PAY BOARD (ABOLITION)

HC Deb 18 July 1974 vol 877 cc693-802

4.58 p.m.

The Secretary of State for Employment (Mr. Michael Foot)

I beg to move, That the Counter-Inflation (Abolition of Pay Board) Order 1974, a draft of which was laid before this House on 9th July, be approved. In view of the lateness of the hour I will seek to abbreviate the remarks I was proposing to address to the House. I am sure nobody will worry about that, but I am sure it is also understood that the Government and the country regard this as an important matter, and, therefore, although we may not have a longer time to discuss it, that does not mean that we do not realise the significance of what we are proposing.

I would say as a preliminary remark that undoubtedly the order for which I am seeking the approval of the House is a complicated one, but it is a complicated order to achieve a simple result. The result is to abolish the Pay Board and restore free, collective bargaining in this country. It is true that the order itself looks much more complicated than that. It is just another example of how the Department of Employment works. It is a Department of few words but very good deeds, and it shows that some things are easier done than said.

We are, therefore, proposing to ask the House to approve it first of all on those grounds. One of the main objections I have always had to the system of the Pay Board and the whole method of the compulsory control of wages is that it takes many essential effective powers away from the House of Commons and away from Departments answerable to the House of Commons, and places those responsibilities in the hands of bureaucratic boards and bureaucratic bodies of one type or another. I have always opposed this operation particularly as it affects decisions about wages partly on those grounds as well as on other, general economic grounds. The experience of the last few months has certainly confirmed my view on that as well as other aspects of the matter.

But it would be ill mannered as well as churlish on my part if I did not pay tribute, despite my objection to the system, to the candour, wisdom and skill with which Sir Derek Figgures and Mr. Derek Robinson and others on the Pay Board have conducted their tasks. Most of the difficulties have derived from the legislation and decisions of the previous Government. [Interruption.] My hon. Friend as Member for Newham, North-West (Mr. Lewis) seems to disagree with me. My hon. Friend and I may have disagreements on certain matters, but I have seen the system from both ends, and it is the system that causes the difficulties.

Mr. Arthur Lewis (Newham, North-West)

Under both Governments the Pay Board refused to take action at any time against well-paid company directors who persistently and regularly increased their pay by thousands of pounds a year.

Mr. Foot

No such cases were brought to my attention. My hon. Friend did not show his usual diligence in that matter.

Mr. Arthur Lewis

My right hon. Friend is wrong. If he asks his right hon. Friend the Prime Minister and the Leader of the Opposition he will find that I took up this matter persistently with all Ministers and that they did nothing about it.

Mr. Foot

I accept my hon. Friend's criticism of everyone but myself. I hope I may proceed on that happy basis.

The Government recognise, and so do I, the seriousness of the economic situation, inflation and rising prices. Naturally enough, many newspapers have contained comments on the figures issued by the Department of Employment and published today concerning the rate of earnings increase, the rate of prices increase and the rate of incomes increase. It is natural that severe comment should be made upon those figures. The country as a whole should consider them seriously.

Mr. J. Bruce-Gardyne (South Angus)

The right hon. Gentleman seems to be leaving the order and going on to the general subject. Before he concludes his remarks, I hope that he will explain what is to happen in cases in which the Pay Board has already exercised its powers to issue restraint orders and companies are in a position of dispute on those orders. Companies need to know.

Mr. Foot

I agree that companies need to know, and my hon. Friend, if he wishes, will deal with such matters at the end of the debate. Some are dealt with in the order. I am not dealing with general subjects that are not directly related to the order. I am dealing with matters which are related to the order, and I hope that the hon. Gentleman will allow me to proceed on that basis.

The background to these events is the general inflationary situation, and everyone is entitled to regard that with the utmost seriousness. The figures on which the headlines in The Times referring to the wages explosion are based have been available for a long time. Those figures were in the Department of Employment on the first day that I arrived there. I am sure that those figures were there when right hon. and hon. Gentlemen opposite vacated the Department of Employment and other Departments of State. I think that everyone understands that when the Government came to office they faced the most inflationary situation which any Government in this country have had to face—other countries have had to face it, too—and it is on that basis that the matter should be considered.

Mr. James Prior (Lowestoft)

Will the right hon. Gentleman explain to the House how the figures which appeared in The Times today could possibly have been available to the outgoing Government last February or March? The figures depend to a certain degree on the operation of the threshold agreements which in turn has depended on the movement of prices since, and, not least, on the effect of the Budget.

Mr. Foot

I am afraid that the right hon. Gentleman has not grasped the point. The forecasts in the Department were just as much available to the right hon. Gentleman and his right hon. Friends when they left office as they were to us when we came in. Those figures took into account the threshold agreement and the estimate of the number of times the threshold agreement would be triggered. In my first speech from the Dispatch Box on 18th March I said that those forecasts in the Department were just as much available to right hon. Gentlemen opposite as they were to me. Those forecasts were in even more alarmist terms than I have said. As I said in my first speech as Secretary of State, those facts were in the Department, and I repeat that now so that the Opposition shall not conduct the debate under any misapprehension.

Mr. Tom Boardman (Leicester, South)

rose—

Mr. Foot

I have already given way several times. If I give way several more times my remarks are bound to take longer.

Mr. Tom Boardman

The right hon. Gentleman referred to the figures given in The Times this morning which showed weekly wage rates over the last two months rising at an annual rate of 42.6 per cent. Is he suggesting that those figures were known to the outgoing Government?

Mr. Foot

The figure of 15 per cent. increase in earnings this year, which is the figure on which The Times bases its estimates, includes the calculations for those two months, and those calculations were included in the forecasts.

The headlines seek to portray that the threshold agreement has suddenly come into operation and upset all the previous calculations. That is not so. The calculations were there on the first day I came into the Department. That gives a somewhat different perspective to the suggestion made in the newspapers about the state of our economic situation. I say this partly to dissipate the mood of panic which is sometimes spread by headlines. If there was a case for panic it was on the first day when the Government took office, and none of the events since has intensified—

Sir Harmar Nicholls (Peterborough)

There is no room for complacency.

Mr. Foot

Of course there is no room for complacency. I said that at the beginning. The hon. Gentleman always takes about five minutes to catch up with what has been said.

Mr. Norman Atkinson (Tottenham)

The week before last I suffered an increase in weight of 2½ lb. If that rate of increase continues, in a few years' time I shall weigh about 6½ tons.

Mr. Cyril Smith (Rochdale)

The hon. Gentleman will have reached my level!

Mr. Atkinson

Based on The Times calculations, if I increase my rate by 2½ lb over that short period, I shall soon be in advance of the hon. Member for Rochdale (Mr. Smith). Will my right hon. Friend confirm that the figures he saw when he came into the Department referred to a phase 3 price explosion of about 17 per cent. or 18 per cent. over the 12 months ending next November?

Mr. Foot

I confirm what my hon. Friend said. He quoted some other figures at Question Time about the reduction in the standard of life that was involved. I would not accept all the figures with which he fortified his argument, but agree with him on his general deduction.

When we came into office we saw the seriousness of the situation, but we were properly committed to the view—everything I have since seen has strengthened it—that one of the steps we must take to deal with the situation was to do away with the statutory controls which were so directly responsible for the smash-up that occurred last winter. That was not the only reason why we were opposed to those controls, because there were also other reasons. We set about seeking to remove the statutory controls, and we said at the beginning that we wished to make as smooth a transition as possible from compulsory controls to a voluntary system. That is what we have been seeking to do.

It is sometimes said in the newspapers that we had not applied our minds to the situation, as if we had suddenly been pushed into the position of having to come forward with proposals. But we carefully considered the best way to go about the matter and I believe that we adopted a wise approach to a difficult problem. One of the objections to a statutory system is that it is difficult to get rid of it. Indeed the moment one gets rid of it there is a danger of an explosion. That is why we approached the matter as we did.

