COUNTER-INFLATION POLICY (Hansard, 12 July 1973)

§ Q1. Mr. Norman Lamont
asked the Prime Minister what plans he has for further meetings with the TUC.

§ Q2. Mr. Adley
asked the Prime Minister if he will make a statement on the progress of his talks with the TUC and CBI.

§ Q14. Mr. Carter
asked the Prime Minister when he next expects to meet the TUC.

§ The Prime Minister (Mr. Edward Heath)
As I told the House on Tuesday, I shall be meeting representatives of the TUC on 27th July and of the CBI on 30th July.

§ Mr. Lamont
Is it not the case that the common interest between the Government and the TUC is in maintaining the rate of economic growth? As more concern has been expressed about the amount of spare capacity available for expansion in the economy, will the Government consider making available publicly, as does the Federal Reserve Board of the United States, regular estimates of the amount of spare capacity in the economy? At the least, as this matter affects confidence, will the Government, particularly in the light of the NEDO report, make fully known precisely what their views are about the amount of spare capacity in the economy?

§ The Prime Minister
I shall consider my hon. Friend's suggestion. We have 1772 already told the House that we have offered to make available to both the TUC and the CBI all the information that we have about the future path of growth in this country. If my hon. Friend thinks that it would be helpful for the Government to consider whether to indicate where there is spare capacity, I am perfectly prepared to have the matter investigated.

§ Mr. Carter
I remind the Prime Minister of two statements that were made in the Conservative election manifesto, "A Better Tomorrow". First, it was said in that manifesto that the Conservatives were utterly opposed to wage control, and, secondly, that inflation was the direct result of devaluation. Given those two statements, how can the Prime Minister and his Government possibly expect to get a reasonable agreement from the trade unions?

§ The Prime Minister
We have had a perfectly reasonable arrangement since last November. We went in detail over the whole of this ground with the TUC and the CBI. We then accepted responsibility for taking the action. There has been co-operation from the employers and from the leaders of most of the unions. I do not see why, in continuing the talks as we are doing, we should not work out a situation that will allow greater cooperation between all concerned and a steady increase in growth. That must be to the interests of the unions just as much as to the rest of the country.

§ Mr. Adley
Has my right hon. Friend seen, published today, a general household survey? Further, has he seen the third leader in The Times this morning entitled, "Britain: a rather comfortable country"? Whilst I recognise that there are selected pockets of hardship which need to respond to selectivity, does not my right hon. Friend agree that the survey shows a picture of a country very different from that which is frequently and vehemently painted by the Opposition? Are not the Opposition, as usual, being thoroughly hypocritical in the way that they are trying to use food prices and other issues to damage the Government?

§ The Prime Minister
I agree that that is the outcome of the survey. It is true 1773 that the Government have done more than any other Government to help specific deprived groups in the community. Nobody can deny that. It is also true that much still remains to be done. That can be achieved only by sustained growth, which we hope to keep at its present rate. It is in the interests of everyone that that Growth should be sustained.

§ Mr. Healey
Will the right hon. Gentleman tell the House how he will justify to the TUC the fact that since last November real wages have been falling although the nation's wealth has been increasing at the rate of 5 per cent. and that profits have been increasing at more than twice that rate?

§ The Prime Minister
If the right hon. Gentleman wants to deal with profits first I can tell him that the TUC has acknowledged—this was part of the structure of the talks—that if the investment which it wants is to be achieved there must be an increase in profitability over the very low levels of the last part of the 1960s. There is no disagreement about this. In any case, profits are controlled under the code, and the code has as one of its key features the firm control of the level of profitability.

§ Mr. Healey
rose—

§ Sir Harmar Nicholls
Is there any way whereby the Government and the TUC can get together to work out a formula that will deal with the situation which sometimes arises at works meetings when people are honestly trying to work out disputes but disruptive elements infiltrate as though they were bona fide employees with a view to upsetting the whole thing?

§ The Prime Minister
There may be difficulties of a particular kind such as my hon. Friend mentions. I think I know the case to which he refers. This is a matter in which those concerned in the factories must be able to use their influence and reach a reasonable understanding.

§ Mr. Healey
On a point of order, Mr. Speaker. You will recall that a moment ago the Prime Minister said that he would first deal with the question why profits had risen—[Interruption.]

§ Mr. Speaker
Order. I was about to call the right hon. Gentleman again for a 1774 supplementary question. The content of an answer is not a matter of order.

§ Mr. Healey
I am grateful. Now that the Prime Minister has purported to explain why profits have been rising at over 30 per cent. will he tell us how he will explain to the TUC that wages have been falling, in real terms, over the past nine months?

§ The Prime Minister
What I will tell the TUC is that with the standstill having extended over the last quarter of 1972 and the first quarter of this year a comparison with the previous six months will show that during the standstill real disposable income rose by 2.1 per cent. That is what I will tell the TUC. I will go on to say that during the first six months of the Labour Government's freeze in 1966 personal disposable income fell by 2.5 per cent. compared with the previous six months. That is the difference between the two standstills.

§ Mr. Harold Wilson
Is the right hon. Gentleman aware that in the 12 months following the Labour Government's four-and-a-half-months' statutory freeze the cost of living index rose by 1.4 per cent.? Is he further aware that during the whole of his six-months' freeze the cost of living rose at 9½ per cent. per annum?

Hon. Members
Answer.

§ The Prime Minister
I will answer all right. I hope that the right hon. Gentleman recognises that the terms of trade during that time remained almost stationary. [Interruption.] The right hon. Gentleman professes to be an economist and statistician, yet he cannot understand the simplest thing about the terms of trade. The terms of trade in that period remained stationary, whereas the Economist index showed that during our period of freeze the cost of raw materials had gone up 70 per cent.