10.45 p.m.

Mr. Arthur Palmer (Bristol, Central)

I beg to move Amendment No. 26, in page 2, line 29, at end insert: 'and also an obligation to take into account, where appropriate, the special knowledge, skill and responsibilities of groups of employees'.

Mr. Speaker

I understand that with this Amendment it will be convenient also to discuss Amendment No. 25, in page 2, line 29, at end insert: '(3) The code shall not allow the real value in terms of purchasing power of any wage or salary to be diminished in comparison with the same real value at the time of the last pay settlement affecting such wage or salary'.

Mr. Palmer

The amendments have some special relevance to the situation in the electricity supply industry.

This is the first time that I have spoken in the course of this legislation, but I can claim to be something of a pioneer as a doubter of the value of incomes policies. In the middle 1960s when I was President of the National Federation of Professional Workers I was an outspoken critic I think of the incomes policy of my right hon. Friends who then formed the Government. I do not believe that such policies can work in a free society. They have certainly not worked anywhere in the Western world so far. If there were a change in the whole nature of society, in the whole balance of property relations, they could possibly work. But I am very doubtful whether the policy now before us will work in the long run in any real sense in precisely the same way that I was doubtful—and was proved right by events—whether the Labour Government's policy would work.

I have a special worry about the Government. In this matter they are reformed drunkards. They have taken to water with all the enthusiasm that at one time they reserved for their gin. They came into office believing that a free-for-all in the economy would solve all their problems and now they seem to think that rules, regulations and formulae will decide everything. It can at least be said in defence of my hon. Friends that they believed in the water in the first place. The Conservatives moved from gin to water, and that, I am told, if done suddenly, can have disastrous results.

My amendments, therefore, will test whether the Government are prepared to take a more moderate course, to take sherry, for instance. The amendments do that by raising two issues. One is differentials and the other is avoiding reductions in standards of some employees.

Anyone with any practical experience of negotiations in industry, particularly, perhaps, for salaried staffs, where one is often negotiating not for a great number of people at the same level but for members of a group working in industry organised in a pyramid or hierarchy, knows that the differentials are the very essence of negotiations. Probably the great majority of claims, settled peacefully or otherwise, that come before negotiating bodies, arbitration tribunals, and so on, are about differentials.

Differentials may be of various kinds. They may be within an industry, between one group of employees and another. They may be within a group of employees, between one employee and another. The other important class of differential is that between one industry and another. In the nature of things, understanding differentials is essential to the whole business of understanding pay negotiations.

My experience in the electricity supply industry, as I think the House knows, is in connection with the fortunes of the salaried technical staff. In the course of our negotiations in looking after the practical interests of some 28,000 technical staff in electricity supply, if we are to be realistic, we are faced with the question of what, for instance, is a charge engineer in a power station worth as against an electrical maintenance engineer or a mechanical maintenance engineer. Such issues are fundamental and take up a vast part of the time of the negotiating bodies, and much attention is paid to evidence.

If the electricity supply industry is now expected to fit its complicated system of staff differentials, which are always changing as techniques change, into the formula of £1 a week plus 4 per cent. of the pay bill over the previous year, whoever attempts to do it will need to be a wizard. It can scarcely be done in any satisfactory fashion, if done at all, by any body of human beings.

What is and will be the grievance in my industry, as it will be in comparable industries, is that this means that the whole carefully built up system of pay comparisons within the industry, between one employee and another—the technical staff in this case—is simply to go by the board. It means that many years' work is to be lost, because it will not be easy to recover from the distortions which the Government's mistaken policies will bring about.

It is important also to look at pay comparisons in relation to responsibility, training and skill between one section of employees and another. The differential with which technical staff in electricity supply are at present concerned is that in relation to industrial staff. This matter is being pursued in no spirit of jealousy, but if there is to be a proper chain of command and a system of responsibility differentials must apply. There must, for example, be a differential between supervisory and non-supervisory staff, just as there must be an adequate differential between skilled and unskilled workers.

It so happens that industrial staff in the electricity supply industry—and I congratulate their negotiators on their ability—managed to get in their improvement before the standstill. But the technical staff were caught by the freeze and this has caused considerable bitterness. Does the right hon. Gentleman feel that the case for restoring differentials should be defeated by this official and arbitrary policy? No doubt the hon. Member for Cornwall, North (Mr. Pardoe) feels that it should be defeated, but I certainly see no justice in such an action. Furthermore, I do not think that the policy will work in any case.