First, we used much more flexibly than did the Conservatives the consent powers in the Counter-Inflation Act. It is not much of a boast to say that we used those powers more flexibly than the Tories did, because they did not use those powers at all. We used them in the case of the miners' strike, which would never have been settled without them. We also used the consent powers in a number of other specific cases, partly on a basis of representations made by Members of Parliament, partly because of what was said by trade unions and employers and partly because of our own examination of the matter. We then came before the House and announced how we were using the consent powers.

We also took steps to see how we could ease the position of several groups of workers who had been most unjustly dealt with and discriminated against in the previous two or three years or longer. We sought to make arrangements for those groups to have special reviews back-dated to the time of the announcement—it will be remembered that two of those groups were the nurses and the teachers—or we made arrangements two or so months ago for special treatment to be given to some other groups, including postmen. It was right that we should take that course because the figures showed that just as the nurses and the teachers had suffered from discrimination, so also had the postmen. We sought to liberate them from the constraints of statutory control, and I am glad to say that a negotiated settlement was reached between the Post Office and the postmen.

There are some other groups which we had to take into account to deal with different situations. One group was the rail and London Transport workers. The Government have already recognised that a solution must be found to the exceptional pay problems of London Transport and British Rail—problems inherited from a period of statutory control. It was not possible to resolve those difficult issues while arbitration proceedings were going on. We could not interfere with the arbitration procedure; its having been agreed, we could not say that we would discount it or abandon it. It was not possible to resolve difficult issues while arbitration proceedings were taking place. As soon as those proceedings have been settled, however, the case will need to be considered as part of the Government's transition from statutory controls to the voluntary arrangements which I have outlined.

The Government can see no reason to prevent British Rail and its unions from reaching agreement as soon as the statutory controls are lifted in the light of the arbitration on pay restructuring. Similarly, there will be no obstacles in the way of London Transport implementing its nine-point plan. London Transport has been one of the subjects with which the Minister for Transport and myself have been especially concerned. We have listened to the case put most strongly to us by both employers and unions. On that basis we believe that an early settlement can be reached, and I believe that it will greatly assist in dealing with this special aspect of the problem. I put that in the category of the cases which it was necessary for us to deal with before we reached the operation of a social contract, to which I shall come shortly, and the general understandings which feature in that contract.

Sir Harmar Nicholls

Is not the real meaning of what the Secretary of State is saying that the "big boys" get the cash and the little people, such as nurses, get promises?

Mr. Foot

No. The hon. Gentleman must not talk in that way because he might mislead people outside the House. We in this House know what value to place on his words, but somebody outside the House might take him seriously. The misrepresentation by the hon. Gentleman must be put right at once because it might cause misunderstandings outside. So far from its being the case that the Government have merely given promises to the teachers or the nurses, it was agreed at the time when we made the announcement of the review that it should be back-dated to the date of the announcement. Therefore, anybody who believed the hon. Gentleman would be misled. I hope that nobody will be misled.

It was surely a reasonable way for us to proceed, in preparing for the change-over from one system to the other, to seek to ensure as best we could that some of the cases which had to be dealt with most urgently—some involving groups of workers who had suffered severely because of the operation of statutory controls—should be dealt with before we came to the next period, to which I shall come in a moment.

We also made preparations in a different sense. We believed it necessary to have two institutions alongside the social contract which would assist us in carrying through the proper conduct of these affairs once we got to the voluntary system. Therefore we took steps to establish, as we said in our manifesto, a conciliation and arbitration service on which we have had consultation with the TUC and the CBI. That service will be managed and developed by an independent council, including representatives of the TUC and the CBI. It will provide conciliation and arbitration services which are freely and readily available both nationally and locally and it will seek to develop and improve effective bargaining machinery.

Both the TUC and the CBI have welcomed the creation of the service and have agreed to give it their full support. Arrangements for its establishment are well advanced and the Government aim to have it in full operation by 1st September, under the chairmanship of Mr. J. E. Mortimer, who is currently Industrial Relations Member of the London Transport Executive and a former official of the draughtsmen's union. We are grateful to Mr. Mortimer for taking on this task and I am sure he will approach it with enthusiasm. I believe that this institution will be able to make a growing contribution to industrial peace, and I hope the House will welcome that appointment and the establishment of a service which, I emphasise, has been welcomed by the TUC and the CBI.

Another institution which we are setting up, as also we have stated in our manifesto, is the Royal Commission on the Distribution of Income and Wealth. The Royal Commission has a different rôle from that of the conciliation and arbitration service. The Government are determined to help to create a fairer society, and as a first step towards this we need to establish in a more thorough and comprehensive way than has been attempted hitherto the facts about the distribution of incomes and wealth of all kinds, earned and unearned. The Government envisage the Royal Commission ranging over the whole field, on the basis of references made to it by the Government, and producing reports of a factual nature which will assist and inform policy-makers and those who are active in collective bargaining.

The commission is to be established as proposed in the consultative document issued on 10th June, with the following basic terms of reference: To inquire into, and to report on, such matters concerning the distribution of personal incomes, both earned and unearned, and wealth as may be referred to it by the Government. The chairman will be Lord Diamond, who will be giving up his position as Deputy Chairman of Committees in another place to take on this task. The commission will begin its work by the end of July, and it is intended that it shall have a standing reference to inquire into the distribution of personal incomes. The terms of this standing reference are published today in draft to enable those interested to comment upon them by the end of the month.

We propose to ask the commission to undertake an analysis of the current distribution of income and wealth and of available information on past trends in that distribution, and we say that we would welcome an initial report on this as early as possible during the first year of the commission's operation and subsequent reports from time to time. I am sure that the House will welcome the readiness of Lord Diamond to undertake this task. I hope people will understand that this commission will be covering a field which in many respects has not been covered at all before, or at any rate has not been covered in anything like the way it should have been.

Although I was not especially in need of support from other quarters, I was happy to see the statement made in The Times in an article by Mr. Paul Routledge, the excellent industrial correspondent of The Times, last Friday. He was not referring specifically to the Royal Commission, but these words have considerable social significance, and they are his words, not mine: By comparison with the surgical dissection that academics have brought to bear on the condition of the poor, the well-off have been ignored. There have probably been no more than half a dozen serious research efforts in this field in the past decade. Perhaps it is not altogether surprising. The chief characteristic of wealth is reticence. If I have done nothing else in the Department of Employment, if I can overcome the bashfulness of the rich I shall be satisfied. I am sure that the commission will assist in that respect, although of course it will cover a wider area than that.

One matter which I hope will be investigated very soon—I do not say that action should wait upon investigation—is one which hon. Members will have read about in the past few days, the report of the Low Pay Unit. In our belief it is a most important document. It is one which will be examined very carefully in the Department since it fits in with one of the essential paragraphs in the social contract document published by the TUC. So there is no conflict between the desire of the TUC to approach this matter and those who have prepared this valuable report of the Low Pay Unit.

I think that the Royal Commission on the Distribution of Income and Wealth will provide the country with much fuller information on all the matters than we have had before. I believe that this institution can play an important part in helping us to deal with these problems.

Much the most important aspect of the preparations which the Government have made for the change-over from the previous system to the system which will prevail if the order is passed is the discussions that we have had with the TUC and the publication by the TUC of its statement on the social contract. That is a statement not devised by the Government. It is one which the TUC itself has put forward and which it believes to be in the interests of the trade unions themselves.

In that document the TUC has given guidance to negotiators about how they should approach wage settlements. That is one essential part of the document. Along with it there are many other aspects of the social contract statement to which I wish to draw the attention of the House and the country. There are its references to equal pay, to the low paid, to the restoration of collective bargaining generally and, of course, to the form in which negotiation should take place over the next 12 months. That is a matter of paramount importance in its document. But these other matters have also to be taken along with it. I believe that the more people read the whole document, the more they will see that it is a constructive effort by the trade unions to approach the matter in the interests of trade unions but that it is also a document which takes full recognition of the national interest. It is in that spirit that this House should approach it.

