§ The Secretary of State for Employment (Mr. Michael Foot)
With permission. Mr. Speaker, I should like to make a statement about the Pay Board's report on London weighting.
The Government have today laid before the House and published the report of the Pay Board on London weighting.
The report was commissioned by the previous administration as an independent examination to advise what changes are required in the basis and operation of the London weighting formula, which was generally adopted on the recommendation of the National Board for Prices and Incomes in 1967. On taking office, the Government decided that it was desirable for this review to be completed and have urged all those concerned to await its outcome.
The Pay Board has taken evidence from many groups and has undertaken detailed surveys. It has concluded—as did the NBPI—that the proper purpose of London weighting is to take account of the different costs of working in London from elsewhere in the country, and that it is applicable only to those in London who have national rates of pay and not to those who adjust their rates of pay to the London labour market. London weighting is, therefore, a solution for a largely 28 public sector problem and should not be paid to those in the private sector who are not in exactly the same position.
With this in mind the board recommends that London weighting should be made as comprehensive as possible to deal with the measurable differences in the costs of working as between London and the rest of the country. It should take account of housing, travel to work and certain other quantifiable costs, for all of which the board suggests what it regards as valid measures. It also sets a value on certain intangibles, such as relative standards of housing. On this basis it suggests that the level of weighting should be raised to £400 for inner London and to £200 for outer London.
By "inner London" the board means an area within four miles of Charing Cross and for the limit of "outer London" it takes the Greater London Council boundary. It would, however, be left to negotiators to decide whether or not to alter these boundaries to suit their circumstances. If they do so, the board envisages that it would distribute the same total sum of money which the Pay Board's boundaries would have produced for the employees concerned.
The levels of weighting suggested by the board are based on information relating to last April, and the board makes no recommendation on the question of retrospection. Looking forward, the board suggests that there should be a simple annual up-dating operative from 1st July each year and relating to costs in the preceding April as published by my Department. There would be a major review of the whole operation of the scheme after three or five years.
The board says that London weighting cannot be designed to help the first-time house purchaser. It sees this as a major but separate problem with which each employer must deal in whatever way the situation merits. Assistance for first-time house purchasers would raise issues for the public sector which the Government will have to consider in the light of the report. There is little doubt, however, that housing is at least as important as pay in many of the labour supply problems of London.
The Government appreciate the clarity and thoroughness of the report's analysis. The board's examination was set in train when statutory pay controls were in full 29 operation, but the recommendations are entirely applicable to a voluntary situation. These recommendations provide a common set of principles by which substantial improvements can be negotiated in the existing rates of London weighting and by which negotiators can arrange for their objective adjustment in the future. The Government regard the report as a most useful contribution to the resolution of this particular problem and believe that the principles proposed should be applied in negotiations on London weighting both in the public sector and by private sector negotiators who are in the same position.
As I have earlier made clear, it is the Government's intention that employers and unions should be free to negotiate on this matter; and the Government are glad to endorse the report as affording guidance by which negotiations on London weighting can now sensibly proceed. If these negotiations lead to settlements before the statutory pay controls are ended, the Government consider that the report provides the exceptional circumstances to enable me to enter into consultation with the Pay Board with a view to using my consent powers to enable implementation.
Although action on London weighting should help to ease labour shortages in the services affected as between London and the rest of the country, I recognise that it is not a complete answer to the special problem of London Transport, on which a strong case was put to me some time ago jointly by the employer and unions. Action on that special situation will need to be taken in the light of the outcome of the current arbitration on London Transport pay.
§ Mr. Prior
The right hon. Gentleman will be aware that the report was produced in response to a request from the Conservative Government. I think that hon. Members, and particularly London Members, recognise the hardship and extreme difficulties with which public service employees have had to contend over the past year or two.
Will the right hon. Gentleman comment on the question of pensions and the Government's attitude to suggestions made in the report? Secondly, are the figures grossed up for tax purposes, as suggested in paragraph 157, because that does not seem to be clear from reading 30 the report? Thirdly, is he aware that it seems extraordinary that the figures for inner and outer London should be so clearly defined as £400 and £200? It is difficult to understand how on earth those figures could have been arrived at with that degree of definiteness. Lastly, will he comment on one matter which is always a difficult matter for the House of Commons but is an important point. I refer to the fact that the figures of £400 and £200 have appeared to be fairly common knowledge over the weekend and were on the BBC one o'clock news programme today. What efforts will he take within his Department to find out where the leak occurred and to make sure that it does not happen again?