Another aspect of this policy which will affect the electricity supply industry relates to the flow of staff from that industry to other industries and vice versa. If the Government interfere with the pay structure and differentials which apply to the nationalised electricity supply industry—and the industry had to wait for a Conservative Government to find itself pushed into the financial red—it will mean that the industry will find itself being treated even more shabbily in future than already by the present Administration.

The general secretary of my union, the Electrical Power Engineers, recently supplied me with some figures which are relevant to this debate. They prove that as a result of this policy the technical staff in electricity supply will suffer a lowering of standards in the next year. The figures show that between December 1971 and December 1972 the price index rose by 7.7 per cent., weekly wages rose by 13.8 per cent., and average earnings in industry increased by 16.5 per cent. From those figures the Prime Minister in a recent speech—I cannot remember the exact date of it—concluded that the increase over the last year in real wages has been 6 per cent. I must point out that the average take-home pay of members of my union—men who carry out a difficult and responsible job and who require considerable experience and qualification to do the job—is £2,500 per year. It is a larger income than that of many of my constituents, but it is nothing compared with incomes that are often taken for granted on the Government benches opposite.

11.0 p.m.

On the phase 2 formula of an extra £1 a week plus 4 per cent. of the total wages bill for a group of employees, the technical staff in electricity supply will have an increase of 5.8 per cent. The loss of the real purchasing value of their incomes, on the Government's own figures, will be 0.4 per cent. I cannot believe that that is just. The Government's only defence is, "We have so blundered over inflation that we can put it right only by the crude application of policies that we admit to be unjust to certain sections." That is no defence. If the Government are in doubt about where they stand, they should test it by putting to the people in a General Election the injustices that arise from their mismanagement.

I make no apology for concentrating on my own industry, because we can get to grips with these issues tonight only by the use of specific examples. In the Sunday Express on 28th January there appeared an article by the hon. Member for Stratford-on-Avon (Mr. Maude), who is quite a frequent contributor and brightens my Sundays sometimes. I have given him notice that I intended to mention the article, which was headed melodramatically: God Help Us if the Militants Wreck the Freeze". In it he wrote: what happens if the electricity workers themselves come out on strike? I do not think they will do so as a whole but the militants just might manage to persuade enough workers to quit to make it impossible for the senior staff"— I think that the hon. Gentleman means the technical staff— to keep the power stations going. What happens then? Frankly, I don't know—but I hope to God someones does. We have been told in the past that troops cannot run power stations. I have never been sure that this was true, given the presence of senior technical staff, but supposing it is? Could the Government raise enough volunteers with the necessary skills to keep electricity supplies going? It would certainly have to try despite the risk of industrial action spreading. The assumption in that article is that the technical staff will do the Government's dirty work and keep the power stations going. The technical staff are not bad trade unionists and would not act in that way in any case. But apart from that, when injustices of the present kind are being perpetrated by a Government on a section of loyal employees, who normally feel a great obligation to our public electricity supply and its consumers, if they were not militant before, those employees will certainly be militant in the future.

In fact the whole of this policy is a perfect formula for turning moderates into militants. It is for this reason that I am glad to move this amendment which, with the associated amendment on the Order Paper may look—I shall not say innocent, but procedural. That is not the case. They were put down deliberately to illuminate points fundamental to the understanding of the unjust nature of this legislation to many.

Mr. Bruce-Gardyne

I was interested by the peroration of the hon. Member for Bristol, Central (Mr. Palmer) when he said—and I apologise if do not quote precisely—that nothing could be more certain to turn moderates into militants than a policy of this kind. That rang a bell in my mind. I seem to remember hearing that said on occasion in years gone by, I think, perhaps, the Home Secretary, and I used to think there was a lot in it. I confess that I have not entirely lost my belief in the strength of that argument today, but no doubt the Secretary of State will be able to reassure us on that.

The hon. Member has two related amendments, and for reasons I shall come to I cannot support him in the second but I have a great deal of sympathy with him in the first, which deals with the vexed problem of differentials. We have been told on numerous occasions that one of the great purposes of phase 2 is to help the lower-paid workers. A consequence of helping them is the erosion of differentials. I do not think there is any argument about that. I know that many observers seem to find it intolerable that there should be lower-paid workers, or indeed that there should be quite a number of people who earn less than the average wage. I gave up mathematics quite a long time ago and I may not be up to date, but I never understood how one arrives at a position where everybody earns the average wage or above. Many will be at the average and above—and on that basis there is a slight mathematical conundrum.

We are assured that the purpose of phase 2 is to assist the lower paid, and that must lead to erosion of differentials. There were some wise words in the Economist—

Mr. Brian Walden

A change.