Mr. Timothy Raison (Aylesbury)

Are the Government a party to the social contract?

Mr. Foot

If the hon. Member for Aylesbury (Mr. Raison) reads the document and the others which have been issued on the matter, I presume that he will understand it better. He will then be able to see how the document issued by the TUC on 26th June and the one it issued earlier on the 11th April are part of a continuing partnership between the Government and the trade unions carrying into practical action what we discussed before the General Election.

We had discussions before the General Election of what measures the Government would take to try to assist in the situation and what kind of measures the TUC would take in response to those measures. The document issued by the TUC on 26th June indicates how we have made progress in that direction and how we can make further progress over the coming months.

Right hon. and hon. Members may say that it will be difficult to carry out. Many excellent things in the world are difficult to carry out. But I hope that they will not deride the document. If they do, I hope that they will say how they expect to deal with our national affairs better by returning to the statutory system.

Mr. Churchill (Stretford)

Can the right hon. Gentleman explain why the Government have never issued a document giving their side of the understanding of the so-called social contract? In that respect, can the right hon. Gentleman also advise the House, if the TUC General Council statement on this matter represents Government policy, when the TUC took over issuing statements on behalf of the Government?

Mr. Foot

It is not the case that the statement by the TUC is a statement of Government policy. It is a statement of attitudes to negotiations and other matters by the TUC which is greatly welcomed by this Government and which I believe would be greatly welcomed by any intelligent Government.

As for right hon. and hon. Members asking what is the Government's attitude to it, we have on a number of occasions said that we welcomed particularly parts of the statement and the whole atmosphere and spirit of it. We believe that it can play an essential part in the conduct of the economy of the country for years ahead. All that has been made quite plain. There is no mystery about it. If the hon. Member for Stretford (Mr. Churchill) read fewer of the slogans and headlines perpetuated by his leaders, he might understand the position a little better.

Before I say any more about that, however, let me come to the Liberal Party. Hon. Members on the Liberal bench look a little neglected. I never like to neglect them. I am not sure whether the Liberal Party has abandoned its views about compulsory wage control. It has previously taken strong views on the subject. One of the things which have interested me at my Department has been representations received from different members of the Liberal Party on the question of statutory controls. They were perfectly entitled to raise individual matters with me, and they did so with their customary courtesy.

I shall quote one or two examples. I will not refer to cases of individual firms. That might in certain circumstances—not always—be invidious. I wish to give an indication of the feeling of hon. Members opposite on these matters, particularly the feeling among Liberal Members, whom I previously suspected of being in favour of maintenance of compulsory controls and who even supported the controls introduced by the previous Government in certain respects.

The right hon. Member for Orkney and Shetland (Mr. Grimond) wrote to me to put the case of one group of firms. He concluded his letter: May I finish by saying that I realise it is quite absurd that you should be troubled by this sort of case but I am afraid it is the inevitable result of the extraordinary machinery devised by the last Government. I am glad to welcome that view from the right hon. Gentleman. As he will know, even prior to his representation we had in the Department taken special steps to give consent to another group of firms operating in the Shetlands. We came to the view that if we did not give those firms special consent for them to be able to escape the compulsory controls, the whole life of the Shetlands and the Orkneys might be strangled. We took action both by giving that consent and by drawing up our proposals which we are dealing with today to abolish the Pay Board. Once restrictions have been removed, the firm to which the right hon. Gentleman referred will be able to negotiate and we hope that by what we are proposing full assistance will be brought to his constituency.

If the Liberal Party, particularly the right hon. Gentleman, thought of voting against us in the Lobby—I am sure that such an evil thought has never crossed the right hon. Gentleman's mind—it would be the basest act of ingratitude since the afflictions King Lear had to suffer.

Mr. J. Grimond (Orkney and Shetland)

The right hon. Gentleman has talked about important correspondence which I exchanged with him, but I hope he does not give the impression that I was ever in favour of the policy which he is now abolishing.

Mr. Foot

I am glad to have that assurance. If I am King Lear, the right hon. Gentleman has given a good impression of Cordelia. What about the Gonerils and Regans who are on that bench?

The hon. Member for Cornwall, North (Mr. Pardoe) is a great champion of a compulsory wage policy. He wrote to me on behalf of the china clay workers of Cornwall. It is because of our policy, not his, that they are getting a wage increase. We had to have a special consent in their case as well.

The hon. Member for Rochdale (Mr. Smith) also wrote to me and said that we ought to abandon the pay controls in order to deal with the engineering dispute. We were able to deal with that without using that method.

Mr. Cyril Smith

I appear to be the only Member to whom the right hon. Gentleman has not extended the courtesy of saving that he would be referring to me in the debate. My colleagues were informed this morning that he would be referring to them. Nevertheless I accept his apology in advance. I ask him to re-read the correspondence I sent to him regarding the engineers' dispute. He will find that I stated specifically that I was not expressing a personal opinion but was merely conveying to him the opinion of a man who employed 40,000 people in the engineering industry. If the right hon. Gentleman is to quote hon. Members in this way, it is important that he makes clear whether he is quoting their views or other people's views which Members have merely passed on to him.

Mr. Foot

I am sorry if I did not inform the hon. Gentleman that I would be referring to him. As I was looking along the Liberal bench I thought that he might be aggrieved if I left him out, so I brought him into the debate.

The hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steele) also wrote to me. He has a special case, like the hon. Member for Cornwall, North. He says that low wages are especially severe in his constituency. But the hon. Member for Cornwall, North He says that they are especially severe in his. The hon. and learned Member for Montgomery (Mr. Hooson), who is not here at the moment, says that low wages are especially severe in his constituency. Therefore, I take it that the Liberals are in favour of compulsory wage control in all parts of the country, except in their constituencies.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

The right hon. Gentleman will want to be fair. If he re-reads my letters to him he will see that both of them contained the statement that was my party's view—a view which we put during the passage of the Counter-Inflation Act—that any statutory prices and incomes policy which was an effective means of achieving social justice must take account of the different levels of wages in different parts of the country. We criticised the policy of the previous Government because it failed to try to raise the level of wages in low-paid areas. We have supported that objective and still support it under the present Government

Mr. Foot

I am glad that I have the whole Liberal Party united, although I am not sure about the hon. Member for Woolwich, East (Mr. Mayhew). He joined the Liberal Party on the misinformation that that party was still in favour of compulsory wage controls. Perhaps he had better cross the Floor again before he discovers his mistake.

Mr. John Pardoe (Cornwall, North)

Since the right hon. Gentleman has mentioned King Lear, Cordelia and the rest, it would be appropriate to say that he is in danger of playing the fool. He may be aware that when the Counter-Inflation Bill was being considered I sought to move two amendments, one specifically to exempt persons with low incomes and the other specifically to exempt persons working in development areas. Therefore, he is more right than he knows when he says that I was exempting my own constituency. I still believe in statutory pay control—though not the sort which the right hon. Gentleman is now abolishing—and so will he when next June wages are rising by 40 per cent. and there is no other answer than to allow unemployment to rise to 2 million.

Mr. Foot

We do not accept the solutions suggested by the hon. Gentleman, but we do not have to quarrel on such a happy occasion because the Liberal Party is not apparently going to vote against the order.

I turn now to the official Opposition. A few months ago they insisted on the maintenance of legal backing for a wages policy. They put down a motion about that for the debate on the Queen's Speech. What is the attitude of the Opposition? They have made charges against the Government generally and against me in particular. They have said that our policy, the social contract and the rest is merely a policy of giving in to the unions. That is the charge they make. No one makes it more frequently than the Leader of the Opposition. He generally makes it at Conservative women's fetes, which is not exactly the place where he might expect to be challenged. Perhaps his audiences at the fetes have not studied the question in detail.