§ Mr. Foot
If I may take the right hon. Gentleman's points in the reverse order, let me deal first with the matter of others having anticipated what I have said today. I have read some reports which have guessed right and some which have guessed wrong, but, in view of the ones that guessed right, I agree that I shall need to make some investigations into the matter and see how it may have occurred. The right hon. Gentleman is well aware that this is not a unique development.
As to why there should be such a sharp distinction between inner London and outer London, with £400 recommended for one and £200 for the other, I can understand that this may be thought to be a very sharp distinction, but I invite hon. Members to read the whole report. It is to this conclusion that a lot of the Pay Board's evidence pointed. It will be found in the report and the discussion of these matters how this has arisen.
I think that we are bound to take account of the way in which the board has tried to examine these matters. However, it should be emphasised that the board itself has anticipated the criticism in that it has said that where different boundaries or different divisions might cause difficulty it is open to the negotiators to alter the arrangements and to have a kind of "kitty" system whereby the total amount proposed to be shared amongst the people concerned could be divided in a slightly different way. But that is underwritten by what the Government have said and what I have said in my discussions, that the report is a guideline to what should happen, and that the 31 matter is to be dealt with by free negotiation.
As to whether these figures are grossed up for tax purposes, that is the situation as proposed in the report. It is not an entirely novel principle. It was partly taken into account in the 1967 report, which acted partly on that principle. But perhaps the board on this occasion has acted more deliberately on that principle and is applying its own method of cost comparison, which is the basis of the report itself.
As for pensions, that is a matter which will also be partly open for negotiation, as is indicated in the report.
§ Mr. Guy Barnett
Is my right hon. Friend aware that there are factors affecting public service workers in London, outside transport and housing, which makes it peculiarly unattractive for people to seek employment there? I have in mind particularly the police and teaching. Does the report take into account these factors in assessing the London allowance to make it more attractive?
§ Mr. Foot
The police stand to benefit from the report on the same basis as anyone else to whom London weighting applies. The report makes it clear that specific labour supply problems have to be dealt with by employers and unions and their remedies tailored to different cases. A main strand running through the report is the emphasis that the board is not seeking to apply it to remedy labour shortages. That is a different matter which has to be dealt with in different ways. If the board tried to apply the principle of London weighting to deal with labour shortages, it would get into hopeless difficulties, as would anyone seeking to apply it on that basis.
§ Mr. Pardoe
Is the Secretary of State aware that the problem is largely created by over-centralised wage bargaining and that part of the answer would be for these nationalised industries in the public sector to go over to local or plant bargaining? Can he confirm that it is still the Government's policy to reverse the trend of people and jobs to the South-East, especially to Greater London? Does he think that this report will help reverse that trend or encourage it?
§ Mr. Foot
This report will be no disadvantage to regional policy. I think that it will merely make the situation clear. The matters which the hon. Gentleman raises were taken into account by the board when it made its decision. Representations along those lines were put to it, although, for the reasons which it gives, it generally rejects them.
As for the hon. Gentleman's suggestion that national rates of pay should be abandoned generally as a solution to the problem, that raises far wider questions. I think that London would be furious if we held up these proposals for London weighting in order to secure the strange remedy which the hon. Gentleman proposes. This report seeks to deal with the immediate injustices which occur for many people working in London, and I think that most people in London will welcome it on that account.
§ Mr. Raphael Tuck
Can my right hon. Friend explain why the standardisation of boundaries is regarded by the report as being impracticable? Does he realise that he is using a star instead of a circle so that places just outside the trough of the star may be outside whereas places inside the peak of the star may be inside, with the result that people living 30 miles from London are getting the allowance and others living 25 miles from London are not getting it? Why, for example, does Watford borough come outside the allowance whereas Watford rural, which is further away, comes inside?
§ Mr. Foot
If I could explain that last point immediately, I should be even wiser than I may appear to be at the moment. I cannot explain that problem. But I can say that the whole question of whether the boundaries should be standardised was considered carefully in the report. I believe that one of the reasons why the board did not do it is that, if it had done it, it would have given rise to even greater anomalies. The board has tried to take account of some of the situations which have prevailed in the past—for example, about the inner London boroughs—in making its recommendations. It has also safeguarded the situation by this "kitty" principle which I have mentioned as being one which should be a guide to spread the money wider or in different ways if that is thought desirable by the negotiators. As I have stressed, we believe 33 that negotiators will have to settle some of these questions. That is why we have been so eager that the matter should be restored to a system of free negotiation.