Mr. Bruce-Gardyne

The hon. Member says it is a change but that was several months ago. In those days the Economist said that the way to help the lower paid was to halt inflation. That is true. I do not think the way is to try to devise a wonderful structure which in some unexplained way will compensate the lower paid artificially, because the reasons they are the lower paid have to do with the structure of the industry in which they work and with their effective bargaining power. The most likely consequences of an attempt to differentiate in favour of the lower paid is to deprive the lower paid of employment because the firms in which they are the lower paid are probably firms which, if they are forced to move nearer the national average at any given time, would have to reduce their labour force drastically, in order to do so.

However, there is the other side of the argument which the amendment is designed to deal with, and that is the problem of the erosion of differentials. I read the other day of a settlement reached between the teaching profession in Scotland and its employers to take effect in phase 2. I imagine that the settlement had the blessing of my right hon. Friends. I may be wrong about that, but if it did not have their blessing, one would be expected to hear something about it. One would have expected the Government to announce that they would slap an order on all the local authorities in Scotland, or whatever it is they do under the Bill.

As I understand it, the effect of the settlement is that whereas for the lower-paid teachers—whom one presumes are those with the least qualifications and those in respect of whom supply is certainly adequate to meet demand, for instance, young unmarried women teachers who will not be in the profession for long—the increase in salary will be about 20 per cent., at the other end of the scale senior teachers, head teachers, and so on, will get 3 per cent. or less.

I do not think that it requires very much calculation to see that, inevitably, in some schools in Scotland as a result of this settlement the position will be arrived at that head teachers or heads of departments will earn nothing at all—certainly nothing in terms of what hon. Gentlemen opposite like to refer to as take-home pay—above the earnings of their assistants.

I remember in days gone by, in long years past, in a different existence in 1966, how we used to point out to right hon. and hon. Gentlemen opposite the folly of trying to recruit, for instance, the chairman of a nationalised industry on a salary which, first, would guarantee that we could not get the right man for that job and, secondly, would disrupt the whole salary structure within the nationalised industry to which that top limit was applied.

I think that this problem arises, and will arise very widely, under what we are proposing in the Bill. I hope that my right hon. Friend the Secretary of State for Employment will be able to explain to the House the considerations which satisfy the Government that this problem will not arise under this legislation whereas we used to say how dangerous such problems were under the legislation introduced by the Labour Party. I think that perhaps we need a word of explanation about this.

I turn briefly to the second amendment, which I could not support, for a simple reason. I was a member of the Sub-Committee of the Public Expenditure Committee which published a report the other day pointing out that at the present rate of progress of public expenditure it was not only most unlikely that there would be scope for a growth of consumer spending on the scale that we have experienced in the last year or more but that it was very unlikely that there would be scope for any significant growth in consumer expenditure over the next 18 months.

I think that, broadly speaking, that is probably true, and if it is true there will have to be cases in which the real value in terms of purchasing power of a wage or salary may have to be diminished compared with the same real value at the time of the last pay settlement.

Mr. Palmer

If the hon. Gentleman believes that and his Government believe it, is not the right policy one of increasing taxation, not reducing it?

11.15 p.m.

Mr. Bruce-Gardyne

As the hon. Gentleman realises, that hardly arises on this amendment. There were implications to be drawn from that report of the Public Expenditure Committee about taxation which the hon. Gentleman will no doubt have drawn. All I am saying is that if the conclusions drawn by the Committee were correct, it seems to follow as a probability that in some cases at any rate the situation which the hon. Gentleman's Second amendment is designed to avert is one we would have to expect to encounter.

Mr. Palmer

What it amounts to under this policy is that some sections of the community will be arbitrarily taxed. Taxation should apply to all.

Mr. Bruce-Gardyne

If there is little scope for growth in consumer expenditure in the next 18 months to two years, one would expect that the real value of the pay of certain groups could be expected to decline between settlements. I remind hon. Gentlemen opposite that under the legislation which their Government introduced this was not an exceptional circumstance. This was the whole purpose of the policy as defined by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). It was to reduce real incomes. This was part of the purpose of the policy.

Mr. Harold Walker (Doncaster)

For two years I was as intimately involved in the administration of that policy as perhaps any member of the Government, certainly any Member present tonight. I can assure him that no matter what his recollection is, this was never part of the philosophy of those responsible for applying that policy.

Mr. Bruce-Gardyne

I will certainly check the precise words of the right hon. Gentleman. My recollection was that he made it clear that part of his aim was to secure some curtailment of earnings as part of the correction policy needed to deal with the balance of payments situation following devaluation. I would not support the second amendment because circumstances may materialise where such consequences as the amendment is designed to avert would be unavoidable.