The right hon. Gentleman says that we have given in to the unions. Let us just see. He has frequently said it outside the House, and I dare say that some of his colleagues are still trying to say it. Let us see what is the basis for this case. The Leader of the Opposition started by saying that we had given in to the miners. He repeated that accusation in the country the other day. He said that we gave the miners all they wanted and then some, and he said that the strike had been settled by a blank cheque. That is quite untrue. The Conservatives would know that it is untrue if they would only consult the people who engaged in the negotiations—the people at the National Coal Board. They do not have to take it from the miners, although the miners happen to know what goes on and the Leader of the Opposition and his colleagues do not. The Miners' strike was settled by a sensible and fair negotiation not by a surrender.

Let me take another major case. These are not trivial examples; after all, the miners' strike was a big affair. Take engineers. Is that a major case or not? Did we surrender to the unions in the case of the engineers? That is the general charge, remember—that we are giving in to the unions all the time. Do the Opposition say that there was any surrender by one side or the other in the engineering dispute? Nothing of the sort occurred. There again, there was a sensible negotiation between two sides. The engineering employers do not say that the unions surrendered, nor have the unions said that the employers surrendered. They came to a sensible agreement after sensible negotiations.

Yet we hear all these wild tales of how the Government have surrendered. What the Government have done and what we are doing even more with this order is to prepare the way for sensible collective bargaining. We believe that that is much the best way to try to avoid both the dangers of mass unemployment and the dangers of confrontation and smash-up which we had under the statutory policy and the policies of the Conservative Party.

When the Leader of the Opposition parades around the country talking of industrial relations solely in terms of surrender, capitulation and battles, we know that that is what he wants—or that that is where he would land us. That is what he thinks industrial relations are about. We say that they are about something quite different. They are about conciliation, about restoring the authority of some forms of arbitration and about trying to get away from talk of surrender, particularly when, as in the case of the two strongest unions in the country—the miners and the engineers—there was no question of surrender. No one who knows anything about those negotiations could make that charge and sustain it.

I do not suppose that the Leader of the Opposition has much influence in the country now, but when he goes about saying that it is all a battle and that there has been a surrender he is putting us back to those old terms. That is where the Conservative Party would take us back if we let it do so. We should soon be back in the days of February and the bleakness of last winter if we allowed that to go on. We should soon be back in the situation that we remember, the days of Lancaster House and confrontations, with people marching in and out of Downing Street saying "The clash is coming," back to the three-day week and threats of that nature. Then, as the country waited with bated breath, no doubt the Conservatives would call sudden meetings to decide what to do and the answer we would hear would be that they had called in Lord Carrington and had been fools enough to take his advice. That is what would happen again under their methods of dealing with these problems.

We are trying to find a different way of doing it. We do not say that there is any simple course. We do not say that there is any single way of dealing with inflation. But we do say that it has to be approached by a whole series of different methods. We say that this return to collective bargaining is one part of it, that the establishment of a conciliation and arbitration service is another part, that proper communication with and information from the Royal Commission on the Distribution of Income and Wealth will be another part and that the policies which the Government follow in their approaches to rents and the rest are still another part. These are the ways in which we can try to tackle the problem.

We think that that is much better than the talk of coalitions. The last time this country saw a coalition in peace time, in 1931, we had the worst Government that we have known this century. That was how we got a coalition policy and, although they did not devise statutory means of doing it then, it was a policy very much based on the real plank which apparently binds the Opposition coalition parties together now—unless we have sundered them this afternoon. That is the policy of which an essential part is the compulsory and rigid control of wages.

I say that that policy has collapsed. It collapsed in February and we as a Government say that we will not return to that policy. That is why we have said not merely that we will carry through the order but that we will not return to a freeze, we will not return to the compulsory control of wages. We have given that undertaking.

When hon. Members are making up their minds about how to vote tonight—if they vote against the order they will be voting for the maintenance of compulsory controls of that nature—[HON. MEMBERS: "No."]—yes, they will—perhaps they had better consult their CBI friends to see what they think. In all our discussions with the CBI, they did not dare to suggest that we could possibly continue with the compulsory control of wages, particularly in the bureaucratic and anti-parliamentary form in which it was devised by the Conservative Party.

Therefore, what this House does today, despite all the difficulties, despite all the problems that the nation faces, is an essential part of ensuring that the social contract shall have a chance to succeed. The abolition of compulsory controls on wages is an essential part of the social contract and tonight we shall see either whether the Opposition have abandoned the policies which led to such a collapse in February or whether they are determined to persist in that course. These are some of the issues on which the election will be fought.

5.38 p.m.

Mr. James Prior (Lowestoft)

The Secretary of State for Employment began his speech on a serious note and I thought that we might hear from him a speech in which he really dealt with the serious issues that we have to face. I find the right hon. Gentleman an engaging man. He still makes exactly the same speeches from the Dispatch Box as he used to make when he sat below the Gangway.

Mr. Arthur Lewis

No U-turns.

Mr. Prior

The difficulty about the right hon. Gentleman is that he forgets that he is now a Minister and that he has a responsibility which he is not carrying out. I wish that he would spend a little less time trying to decide how he is to share out the money which the rich supposedly have left and perhaps a little more time describing how our economy and our society can create more wealth. That is the only way in which we shall overcome our problems. When he makes snide remarks and cheap asides about that section of society that is creating all the wealth, he would do well to remember that the top rate of tax introduced by his Government on investment income is now 98 per cent.

Mr. William Hamilton (Fife, Central)

Poor things.

Mr. Prior

The right hon. Gentleman began his speech on the basis of the serious situation the country faces. We have had another reminder this afternoon of the way in which unemployment is starting to rise. We know the situation of inflation, and now this is being added to by higher unemployment. It is therefore right that the House should adopt a sober mood in discussing the issues before us today.

The order before the House is designed to do two things. First, it abolishes the Pay Board. Second, it abolishes the power provided by the Counter-Inflation Act 1973 to create a Pay Board. Along with this power there falls the power also to devise a code for the guidance of the Pay Board and for the practical guidance of those concerned in decisions about pay, and the power to make general references to the Pay Board on questions of remuneration.

This order is a wholly negative piece of legislation. It is negative not merely in the sense that it abolishes existing machinery without putting anything new or better in its place, but negative also in the deeper sense that it sets this country a good deal back while on its journey towards a fair and rational way of dealing with the problem of inflation.

As the right hon. Gentleman spent so much time discussing nurses and teachers he might for a moment have borne in mind that the real problem about the pay of nurses, teachers and many other sections of society that have fallen behind in recent years—not just in the lifetime of the previous Government but Govern- ments prior to them—arose because of the power of some people and some sections of society to get out of the economy, by certain means, wages which other sections were not able to get out of it because they were not prepared to take the sort of action that others took.

Looking back on the whole period since the war we can see the problems the nation has had in devising a system which maintained full employment and yet, at the same time, did not give rise to high rates of inflation. We can go back even to the 1944 White Paper on employment policy, which stated: Action taken by Government to maintain expenditure will be fruitless unless wages and prices are kept reasonably stable. This is of vital importance to any employment policy, and must be clearly understood by all sections of the public. If we are to operate with success a policy for maintaining a high and stable level of employment, it will be essential that employers and workers should exercise moderation in wage matters so that increased expenditure … may go to increase the volume of employment. Before the war we had 2 million or 3 million unemployed and reasonably steady prices. Since the war we have had full employment but a degree of inflation. In terms of human happiness, dignity and social progress, the decision we have made as a country since the war has been right. But inflation has now become an avalanche. It is worse here than in most other countries.

Mr. E. Fernyhough (Jarrow)

I wonder how the argument that the right hon. Gentleman is presenting to the House applies in respect of Italy. Italy has had the unemployment and, likewise, the inflation.

