SOCIAL CONTRACT (Hansard, 2 July 1974)

§ Q1. Mr. William Hamilton
asked the Prime Minister if he will seek a meeting with the TUC to discuss progress made in the implementation of the social compact.

§ Q6. Mr. MacGregor
asked the Prime Minister what recent meetings he has held with the leaders of the TUC.

§ The Prime Minister (Mr. Harold Wilson)
I have had no recent meetings with the TUC on specific subjects and no such meetings are planned at present but, as I have already announced, I shall be taking the chair at the meeting of the NEDC tomorrow. My right hon. Friend the Secretary of State for Employment 206 and other Ministers concerned have been holding detailed discussions with the TUC on the implementation of the social contract.

§ Mr. Hamilton
Is my right hon. Friend aware that his recent statements about the dangers inherent in the threshold agreements will be widely welcomed by those who want to tackle inflation? In view of those statements, however, can he be a little more specific on this point and about what will happen at the end of phase 3? Will he consider making a television broadcast indicating to the British people the extreme seriousness of the economic problems that we are now facing and the importance of implementing in full, in the spirit and in the letter, the social compact with the trade unions?

§ The Prime Minister
While thresholds have not worked out as intended, it is certainly a fact that both the then Government and the then Opposition were in favour of introducing them as a protection. What has happened is that the hopes about world commodity price levels failed to be realised after thresholds were introduced, in a bit of a gamble, by the previous Government last year. The threshold issue raises many difficulties. There will be discussions in the post-stage 3 situation. Of course, the problem is that very many union-employer agreements incorporate thresholds and some do not. But the TUC has made clear—I think that this will be welcomed—that where there have been thresholds one does not get one's thresholds a second time in a subsequent wage agreement.

§ Mr. MacGregor
In view of the Prime Minister's reference over the weekend to the difficulties of even maintaining living standards, when he takes part in these consultations, particularly with the TUC, will he investigate the possibility of using percentage thresholds as the norm for general increases in wages for everyone, as the National Economic Review has suggested, rather than as an addition on top, as the best means of protecting the majority of people from excessive wage rises and of offering some prospect of a slowing-down of the rise in prices?

§ The Prime Minister
The hon. Gentleman will have noticed that the TUC has said that it attaches at this time, in the situation that I was describing, more importance to maintaining protection against 207 increased prices than it does to going for wage increases having no relationship to those prices.

§ Mr. John Ellis
Will my right hon. Friend accept that the myth spread abroad that wages rise and then prices rise as a result has now been completely destroyed? Will he also accept that we now have a situation in which prices rise first and, therefore, wages follow them? What is his real belief about this curious state of affairs? What is the next stage of play after that? Do we not have to control prices, in effect, to control wages?

§ The Prime Minister
I dealt with that matter at considerable length in the speech I made on Sunday. I refer my hon. Friend to that speech. A fair and unbiased approach to this problem would be that over the last year or two it has been prices which have set the pace—partly overseas prices, and partly matters such as the Housing Finance Act and things of that kind. But the danger for 1975 and 1976 is the response of wages to those price levels and the need—as I have said; it was the main point I was urging—for us and other countries to tackle the price question as a matter of urgency, so that we do not get this catch-as-catch-can spiral.

§ Mr. Hugh Fraser
The whole House will be indebted to the hon. Member for Fife, Central (Mr. Hamilton) for drawing attention to the rate of inflation. Will the Prime Minister bear in mind that such is the current rate of inflation in costs to local authorities and such is the increase in the wage bill—as I know from the Socialist-controlled Staffordshire County Council—that unless there is some check or further help from central Government there will be increased precepts in September?

§ The Prime Minister
That is, of course, an important part of a still wider national problem. As the right hon. Member said, there have been increases in wage bills. As a result of local government reform—perhaps this would have happened under any local government reform—there have also been fairly considerable increases in the salaries of some of the principal officers of those areas concerned. However that may be, the total burden falling on the rates is exactly as it was planned by the Con 208 servative Government. Recent arguments have been about the distribution of that burden in different areas.