The first amendment raises a point of considerable substance to which the House needs an answer—the consequence of the erosion of the differential. The hon. Gentleman referred to one industry of which he has particular knowledge, but, as he emphasised, there are many examples. We on this side expressed real and understandable concern on this point when previous legislation was going through the House, and we need to know what circumstances have changed to make these anxieties unnecessary today.

Mr. Pardoe

I am interested in the amendments and even more in the speech of the hon. Member for Bristol, Central (Mr. Palmer) because he has enormous knowledge of the electricity industry. It was interesting to hear him defend differentials in an industry where differentials have been enshrined for so long. The amendment is in defence of differentials. As we have heard, this is the conventional wisdom shared on all sides.

I challenge the whole basis. How did differentials arise? If there were a pur- pose for them as we have them today, codified and solidified into an historical mould, that reason no longer exists. I doubt whether even the differentials in the electricity industry can be justified in economic terms, although they might be justifiable in social terms. To find out how differentials came about one would have to go back to Adam Smith, the pin factory and the division of labour. An individual wanted to specialise and to increase the value of his output. Through self-interest he became skilled and increased the value of his output and therefore his income. There is nothing wrong with enlightened self-interest, but that was individual action to advance self-interest.

There might still be justification for differentials based on the value of an individual's output, but in the electricity industry today one could hardly justify differentials by reference to the value of the output of individuals.

Mr. Palmer

There is a considerable differential between the hon. Gentleman's income and that of most of his constituents.

Mr. Pardoe

I am coming to that. Do we need differentials to obtain skilled people? Do we have to pay graduates more for having received a privileged education? I do not see why we should send the privileged few—mostly from the middle class—to university out of money taken in taxes out of the pockets of the poor—who pay a higher proportion of their income in tax—and then say that those who have been to university should be paid more because they have had a privileged education. I have never thought that a privileged education entitled one to a higher income. In a just society precisely the opposite would apply.

We are continually told that to get people to take responsibility we have to pay them a higher salary. But there are people who enjoy responsibility. There are people who went for a commission when they were doing their national service—not for the pay. When I was asked why I had gone for a commission I said, "National service is Hell, and I want to do Hell first-class." It was more comfortable than slogging it on the barrack square. That is one reason why people go for differentials, but I do not see why we have to back up differentials in a pay policy.

Mr. Ronald Bell (Buckinghamshire, South)

Are not we hearing the official policy of the Liberal Party?

Mr. Pardoe

All in good time. We rarely hear the official policy of the Conservative Party from the hon. and learned Gentleman.

Why do we pay judges such an enormous income? I suppose that arose because we had to stop them being corrupt. Why do we pay the Chairman of the Pay Board vastly more than we pay a clerk in the Pay Board or a Member of Parliament? The job of chairman I imagine to be fascinating and there are many people who would like to do it without being paid £20,000. I imagine there are people who would be prepared to be Chairman of the British Railways Board without geing paid £20,000. It is argued that one needs to preserve differentials in order to have efficiency in industry. It is an argument that, holding an egalitarian philosophy, I cannot support because it is élitist.

Mr. Brian Walden

It is late at night and I want to be certain that I understand what the hon. Gentleman seems to be proposing on behalf of the Liberal Party. Apparently, it is the idea that the cleaning woman at the court should be paid more than the judge because she does not enjoy her job and he does, or that the people in the cafeteria of the House of Commons should be paid more than Members of Parliament because we enjoy our jobs and they do not. It is not that I necessarily disagree with the hon. Gentleman, but I want it on record that this is the view of the post-capitalist Liberal Party.

Mr. Pardoe

The hon. Gentleman is getting near to what the view would be.

Mr. Walden

I thought so.

Mr. Pardoe

I think the Liberal view would be a wish to narrow the gap at this stage, although not immediately to close it. I can imagine a situation in which, because cleaning floors and swabbing out lavatories or working in the mines—a ghastly job—or clearing dustbins were such nasty jobs, those who do them would, in a just society, be paid more than they would for doing nice, comfortable jobs in decent, carpeted surroundings. This is something we shall inevitably have to move towards. It is one of the reasons why the miners, for example, have been able to get fairly large increases vis-à-vis civil servants.

Mr. Walden

Then what in the name of Heaven is the hon. Gentleman doing in a party called the "Liberal Party"? May I introduce him to an idea called "Marxism"?