Mr. Prior

But Italy also, until recently, had a far higher rate of growth in her economy than we did, and Italy had no more inflation than we had. I do not think that the experience of Italy in any way changes one iota what has happened and what I have been describing.

We are now in danger of the worst of both worlds. We are in danger of having very high inflation and recession leading to high unemployment at the same time. To reflate in such circumstances can itself lead to further unemployment. High inflation: high unemployment. That is a recipe which the right hon. Gentleman did not deal with at all in his speech. It is a recipe for authoritarian government and controls and loss of freedom such as we should all detest. The public have not yet understood that, although they suspect that much is wrong. We in this House have a duty to point it out. It was a great pity that the right hon. Gentleman did not delve a bit deeper in his speech to point out some of the dangers which the nation faces if it continues on its present course.

The whole post-war period has seen a set of variations on the theme of the twin pressures of full employment and of demand inflation on the economy. During this period there have been many shifts of emphasis in Government policy as between the various objectives of growth, price stability, full employment, the maintenance of the exchange rate and the maintenance of a satisfactory balance of payments. A great variety of expedients has been tried.

In respect of incomes policy there is no need for me to go over again the long story of wage restraint, guiding lights, norms and gateways. These are all familiar to us, and we shall always return to them because their story reflects the inescapable fact that, as a nation we simply cannot pay ourselves more than we earn; that as a nation we are obliged to find a way of balancing our incomes with our earnings, or we face dire consequences. The country must be brought to recognise this fact.

I think that we in the House, for the most part, do recognise this fact. While we may each give a different weight to each of the various factors which give rise to inflation, we all agree that the rate of growth of incomes is a factor of primary importance. The Prime Minister once described, in a well-known epigram, one man's pay rise as another man's price rise. I think that we also know today that one man's pay rise may be another man's job.

We all have the same objectives: full employment and growth without inflation. We share the same analysis: that we cannot sustain growth and full employment or avoid inflation unless we can find a way as a nation of limiting the growth of incomes to what we can afford. The only thing that is lacking is agreement on the methods and instruments by which those shared objectives are to be pursued and that common analysis implemented.

We should much prefer, for many reasons, a voluntary system. It keeps the Government out of it. It avoids distortions. It is true to the spirit and philosophy of the Conservative Party. I tell the right hon. Gentleman that we got no joy in those last two years of having people in and out of No. 10 and the Departments of Whitehall. We should much have preferred to try to do it another way. In an ideal world the voluntary system is the only possible course one would adopt. But it requires a balance of power within the bargaining process which has not been noticeably present in recent years. We talk about free collective bargaining, but how free is it, and how much of a bargain is it nowadays with the monopoly power of trade unions?

Hon. Members

Nonsense.

Mr. Arthur Lewis

And company directors.

Mr. Prior

It is all very well for hon. Members to say "Nonsense ", but the whole country knows the power that certain unions are able to exercise. Anyone in government knows it. One does not have to be in government more than five minutes to know it—or if one is in government and does not know it, one ought not to be in government. There is wide agreement in the country as a whole for this view. Many people would rather have some form of incomes control than a significant rise in unemployment.

As one looks back on the history of inflation and incomes policy one finds that there has also been a wide divergency and discontinuity in the policies and institutions we have adopted as controls. I have always thought that the right hon. Member for Birmingham, Stechford (Mr. Jenkins) was right in his 1969 Budget, because at that time he suggested that what we needed to do was to abolish incomes policy and accept instead some reform of industrial relations which could be substituted for it. That was the whole basis in 1969 of getting rid of incomes control and having the "In Place of Strife" legislation.

We pursued that view in 1970. We thought that was right and was the best way to do it. It would have left free collective bargaining, but within a framework of law which trade unions would have to follow. I still believe that that would have provided the country with by far the best answer. That was one of the reasons why we were convinced that the right thing to do was to get rid of the National Board for Prices and Incomes. But I do not believe that we can go on changing institutions and bodies every time there is a change of Government. It is that which is doing so much harm to confidence in our economy.

We have heard from the Secretary of State today that we are now to have the CAS under Mr. Mortimer, whom we wish well, and the Royal Commission on incomes distribution under Lord Diamond. We are to have another two bodies that will do very much what the Pay Board in one form or another could have done and could even do now, and what the Prices and Incomes Board before that could have done. There is no points in this constant switching and changing of our institutions. The British are creatures of habit, and it would be better for them to become used to one institution. We could change its rules a bit and even change its members.

I do not suppose that anyone on my side of the House would particularly want to see the Pay Board with Sir Frank Figgures and Mr. Derek Robinson still there. That is a matter about which there would be some divergence of view. My own view is that in many respects the Pay Board did extremely good work. It has built up a certain expertise, and it is a mistake to get rid of it. The board could live with a voluntary policy. When my right hon. Friend designed the Counter-Inflation Act he did it in such a way that the board could operate within a voluntary policy. I believe that to be by far the best way.

Mr. Foot

I hope the right hon. Gentleman will not compare the two institutions he mentioned with the Pay Board. Whatever may be the virtues of one or the other, the Pay Board was backed with sanctions and even the criminal law. It could operate without reference to Parliament. It was a quite different kind of institution from either of the bodies we are seeking to establish, neither of which challenges the power of Parliament and neither of which is equipped with the threat of legal and criminal sanctions.

Mr. Prior

The right hon. Gentleman does not know. There is no reason why the Pay Board should not be continued in existence as an independent body monitoring the progress of the social compact and expanding its advisory function under Schedule 1 to the Counter-Inflation Act. For example, it would be possible, if we wanted it to do so, for the board to monitor the progress of the social compact. That might be a rather satisfactory job. I have a great deal more reliance on the board's monitoring it than the right hon. Gentleman's doing so.

Mr. Bruce-Gardyne

It may be of consequence to mention that the last occasion when we experienced an appreciable deceleration in the rate of increase in unit labour costs, from 11 per cent. to just over 6 per cent., between 1971 and 1972, came at the end of a period of three years when we had not had any such institutions.

Mr. Prior

My hon. Friend must also recognise that by the summer of 1972 the situation had drastically changed. By August-September 1972 wages were rising at a rate of 16 per cent. year on year, and unit costs were not falling to anything like the extent to which they had fallen in the earlier period. When I think back to a time when wages were rising at 16 per cent. a year, remembering how serious we thought that was and comparing it with the way in which wages are rising now, I am even more dismayed by the Government's attitude.

I believe that no one will pretend that as a system of incomes restraint the social compact is so sure of success that we need not bother to think about alternative or additional approaches to dealing with the problem of inflation. We all hope that the social compact will succeed, but we must all have very much in mind the possibility of its failing and the consequent development of the runaway inflation of which the Chancellor of the Exchequer spoke at Durham last month.

Before I come to that speech, I should like to say to the TUC that I hope it will do its best to apply to the non-conformers with the social compact sanctions as tough as it did to those unions which chose to register under the Industrial Relations Act. I shall regard that as an indication of not only its desire but its determination to make the social compact work.

The Chancellor said at Durham: There are at least some signs that the price of our imported raw materials may level off in the months ahead. So what happens to wages is the key to controlling inflation in the coming year. The right hon. Gentleman said that on 1st June. Two days later Mr. David Basnett, General Secretary of the General and Municipal Workers' Union, remarked that if the Government were saying that wage costs were the major cause of inflation, they were not saying that during the election. We all remember that.