§ Mr. Grylls
Can the Secretary of State elaborate a little on his reply to the hon. Member for Watford (Mr. Tuck)? It is a matter for concern to those living in the inner Home Counties that the border with the GLC is artificial. The costs of housing and other services for such people as teachers, policemen, firemen and others in the public sector are just as severe as for those living in London.
§ Mr. Foot
I appreciate the feelings of hon. Members who represent areas just beyond the GLC boundary or other boundaries not affected by this report. There is a large stretch of the rest of the country which is not affected by the report. That is one of the matters into which the Pay Board was asked to inquire, not merely how to distinguish between what should be done in the GLC area and the neighbouring areas but also how it could make proposals which would be fair to London and to the rest of the country. So these matters have to be taken into account. On the specific matter raised by the hon. Gentleman, the board examined it and came down as I have described, for the reasons which he will see in the report.
§ Mr. Wellbeloved
Is my right hon. Friend aware that there will be widespread disquiet in London at the embodiment of the principle of continuing discrimination against those public servants working in inner London and in outer London? Can my right hon. Friend confirm that it is now open to employers and trade unions freely to negotiate agreements without taking account of that unacceptable discrimination?
§ Mr. Foot
I answer my hon. Friend directly. As I have said two or three times already, it is open to negotiators to vary the proposition along the lines that I have suggested. They need not necessarily be governed by those boundaries. But that would mean that those in inner London might get somewhat less and those in outer London somewhat more.
§ Mr. Foot
The question that is on is negotiation on the basis of these general 34 proposals. I said to all those who came to see me on delegations beforehand that we would act immediately the report came out. I think that we have acted swiftly in making these arrangements on the very day that the report is announced. Negotiations will now take place. Those negotiations are to ascertain how best the report can provide a way to proceed. Both in the report and in what I have said, there is considerable flexibility in the way that the matter can be applied.
§ Mr. Berry
Will the right hon. Gentleman tell us more about the difference between outer and inner London? I do not begrudge the £400 for inner London. The right hon. Gentleman said that one of the criteria was travel to work. He must be aware that it is not half the fare to travel from outer London. Since people in outer London travel long distances, may I ask him to have another look at the matter and consider bringing the £200 much nearer to the £400?
§ Mr. Foot
This is an independent report. The board examined the question posed by the hon. Gentleman. Obviously, it would not have proposed different figures if it had not examined these facts. I suggest that he and other hon. Members should look at the report and study the reasons for these proposals. I repeat that, to guard against some of those difficulties, the board has suggested how the matter can be made more flexible within roughly the same figures. The Government have said that the matter is now for negotiation. We will not for many more weeks be governed by the statutory system, and that will assist the situation. I believe that the report can be used as a valuable guide for settling the matter, taking into account that the sums proposed are to be fair to London and to the rest of the country. London Members must take that into account as well as the rest of the proposals.
§ Mr. Atkinson
Does my right hon. Friend agree that the report bristles with the very anomalies that he assured hon. Members he would do everything possible to avoid? Does he accept that it comes as some disappointment to many hon. Members on this side of the House that he has accepted a report which will perpetuate the differentials in London which are clearly unfair, especially when the whole basis of the report is upon postal 35 districts? Is he aware that he adds to that disappointment if he now says that within a global figure of £289 million, or thereabouts, negotiators can, for instance, shift teachers from one postal district to another to conclude agreements that may possibly iron out these anomalies? Therefore, will he assure the House that whoever negotiates—Burham or the London boroughs themselves—it will be possible for teachers who are working and living in areas like Tottenham to get the same amount as those living further from the centre in, for example, Hampstead when it comes to the final negotiations?
§ Mr. Foot
All those questions can be taken into account in the negotiations. I do not agree that we have accepted all the anomalies and rigidities of the situation. I am sure that my hon. Friend will agree, when he reads the full report, that it overcomes many of those rigidities and anomalies that existed and that the proposals are of a more general character. In the next few weeks we shall be doing away with the statutory controls altogether, and that will greatly ease the situation.