Mr. Pardoe

The hon. Gentleman is an apostle of one revolutionary philosophy but it is not the only revolutionary philosophy. I happen to base my political philosophy on the greatest revolution known to man, which was not that little affair in 1917 but the revolution of 1789. The second banner of that revolution was equality, and I believe that Liberalism is about liberty, equality and fraternity in equal proportions. I am an unashamed egalitarian, and I am not in the least surprised to find an unholy alliance between these mock 20th century Socialists and the party of the élite in believing that differentials have in some way to be preserved for ever and anon. These are the people who now defend the elitist concept of society. The hon. Member for Birmingham, All Saints, is an absolute product of meritocracy.

Mr. Walden

I cannot say the same of the hon. Gentleman.

Mr. Pardoe

No, but I am not desirous of being so.

Mr. Walden

That is obvious.

Mr. Pardoe

That is the difference between us. The argument of the hon. Member for Bristol, Central is not very different from that which has been put by hon. Members opposite. They argue that it is necessary to lower the rates of taxation on very high incomes because high rates of super tax are destroying incentive. I have never believed that argument. It is absolute nonsense. When hon. Members opposite tell us, with tears running down their faces, of some friend who earns £20,000 a year and keeps only 6d. in the £, one can only say that if that is a disincentive he is "bonkers" to be working in the job if he does not like it, for otherwise he is doing it because he likes it, irrespective of money. I suspect that there are many people who would willingly come forward to do these jobs without financial reward.

If the hon. Member argues that his free collective bargaining and his precious differentials are needed for the lower paid, all I can say is that they seem to have done nothing for the lower paid. With free collective bargaining and differentials, we have been unable to solve the problems of the lower paid, and I do not believe that it will be possible to solve their problems—including, for instance, the badly paid women in industry—unless we close the gap, which means abandoning these precious differentials.

Mr. Palmer

How does the hon. Gentleman suppose that in any kind of sane world he can get the kind of equality of incomes he is talking about without a complete change in property relations? That is the only possible basis on which it could be founded.

11.30 p.m.

Mr. Pardoe

That is right. There would have to be a complete change in property relationships. Part of Liberal policy is to distribute wealth. We are a distributionist party. One of the tragedies of six years of Labour government was that the Labour Party failed totally to redistribute wealth.

Mr. Palmer

Property.

Mr. Pardoe

Yes, property and wealth. Property is wealth. Property is an instrument of personality; we have to distribute it. I entirely agree with the hon. Gentleman.

However, I do not agree with the hon. Gentleman that we need to preserve his precious industrial differentials, which have done nothing to solve the problems of the lower paid and which are based on nothing economic. They are historical and they should be abolished. Certain new differentials may have to be built into our pay system if incentives are required in the short term. In an ideal society, they would not be required. However, the differentials about which the hon. Gentleman speaks have come about as a result of history and bear no relationship to what we need in society today.

Mr. Atkinson

I have a vested interest. I have not been a president of the Oxford Union and therefore I cannot join in the fun which has taken place between the two sides of the House. There seems to be a similarity of thinking between hon. Members opposite and one or two of my hon. Friends. My views are much nearer to those of another hon. Member who does not share my political philosophy. However, his views seem to be getting nearer to the policies which I hope the Labour Party will one day pursue.

If this argument is about the creation of a fair society out of an unfair society, surely the narrowing of differentials must be part of that philosophy. It must be part of the political apparatus which we are attempting to set up.

Mr. Brian Walden

My hon. Friend knows better than that. The clue is the question of property relationships. None of the differentials could be narrowed permanently without a transformation of property relationships. My hon. Friend has nothing in common with the hon. Member for Cornwall, North (Mr. Pardoe). What he says is claptrap. My hon. Friend is a Marxist. That makes some sort of sense.

Mr. Atkinson

I am grateful to my hon. Friend. That was part of the argument which I was about to use. We are talking about property relationships. and therefore this discussion is about ownership. The basis of Labour Party politics is ownership of property. This is where the transference of wealth takes place. That is what the argument is about. I did not want to personalise it, but, in view of some of the comments made tonight, perhaps we should do so. If we say that one-sixth of the Liberal Party is involved with Royalty, we get the matter in perspective.

Mr. Pardoe

One-eighth. It is one-ninth on Fridays.