I come to the seriousness of the situation. Here I should like to quote from a leading article in The Times this morning headed "The Wages Explosion". It says: It was firmly implied that the return of a Labour government, committed to such a compact, would cause organised labour to reduce its wage demands during 1974 and beyond. Cynics and economic forecasters were, for the most part, prepared to count very little for credit from this policy. And they are rapidly being proved right. We are now already in a phase where rises in wage costs are taking over from rises in the price of oil and other imported commodities as the main engine of inflation. The Economist has said: Other wage claims and post-stage-three settlements are soaring far beyond reason. British Rail, the Post Office and London Transport have already conceded wage increases of about 30 per cent. for the autumn. In private industry, electrical contractors are to get 40 per cent., oil tanker drivers between 25 per cent. and 30 per cent., and Imperial Chemical Industries has offered its workers between 19 per cent. and 27 per cent. If pay controls are abandoned before the election there will be an avalanche of increases". That is a quotation from the Economist.

Mr. Foot

I know that it is a quotation from the Economist. That does not sustain its validity. First, I do not accept all those figures. Secondly, some of the settlements that have been lumped together should be separated, for the reasons I have given before. They are separated in the understanding of the TUC and the social contract, for the reasons I gave—particularly the British Rail and Post Office settlements.

Mr. Prior

That does not add up in economic terms. The right hon. Gentleman is saying, in other words, that the social compact begins when one wants it to begin, but not until then. Therefore, people can have a big increase before it begins, and that does not count. It may make some political sense to the right hon. Gentleman but it does not make economic sense to the rest of the country.

Mr. Foot

Perhaps the right 'Ion. Gentleman should think it over a bit more carefully. His leader chose to pretend that the Conservative Government had a system for selecting some of the people who should be allowed to catch up because they had fallen so far behind. What we have done is to allow the nurses, the teachers, the postmen and the railway-men to have increases on that basis. Is the right hon. Gentleman in favour of the nurses having their review or not?

Mr. Prior

That is not the point. The chemical workers, Shell tanker drivers and almost everyone else in the economy are getting such increases. The right hon. Gentleman knows that the matter is not confined to the nurses or the teachers. It goes much wider than that. He should face the facts of life. There are two sides to the social compact—

Mr. Atkinson

We must start trying to understand some of the things that are now happening to wage movements. The Times does not help when it refers to percentages. A percentage itself is irrelevant in economic terms. If we talk about 20 per cent. or 30 per cent. of nothing, that will not have much impact on the economy or the level of demand. If we talk about a board of directors which receives enormous remuneration and whose members receive a 20 per cent. increase, that obviously will raise the level of demand considerably. The use of arithmetical sums of that kind in terms of percentages is valid only when wages are compared with prices. If the right hon. Gentleman wants to talk about the level of demand, which has decreased in the third period of the previous Government's wages policy, he should talk about the total sums involved and not the percentages.

Mr. Prior

The trouble with the hon. Member for Tottenham (Mr. Atkinson) is that he is trying to put his head in the sand so as not to recognise what is going on. Some of the people in his union whom he supports are those who will suffer enormously over the coming months as a result of the high rate of inflation, which might be said to be an induced rate, for which many Labour Members must take some responsibility.

There are two sides to the social compact—namely, that of the Government and that of the trade unions. The retention of the Pay Board and the Government's powers over incomes under the Counter-Inflation Act bears on the position of both parties. As long as there is any doubt about the social compact achieving the purpose for which it was designed, the Government cannot be justified in casting aside their existing reserve powers. Just as when all efforts to achieve a voluntary policy broke down in the autumn of 1972 it was right to introduce a statutory policy, so now, when the Government believe that a voluntary policy may have a chance of success—that is a belief which is shared by the TUC and parts of the CBI—it may well be right to put the statutory powers on the back burner. I believe that to discard them entirely must be a great mistake.

When the right hon. Gentleman and his party came to office—he mentioned this today—he told us that certain figures were available to them. He talked about figures but in fact they were estimates which have since changed considerably. They have changed partly as a result of the Chancellor of the Exchequer's Budget and partly as a result of the much laxer policy that the right hon. Gentleman has adopted towards wage settlements.

I would be the first to admit that the situation was serious. The first thing that happened was that the miners broke through the pay policy. The Government settled with them on any terms. The right hon. Gentleman has said "We just sent the National Coal Board and the NUM away to settle and they made an agreement amongst themselves." Does anyone believe that the miners did not get everything that they wanted as a result of that approach? The right hon. Gentleman is a simpleton—I do not really think that he is—if he believes that the National Union of Mineworkers did not get what it wanted.

Mr. Foot

What the right hon. Gentleman is saying on that subject is absolutely false. Before he makes such a statement he should check with the National Coal Board if he will not believe the miners. The right hon. Gentleman should find out the facts and then come back and apologise.

Mr. Prior

I am prepared to find out the facts, but I think that they will entirely support what I have said. The right hon. Gentleman has a charming and disarming way of settling disputes. It is consistent with the following approach—"Go away and settle. Do not worry me about the cost or the effect on the economy, just settle. We will pick up the bills later, preferably after the General Election."

Mr. Foot

I do not think that the right hon. Gentleman does any good by trying to deal with these matters by adopting this sort of distortion. That is not what happened in the mining dispute. It is not what happened in the engineering dispute, and it is not what happened in the London weighting issue. Before he utters such ignorant lies he should find out the facts.

Mr. Prior

That is exactly what happened on the London weighting issue. The right hon. Gentleman produces a policy and then backs away from it. It is plain that he has done so. His Department is no longer one which is meant to exercise some control over these matters. The right hon. Gentleman is actually pushing for higher wages—

Mr. Foot

Absolutely false.

Mr. Prior

The economy will suffer. The right hon. Gentleman should take these matters much more seriously. My right hon. and hon. Friends take it seriously.

Mr. John Peyton (Yeovil)

I am much impressed by the gravity with which my right hon. Friend approaches the state of the economy. His approach impresses me more than that of the Secretary of State, who gives the impression that all he can give to our problems is merely a passing glance. However, I must ask my right hon. Friend what he is actually asking us to support tonight.

Mr. Arthur Lewis

Another U-turn.

Mr. Peyton

Is my right hon. Friend asking us to support his opposition to the abolition of the Pay Board or his insistence on some effective action being taken to stem the tide? I for one am not anxious to support the retention of the Pay Board.

Mr. Prior

I know that my right hon. Friend is not anxious to support its retention. What I am saying is that in the present serious situation it is necessary to have available for use, should it be necessary, every weapon that can be obtained from the armoury.

The present situation is that there is now a complete free-for-all. We know the rate at which wages are increasing. Nothing is being set up; nothing is being left on the statute book which will give the Government any reserve powers to introduce a statutory policy. All our experience when in government was that if we did not possess such reserve powers there were two alternatives. The first was to struggle on without any form of statutory policy. If we took that course we might be having wage increases of 20 per cent., 25 per cent. and 30 per cent. by the autumn.

Mr. Arthur Lewis

Why wages all the time?

Mr. Prior

The other alternative was to have a freeze. That is the only thing that can be operated quickly. What I want the Government to do, and what I think is wise from the point of view of our party when it comes into government, is to have statutory powers in reserve. I do not want to use them. It would be much better if we could get through without using them. There is a grave danger in allowing them all to go. It would be much more sensible to keep them in reserve and bring them out only if necessary.

There are many difficulties ahead of the nation which will require a great deal of effort to solve. If we can find a solution through the social compact and not by coercion, so much the better. Perhaps we can do it partly by controlling demand. I have never thought that the money supply could be the sole method of control but I think that it has an important part to play in the present situation. At the rate at which inflation is now running it has an even bigger part to play, but I do not think that we can rely on it alone. I feel that those who take the view, which I do not entirely share, that control can be applied through the money supply alone would find that, like all other panaceas, it would soon prove to be socially unjust and too crude a method. One result would be that the level of unemployment would become unacceptable. Of course, for every 1 per cent. increase in wages that we cannot afford we are bound to add to the number of unemployed which we shall have to endure. I believe that we need the whole armoury and that we cannot afford to get rid of any of our weapons. Perhaps we can put some of them in oil, but they should be available to use at any time.