The general figure is not absolutely laid down. However, I think that it ought to be a guide. A London weighting system must be fair to people not only in London but outside London, and that must be taken into account. That consideration figures most prominently in the report.
§ Mr. McCrindle
Does the Secretary of State agree that his acceptance of the report will create additional consternation in the areas just outside Greater London boundaries? Does he recognise that, even on the present differentials, areas such as Brentwood and Ongar are losing teachers, postmen and the like to Greater London? I wonder whether in those circumstances he would suggest that a further inquiry be set up to consider whether an intermediate area should be created between the Greater London boundary and other parts of the country.
§ Mr. Foot
It is impossible to deal with the situation by suggesting that there should be a series of intermediate areas outside the London area. The more that suggestion is advanced, the more it indi 36 cates the problems that would arise for the rest of the country if that were so.
The hon. Gentleman said that there were labour shortage problems in the area just beyond the GLC fringe. Labour shortage problems exist in many other parts of the country, particularly in some of the other big cities. The report is not designed to deal with specific labour shortage problems, as hon. Members will discover when they read it carefully. Indeed, they need not read it carefully; a cursory reading will be sufficient. That is not the principle upon which the report is based. Labour shortage problems must be looked at in a different way, as I indicated in the latter part of my remarks. I invite the House to read the report carefully before judging it. No doubt we shall have a debate on the matter. I am certainly eager that we should do so. When we debate the matter, London Members will be able to put their views and hon. Members representing the rest of the country will be able to put their views as well.
§ Mr. George Cunningham
Does my right hon. Friend accept that the higher the London allowance is placed, the more useful it will be to have two zones, an inner and an outer, to reduce the harshness of the distinction between those in the outer boundary and those completely outside London? Does he also accept that the inner London area proposed by the board is so small compared with the whole of the GLC area that if it were to be spread over the whole of the GLC area the figure that came out would be very close to the lower figure of £200 and very far away from the higher figure of £400?
§ Mr. Foot
I think that my hon. Friend should study the report before he jumps to all those conclusions. The report, in paragraph 129, states:As far as Inner London is concerned we accept that the eight Inner London boroughs should be regarded as broadly equivalent to the 4-mile area.It then goes on to describe how it should be done. Therefore, the House would be well advised to read the report before passing a verdict upon it.
When said bluntly, as I and the board have to say it bluntly, the distinction between inner and outer London appears very sharp and, in a sense, crude. But I believe that hon. Members, when they 37 have read the whole report, seen the safeguards that are proposed for dealing with the situation, and understand the further safeguards which the Government have proposed for dealing with it, will appreciate that the report offers a great advantage to Londoners and that the vast bulk of them will welcome what is proposed.
§ Sir B. Rhys Williams
This decision will make it easier for people living in inner London to meet their rents, which we welcome, though not, it seems, the first-time home buyer. How do the Government propose to make corresponding increases in the supply of accommodation to rent, particularly in the private sector?
§ Mr. Foot
That is a different question which should be put to a different Minister. The hon. Gentleman will understand that the report refers to first-time home buyers roughly in the terms in which I mentioned them in my remarks. Although the board's statement is more elaborate, it makes suggestions which will have to be taken into account by the Government.
§ Mr. Hayhoe
If the "kitty" principle is applied to the teachers and one figure is set for the whole of the London area, may I ask whether the right hon. Gentleman would indicate or estimate what that would come out at? Does it come out at about £260? It would be helpful if he could give an indication.
Secondly, if teachers and others on the boundary negotiated for a single London allowance for the whole area, it would create the absurdity that a teacher working in Hounslow and living in Spelthorne would be paid the allowance, whereas a teacher who lived in my constituency but taught in Spelthorne would not. These difficulties at the margin may create great dissatisfaction, particularly when the allowance has been raised.
§ Mr. Foot
Not being a mathematician or anything of that order, I shall not try to guess the figure, but what the hon. Gentleman said underlines the Government's wisdom in proposing the abolition of statutory control. It means that the negotiations about these matters can take 38 place and be implemented under a system where statutory controls no longer exist.
That is why, right from the first day when delegations of teachers and others—but teachers were prominent—came to see me I asked them to await the publication of the report and said that they would not be bound by the details of it. We hoped that by the time the report was published we would have reached the situation that statutory controls no longer existed. These controls are to be removed within two or three weeks' time, and I look forward to the enthusiastic support of the Opposition in removing them.