Mr. Atkinson

Let me deal with the arguments advanced by an hon. and learned Member who is a judge. He advocated earlier that Members of Parliament should accept a voluntary cut in their salaries as a method of giving leadership to the nation. [HON. MEMBERS: "Who said that?"] I do not know his constituency. I understand that he is known as "the Nabarro lawyer". He was involved in a recent famous case in which he gained some fame—and no doubt a sizeable brief. His earnings are about £25,000 a year outside this place. I understand that he is Recorder of Colchester. Taking that with the brief fees which he receives, I imagine that his earnings are about £25,000. When talking about differentials, he said that railwaymen were not as valuable to society as judges and lawyers. He went on to suggest that if there were one way in which the railwayman could help his economic problem it was by practising at the Bar. He said that there was no reason why this should not happen. I do not know whether that is a serious argument—that one can change a job in this way to solve the problem.

The point is that there is an industrial dispute involving the railwaymen, with a consequent disruption of the economy. A serious situation has arisen as a result of these men withdrawing their labour. If all the judges withdrew their labour tomorrow I doubt whether many people would be inconvenienced. Some people would no doubt welcome the situation so created. That would also apply to barristers. I should think that we could solve many problems if we got rid of most of the barristers practising today, particularly those in the income bracket which the hon. and learned Member claimed to be in earlier, when he was putting himself alongside railwaymen in a serious argument about differentials.

There is an argument that railwaymen are worth more than judges anyway, on that basis.

Mr. Pardoe

And probation officers.

Mr. Atkinson

And probation officers. A probation officer would be worth more than the man doling out the sentence. I know that the hon. Member for Cornwall, North was not serious when he was talking about the person cleaning the court as against the judges. But, recognising the argument about property, we are trying to narrow differentials.

Mr. Brian Walden

Even at this hour, let us get this right. Within our present form of society, what a man is paid is what the market will pay him. That is known to all hon. Members. Of course, if we destroy the market and change the property values, those scales die, but until we do that they exist, and no legislation of this House can prevent their existing.

Mr. Atkinson

I accept what my hon. Friend says. I do not challenge the basis of his argument. What he says is absolutely true, but in real life we are now faced with paying, wage increases in terms of percentages and flat rates right across the board. I share the view of the TUC that if we are to help those at the lower end of the scale we should stop talking about percentages and talk in terms of cash. If there is an immediate policy to be pursued in this situation it is the policy suggested by the TUC—a £3 flat rate—which was discussed at the Downing Street talks and elsewhere—as against the Government's £1. The TUC was talking in terms of a £3 or £2 increase right across the board, which would have the effect of reducing the existing differentials.

Those are courageous arguments to put forward by men in the trade union movement, representing skilled workers and others who enjoy the benefit of the high differentials that exist in industry. The trade union leaders talk about flat rates of that kind, perhaps topped up by a fixed percentage, not unlike the present formula, although the Government's formula of £1 plus 4 per cent. is so unrealistic that it is out of this world. But there is an argument in favour of this sort of adjustment in the present situation, which is a critical one. I should have thought that one of our objects should be to reduce the differentials in society and take away the rough edges of unfairness which exist, and which we all recognise to exist.

That brings me to the two amendments, both of which I support, with the qualification that I want to see a shrinking of the very wide differentials existing at the moment.

For a wage earner in industry to maintain his standard of living, he must be paid about 4 per cent. in addition to the rise in the price index. In terms of take-home pay, anyone making average earnings in industry must be receiving 4 per cent. more than the rise in the price index to break even at the end of the day. This is the real cause of much of the dissatisfaction in the present discussions. Taking into account all the peripheral aspects of the argument about the 4 per cent. on top of the price index, possibly the result is a higher figure, but certainly that is the minimum. That is the case spelt out in the second amendment, and for that reason I support it.

A very real point which many of my right hon. and hon. Friends argue is that there should be a lessening in present differentials if we are as soon as possible to move to a less unequal society. My experience in life is that the most wealthy make the least contribution to the wellbeing of the world. They make the least contribution to progress in any form in this or in any other country. The really great men whom I have had the privilege to know in my life have received the least money. There is obviously something wrong with a society which has its values upside down. Most of us understand why it has happened, but now it is revealed for all to see.

I have had the privilege to know some of the world's finest engineers, and we should be proud of them. But I am amazed to see in our newspapers, especially at weekends, advertisements for civil, mechanical and nuclear engineers, and the salaries quoted are absolute pittances compared with those of the accountants, the financial lawyers and others who do all the financial manipulation. They are the wizards of our society, and they are compensated the most.

It is an odd situation when some of the finest surgeons in the world are paid much less than people managing dance halls. A week or two ago I saw that a leading dance hall company was advertising for managers to take over the management of small dance halls up and down the country, and it was offering £15,000 a year. In the same newspaper there were advertisements for experienced and technologically advanced engineers to do extremely responsible jobs creating some of the most advanced and imaginative concepts in the world, and the salaries they were offered were about £4,500 a year.