By seeking to abolish the Pay Board and the power to operate an incomes policy, the Government are stripping themselves of any alternative to deflation or a freeze. They have left themselves bare of any alternative. It is an act of massive irrelevance, at this time of all, with what we know is ahead of us, for the nation not to have these extra powers.

The Secretary of State has been a great disciple of Aneurin Bevan. Let him remember that famous Labour Party conference speech when Aneurin Bevan derided and scattered the unilateral disarmers. Mr. Bevan would not go naked to his conference table. Neither should the Secretary of State go naked to his. He should resist the demands of the TUC on this issue. Let him act as one of Her Majesty's Ministers for a change. The situation demands, and the nation expects, it.

6.11 p.m.

Mr. E. Fernyhough (Jarrow)

The right hon. Member for Lowestoft (Mr. Prior) has made very grave charges against some of the most responsible men in the country. He is really saying that the leaders of the TUC are trying to mislead the country, that they are not true and honest and sincere in what they are saying about the social contract. He is trying to convey the impression that all the difficulties, all the problems and all the anxieties about inflation that we have are solely due to the wicked, greedy, avaricious trade unionists.

The right hon. Gentleman represents the farmers. I have never known him to be backward when farming interests are at stake. Among hon. Members opposite there is a powerful lobby for the NFU. Week in and week out, they ask for more for the farmers. When the farmers get more, does not that add to inflation? Are we to believe that the farmers can get more without its adding to inflation but that the miners cannot?

The right hon. Gentleman has forgotten the experience of the nation in the first three months of this year. Had the Conservative Government remained in power the situation today would have been catastropic. They would have preferred to have kept the miners out—and every day longer the miners were kept out the deeper would our economic problems have become. It is quite remarkable how ready the Conservative Government were to pay the oil sheikhs what they demanded.

Mr. Cyril Smith

What would the right hon. Gentleman have done?

Mr. Fernyhough

I should have paid them, but I was also prepared to give the miners a living wage.

Mr. F. A. Burden (Gillingham)

I am trying carefully to follow the hon. Gentleman and I have expressed sympathy with the miners. If the miners now came out with a demand of a similar character and a threat to take action if it were not met, would the hon. Gentleman meet that claim, whatever it might be?

Mr. Fernyhough

I do not believe that the hon. Member for Gillingham (Mr. Burden) cannot read. He must have read the decision of this year's miners' conference. They have said that there will be no conflict and no confrontation.

Mr. Burden

Answer the question.

Mr. Fernyhough

I have answered it. The hon. Gentleman has asked me to deal with a hypothetical situation. The men who could create that hypothetical situation have said that they are not going to do it, but the hon. Gentleman does not believe them. The vast majority of the delegates at the conference said that they would not create such a situation. The union is a democratic organisation and the miners will abide by that decision. The hon. Gentleman should not give grist to the mill of the minority who would like to do it. He should be helping those who are reasonable and sensible.

Mr. Dennis Skinner (Bolsover)

I think that my right hon. Friend the Member for Jarrow (Mr. Fernyhough) will appreciate—

Mr. Burden

He is not right hon.

Mr. Skinner

He is right hon. How long has the hon. Member been here?

Mr. Burden

Longer than the hon. Member for Bolsover (Mr. Skinner).

Mr. Skinner

And the hon. Gentleman has made more mistakes. When my right hon. Friend the Member for Jarrow talks about the minority in the NUM who might wish to have a conflict, perhaps he will reflect on his words, because I know that he will agree with me that a conflict can only be caused by two sides. It could be argued usefully and properly that the conflicts in 1972 and 1974 were not caused by the majority or by the minority in the NUM but by the other side. If there is no conflict this autumn I am sure my right hon. Friend will agree that it will not be as a result of a majority or a minority in the NUM but because of the different climate which could well have been contributed to by the present Government.

Mr. Fernyhough

I think that is true. My right hon. Friends said to the men in charge of the nationalised coal industry "It is your job to run it and we will give you a bit of flexibility to do so." Under the Conservative Government the National Coal Board's hands were tied despite the fact that coal had become more important than ever to the economic life of the country. The Conservatives were prepared to see the economic situation become catastrophic rather than eat a little humble pie. It is obvious that we are in a changed situation in which our coal is ever more important.

The right hon. Member for Lowestoft referred to the producers of wealth. Are there any people who are greater producers of real wealth than the miners? It is the trade unionists, the men in the factories, in the pits and in the fields, who are the real producers of the wealth of Great Britain. If the Stock Exchange closed tomorrow Great Britain would not basically be affected, but as long as the farmers and the farm workers, the miners and the men in the factories and in the docks go to work the nation's wealth is created. As long as they were at work and creating wealth it would not really matter if all the banks were bombed out. The idea that the men who do the basic work of the country are not its producers of wealth makes me sick.

Now, we live in a different age. The men who have done the hard, dirty and dangerous work of society know now that for generations they did not get a fair reward. They are no longer going to be pushed around.

Mr. Burden

rose—

Mr. Fernyhough

No. I have given way several times.

Our workers, whether they be miners, engineers, shipbuilders or anyone else, cannot be treated as they were in the past. They have arrived. Unless we recognise that basic fact we cannot begin to deal with the problems with which the nation has to contend. Unless we recognise that, we cannot get the understanding from them which is essential to this nation's future well-being. They are basic pillars. Try to knock them about and the whole edifice will collapse. Give them the remuneration to which their contribution to society entitles them and they will co-operate in getting us through the problems we face.

I do not believe that the dangers we are facing, the problems we are trying to tackle, can be tackled adequately on the basis of confrontation. We can only deal with them by sitting round the table and getting sensible and reasonable men to reach sensible decisions. We could not do that under that legislation we seek now to remove. It was the barrier that prevented such action. It is the new kind of conciliation machinery, which my right hon. Friend is trying to establish, which will prove to be a much sounder alternative in the new climate everyone is trying to create.

There will be two sides to industry for longer than my lifetime. In that event the easier we can make the pathway to conciliation the better it will be for employers and employees. If it is easier for them, then in the long term it will be better for the nation. That is why in taking his followers into the Lobby tonight in an attempt to maintain legislation which has completely failed in its purpose the right hon. Member for Lowestoft is not doing the nation a service.

The right hon. Member referred to the figures my right hon. Friend said were awaiting him. Does he question that during the General Election he and others in his party said that the deficit in the nationalised industries totalled about £500 million? Does he accept that when my right hon. Friends got to their respective desks in Government they found that far from its being £500 million it was approximately £1,400 million? Does he further accept that if that were to be passed into the economy it would he bound to affect the cost of living and to be highly inflationary? The Conservative Government knew about this before they left office. They did not tell the public. It was found out because there was a change of Government. Is the right hon. Gentleman saying that charges for electricity, and coal and rail fares would not have increased by more than £500 million?

Mr. Prior

I think we should get this clear. My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) announced before Christmas that it would be necessary to increase the nationalised industry charges. The deficit was never struck at £500 million. The right hon. Gentleman has got two sets of figures mixed up. At that time we were subsidising the nationalised industries to the tune of £500 million. I do not believe we could have gone on indefinitely subsidising those industries. It is a bad policy.

Mr. Fernyhough

It may be a bad policy, but if the right hon. Gentleman were to take away the subsidy from London Transport, London would come to a halt. We cannot run a transport system on the basis of insisting that every single unit and yard should pay its way. It would be well-nigh impossible for us to operate any public transport system without a subsidy.

Mr. Arthur Lewis

The right hon. Gentleman corrected my right hon. Friend's figures. Is my right hon. Friend aware that we subsidise to the extent of thousands of millions of pounds the Army, Navy and Air Force because we pay for them out of taxation? We do so because we think it is necessary for the good of the country. No one objects to that. If we think it is for the good of the country to have a service is it not a good idea to pay for it?

