HC Deb 06 March 1973 vol 852 cc238-40

I now come to my second main theme—the attack on inflation.

At the time of the Budget a year ago, we had had a considerable measure of success in moderating the rate of increase of both pay and prices. But by the summer that trend was being sharply reversed, and it was against that background that the Government entered into the tripartite talks with the TUC and the CBI.

The breakdown of those talks made it essential for the Government to take statutory action. By October and November last year both average earnings and hourly wage rates were running 15–17 per cent. above a year earlier and, in spite of the restraint exercised by a large part of British industry, including the nationalised industries, the October retail price index was nearly 8 per cent. above a year previously. The standstill introduced on 6th November was essential to provide a breathing space and to reverse the upward thrust of pay and prices.

The Government's policies for the next stage of the attack on inflation are expressed in the Bill which is now before Parliament and in the Consultative Document on the Price and Pay Code which we debated yesterday.

This Budget is based on the determination that these policies shall succeed: and that success is crucial to all the nation's hopes for steadier prices and rising prosperity.

The country has cause to be grateful for the efforts to restrain prices which most of British industry was already making before the standstill, as a result of the CBI initiative. It may seen onerous that there should now be a further period under which companies are asked to do their utmost to absorb cost increases, with the back-up of a profit margin control. But industry stands to gain with the rest of us from sustained economic growth and the investment which it requires and stimulates. There is no bar whatever to increased earnings either from exports or from the bigger turnover on the home market which growth will make possible. And we certainly have no intention of impeding investment. By making it less easy to pass on increased costs and by asking that the benefits of increasing productivity be passed on in prices, we are reinforcing competition, not working against it.

The objectives of the counter-inflation policy—faster growth, steadier prices and more help for the lower paid and the pensioners—are all common ground between the Government, the TUC and the CBI. I therefore still hope very much that the TUC, as well as the CBI, will join in the wide-ranging consultations on the drafting of the Price and Pay Code. If the TUC cannot see its way to do this, the result will be a loss to the community in general and to its members in particular. I repeat that the Government are ready at any time to resume discussions with the TUC.

It is not given to those involved in public affairs always to form a unanimous view as to what should be done, but I do not think it can be said that we have been unreasonable in our attitude. We have given prority to rapid economic growth. We have held down nationalised industry prices. We have made massive reductions in taxation so as to increase employment. We have already increased old-age pensions proportionately more than ever before. We have provided relief on rents, and relief on rates. [HON. MEMBERS: "Oh."] We have given special help to the low paid. All these are major items of policy where we have taken action in the national interest, and where that action has coincided with the requests and recommendations of the TUC.

Under stage 2, with particular emphasis on the need to improve the position of the lower paid, we are permitting pay increases which would be considered large on any normal reckoning. Of course, I fully realise that intervention in the cycle of pay settlements creates anomalies between different groups. But to have allowed inflation and rising prices to continue without check would have been far more unfair. And we have made it clear that for stage 3, starting this autumn, we shall ask the Pay Board to make recommendations for tackling some of these anomalies.

The Pay Board's inquiries during stage 2 will enable it to get an overall measure of these problems. During this stage it will be expected, on the basis of its knowledge of the whole range of cases, to advise on the ways in which these problems should be dealt with within the framework of stage 3. It will be on the basis of that advice that the Government will consult the two sides of industry and Parliament on the revision of the code for stage 3.

Forward to