Between dance hall managers and engineers or surgeons there is this curious differential. Some of our greatest thinkers are paid the least. So we are all con- cerned about differentials in this immediate situation, whether they are at the wage level or at the professional level, if we are to get some sort of order into a confused society.

Mr. Palmer

All the people to whom I have referred are workers. They can live only by selling their knowledge and skills. I am glad that my hon. Friend has made a differentiation between those people and those who live by other means altogether.

11.45p.m.

Mr. Atkinson

This is precisely the point. It is my experience, and I am sure that of all hon. Members, that the entrepreneur, the gambler, the person who plays the Stock Exchange, the fellow who manipulates the accounts in insurance, the "bod" who makes no significant contribution to our society but merely tinkers with the fabric, is compensated at the highest level. He is revered, he tops the honours list, he goes for all that is going. All that glitters in our society is presented to him. But the people upon whom our progress depends, the very essence of our society, are paid the least. So it is in the wage-earning world. The people with whom I associate who have a weekly wage packet also suffer from this lack of fairness in society.

I am on the side of those who want to shrink differentials to create more fairness. I understand all the problems attaching to this matter. It will be many years—I doubt whether it will be in my lifetime —before we arrive at the state of affairs where we can judge the value of one industry against another or one group of people against another, where we can get common acceptance of these values, and people can begin to take from society the equivalent of what they put in. If that can be done by common agreement, I believe that we shall be well into our Socialist society.

Mr. Brian Walden

A number of issues have arisen as a result of the amendment which are worth at least a cursory comment.

I do not think that the Labour Party has ever disagreed with the proposition that differentials are too wide. All my right hon. and hon. Friends know how the differentials came to be set. They were set partly as a result of market forces and partly—this should be said frankly—as a result of trade union bargaining pressure. Where it existed we tended to get a better deal; where it did not exist, we tended to get a worse deal. If women are less well treated than men in terms of income, it is because they have been the most poorly organised group in our society.

I agree with my hon. Friend the Member for Tottenham (Mr. Atkinson) that we need pro tanto agreements. Though this is partly a matter for the Government—a responsibility which they do not appear to intend to undertake—it is also a matter for the trade unions. In any wage negotiations the trade unions must put forward pro tanto arrangements. Some could argue that it will be easier under the arrangements that the Government have devised, because of the clauses about the lower paid.

I am concerned not with this sham of a Bill but with the future years about which my hon. Friend spoke. The Labour movement can make an enormous contribution towards narrowing differentials if it always goes for pro tanto agreements. What it cannot go for is the rubbish of the hon. Member for Cornwall, North (Mr. Pardoe)—namely, job satisfaction. If we paid people on job satisfaction, the guards at Auschwitz would have had the biggest salaries in the world. That is nonsense. One can conceive of a situation in which the judge does not enjoy his job but the court usher does. The idea that one can go around and find the people who are not enjoying their jobs and pay them proportionately and then discover those who are and deduct something from their salaries is piffle, and has nothing to do with Socialism of any kind—

Mr. Pardoe

Nor does the hon. Member.

Mr. Walden

The hon. Gentleman is quite wrong. My hon. Friend the Member for Tottenham and I, and sometimes my hon. and right hon. Friends on the Front Bench and I, do not always agree, but we do work in a broadly similar direction, and we do work on the basis of a change in property relationships. We are coming to this, but until there is some substantial change there, the differential problem is a matter for the Government and the unions. But it should be isolated from the issue of job satisfaction. That is not a justifiable or sane basis on which to differentiate between people's monetary income, under any system—Socialism, capitalism or what the Government are now providing for us.

Mr. Maurice Macmillan

These amendments are attempts to write into the Bill guidelines for the Pay Board on matters which should properly be dealt with in the code. It is for this reason that I ask the House to reject them.

My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) asked me about militants. Militancy started under the previous Government, was checked for a while under our Government, and started again later. I agree with him that the best way of helping the low-paid is by decreasing the rate of inflation. I also hope that we shall be able to resume the talks with the unions and employers on the special problems of the lower-paid, which was a feature of the original tripartite talks, and which I hope might be considered as a separate and special problem.

The terms of the agreement mentioned by the hon. Member for Bristol, Central (Mr. Palmer) were not imposed by the Government, and the formula to which he objected leaves room to negotiate. As to the amendment dealing with maintaining real value in terms of purchasing power, paragraph 75 of the Green Paper says that the first of the principles of the code relating to pay is to limit the rate of increases in pay in money terms to a level more in line with the growth of national output, so as progressively to reduce the rate of price inflation and improve the prospect of sustained faster growth in real earnings. I am not sure how the hon. Member arrived at his calculation. Using the £1 plus 4 per cent. formula in the case of these staffs, he came mysteriously to a figure of 5.8 per cent. for that bargaining group, rather than 7 per cent., as is the case for most. I would have to consider this case in greater detail.

The subject of the Budget has been raised, but that is not a matter for me or any Minister to speculate on. The hon. Member for Tottenham (Mr. Atkinson) took the argument about differentials rather wider, and it developed into an argument with his hon. Friend the Member for All Souls—[Laughter.] I apologise. I mean the hon. Member for Birmingham, All Saints (Mr. Brian Walden). It was the nature of the hon. Member's argument which led me to make a perfectly natural slip. Both hon. Gentlemen seemed to have an element of reason in their arguments, although I could not agree with all they said. I could not say the same about the arguments of the hon. Member for Cornwall, North (Mr. Pardoe). I found myself lost in a maze trying to follow the thread of reasoning through the words behind which he successfully hid it.

The hon. Member for Tottenham returned to the narrower point about differentials when he talked about the market rate and the bargaining power of the unions. I say to him, to my hon. Friend the Member for South Angus and to the hon. Member for Tottenham, that the erosion of differentials is not in itself necessarily affected by the £1 plus 4 per cent. formula as used as a method of calculating the total amount available as a pay limit for a negotiating group.

The hon. Member for Tottenham referred to the courage of the unions—some of them representing highly-paid people—in suggesting a flat rate. It would have been fairer, with a narrowing of differentials, if the tripartite talks had produced agreement on a flat rate to be applied across the board. But it is not an easy concept to introduce. It is simple to formulate as a concept, but in our complex pay structure it is not easy to introduce and it was the failure to get agreement on that point which led to the present policies.

Mr. Bruce-Gardyne

I accept that the £1 plus 4 per cent. formula does not in itself necessarily lead to an erosion of differentials, but surely my right hon Friend would agree that the £250 limit does.

Mr. Macmillan

Yes. The emphasis in the tripartite talks and thereafter was on helping the lower-paid, and certainly the ceiling of £250 limits the capacity of the higher-paid to get increases in salary.

I say to the hon. Member for Bristol, Central, who started by saying that he was opposed to some of his hon. Friends on incomes policies generally, that I thought he was arguing against some of his hon. Friends in an earlier debate this evening. He wanted to make the code and policy less flexible by writing bits of it into the Bill. His hon. Friends were seeking to make it more flexible. The reason for the degree of flexibility we have sought to achieve in the formula is simply that it seemed important to the unions concerned when we were discussing it at various stages. Apart from the limiting effect of the £250 there is no necessity, in the method of negotiating, to give a specific advantage to the lower-paid, although it is an expressed hope of the Government. The formula has to be like that because it is the intention that it should have that effect.

The hon. Member referred to a problem that has arisen in his and in one or two other industries, including the Post Office, where different parts of the same industry have different negotiating dates. That has led to one section being caught by the standstill and another section not being caught. It is precisely to deal with these sorts of anomalies that the Pay Board will give them early consideration during the course of phase 3, so that they can be rectified in the course of the next pay rise. I fully accept that this has led to considerable difficulties in comparisons between the supervisors and others and that it is a problem which will require early attention by the Pay Board.

Mr. Palmer

Will the Secretary of State therefore give me an assurance that in cases like this, if it were found that in terms of real standards the incomes of one group compared with another had been reduced, it would be possible for the Pay Board retrospectively to put the situation right?

Mr. Macmillan

In applying the policies of stage 2 the Pay Board will be bound by whatever are the terms of the code, after the consultations and debate have taken place on this document and the House has debated the draft code. The Pay Board will take this type of problem into consideration in advising on how to formulate the guidelines for stage 3 which, after consultation and debate in the House, we intend to embody into a code for stage 3. I can assure the hon. Gentleman that I am aware of the problem that exists in his industry and one or two others.

12 midnight.

We have had a fascinating debate on a somewhat narrow point. The hon. Member for Bristol, Central will accept that whatever assumptions one makes about his arguments and whatever conclusions one reaches on the points he has raised, they are matters of guidance for the Pay Board, and are therefore more appropriate to the code than to the Bill. They would be severely limiting on any freedom of action, in a way which has been deplored by the Opposition, particularly if they were written into the Bill. For those reasons I ask the House to reject the Amendment.

Amendment negatived.

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