Mr. Fernyhough

My hon. Friend has in some respects tried to reinforce the much smaller argument I was making, that we could not possibly have a public transport system working on the basis that every single yard of the service operated in a viable fashion.

It is rather tragic that Conservative Members have learned nothing from the experiences of these past 18 months. They still believe that in the middle 1970s it is possible to deal with trade unions almost as they were dealt with when the Combination Acts were introduced. The trade unions must not only be recognised and consulted. In the end it is with them that we must settled. The Conservative Party prefers confrontation, a settlement like 1926, starving the men back.

Our policy for settlement is by sitting round the table. I warn right hon. and hon. Gentlemen that if the country has to make a choice it will support those who stand for conciliation rather than those who seek confrontation.

6.25 p.m.

Mr. Maurice Macmillan (Farnham)

I must apologise to the House and the Minister concerned because I shall have to miss most of the Government's reply because of a long-standing engagement. No doubt I shall be able to read the proceedings in HANSARD, in due course. I am not sure when.

Normally in these circumstances I would not seek to catch your eye, Mr. Deputy Speaker. I do so now only because I am in some sense the political midwife of this 16-month-old infant Pay Board which the Secretary of State is seeking to murder in this order. I hope that the House will prevent him from doing so.

We are not, as the right hon. Gentleman suggested, discussing the merits or demerits of a statutory pay policy. We are discussing the existence of this organisation and Part I of the Act. Voting against this order is in no way to vote in favour of a statutory policy. Nor do I think it expresses in any way a view damaging to or implying distrust of the social contract. I hope that the House will reject this order because, whatever the Secretary of State may say and whatever he may think he is doing, the result of this action would be to foster in 1974–75 the same sort of inflationary pressures as the previous Labour Government created in 1970–71 by their pre-election abandonment of any form of income policy.

I quite understand the Secretary of State's wish to drop a statutory policy and at this stage to do away with a separate Pay Board and Pay Code. But he is doing a lot more than that. He is limiting the possible future action of any Government by permanently destroying what could remain as a valuable and useful piece of machinery. It is useful for any pay or prices and incomes policy, not only statutory, not only formal and voluntary but even for the sort of policy which is being operated only through collective bargaining conducted on the lines laid down by the unions which, as I understand it, is the Government's present policy.

The Secretary of State referred to the new conciliation and arbitration services. I welcome them. However, I do not think that they fill the rôle that the Pay Board could fulfil. They will no doubt be valuable, but their effectiveness on pay is likely to be distorted by the power of some unions compared with others. That view has been put to me at various meetinsg by union leaders.

Even were that not so, I think that a board of this kind, in relation to the level of pay as opposed to the settlement of disputes, is a syndicalist type of organisation and even less responsible to this House than any type of hoard or agency that we have had before.

I have some sympathy with what the Secretary of State is trying to do about stopping a separate Pay Board and Pay Code and abandoning a statutory policy as of now. However, I do not have much sympathy with his choice of method. He could have achieved his objective under the 1973 Act. Section 1 allows him to amalgamate the agencies or to amend the Act in any way that he likes by order. In Section 2 "Treasury"—a word the right hon. Gentleman appears to dislike—could be amended to any other Department or, indeed, to the Agencies themselves. Under subsection (2) the word "may" allows him to exclude the Pay Code altogether if he chooses to amalgamate the agencies. He can, in effect, achieve a single agency, without going to these lengths, dealing effectively only with prices. All that is possible under existing legislation.

I do not believe that the right hon. Gentleman would be right to do that. But, if he were to do that, he would, in effect, be saying that the Government are seeking to control inflation through their tax and monetary policies only, plus direct control of dividends, profit margins and prices. If that is the Government's policy, I do not believe that it will be possible to bring the degree of control over the present possibilities of inflation without the danger of seriously damaging investment and job prospects and causing unemployment.

Therefore, to get out of the difficulties which right hon. and hon. Members on both sides of the House and the trade union movement and many employers admit that the country faces, in the 1974–75 wage round we shall need a policy, however it may be achieved, of wage restraint. This is accepted by the unions in the guidelines that they have set out, particularly the 12 months' interval between claims continuing to apply.

Mr. Arthur Lewis

What about incomes?

Mr. Macmillan

I said "wage restraint" for two reasons. First, it is the main pressure on internal costs, and secondly, it is what is dealt with in the trade union guidelines which we are discussing. We need this policy of restraint not to put right errors of the past but, looking to the future, to achieve the prosperity which I believe we can still reach and to avoid the dangers which undoubtedly face this country which have been put before us by hon. Members on both sides of the House and by the Press.

I think that imported inflation is past its peak. Food and energy accounted for almost half the increase in the retail price element at its peak. Food prices are falling, energy prices are stabilising, and the prospects for the cost of raw materials seem more favourable to this country.

The underlying rate of inflation, which is now probably between 20 per cent. and 30 per cent. at an annual rate, could come down to between 10 per cent. and 20 per cent. in a year provided that we can contain the domestic element in the cost of our goods and services. The main part of that domestic element consists of wages and salaries. It is no use right hon. and hon. Gentlemen opposite seeking to deny this fact. Whatever we may choose to do for other reasons to limit other forms of income, the main element in domestic costs, if material costs are stabilising, is wages and salaries. If in 1974–75 we could manage to hold wage settlements down to a level of about 15 per cent. and gradually lowering, the Government would be able to maintain a relatively steady position for wage earners' real disposable incomes and help to bring the rate of inflation below about 10 per cent, by the end of 1975. The problem is how to get that degree of restraint.

Some experts, I read in the Press, are already saying that it will require a wage freeze. I do not believe that is or need ever become necessary. I accept—no one more than I—the difficulties and limitations of a statutory policy. But there is no need to abolish the Pay Board in order to abandon the statutory policy. Under Section 4 of the 1973 Act we can stop it at any time by Order in Council. Of course, we could still bring it back up to the end of March 1976.

We are left with the social contract. I do not wish to belittle what the trade union movement is seeking to do in the social contract. I do not believe and never have believed, nor have any Government of which I have had the honour to be a member believed, that the policy of confrontation is or was wise or sensible. But we must admit that the concept underlying the social contract has had a mixed reception among trade union leaders. I suspect that many trade union leaders had some difficulty in explaining its implications to their membership. I understand their problem. Such a policy, compact or contract without any sanctions—whether they are voluntarily imposed by the unions upon themselves is immaterial—is dependent on strength. The effect of the guidelines on different groups of negotiators will depend very much on the industrial strength of the unions and industries concerned. I fear that under this type of policy we shall see again what 25 years of free collective bargaining produced—the lower paid falling steadily behind.

The Secretary of State referred to special cases. The trouble is that after he has abolished the Pay Board these ad hoc inquiries into one special case or the other will either add to inflationary pressures or produce more anomalies in the relationships between different wage groups than they solve. The Secretary of State is abolishing the machinery which otherwise would be available to him for conducting these inquiries more systematically.

In 1972 we sought a voluntary policy. That search ended in failure and resulted in a statutory policy. After the experience of the tripartite talks, which so nearly reached agreement, in 1972 there was a very wide area where the CBI, the TUC and the Government were in agreement. One of the areas of agreement was that it would be desirable for us to find the sort of voluntary policy contained in the present TUC guidelines. It was upheld by the union membership at those meetings as much as by anybody else that such a policy required to be fair and effective; and should contain a method of dealing with what came to be known as the "rogue elephants", a method which could police productivity bargains so that the false ones did not get through, and which could protect the weak against the strong. Whether or not there were legal sanctions as a backup to the decisions of a voluntary body was another matter. It was generally agreed that such a policing body ought to exist. It was in the light of moving smoothly, as the Secretary of State wanted to do, from a statutory to voluntary policy that the 1973 Act was designed, bearing in mind the agreement shared by the unions that there had to be some back-up for a voluntary policy.

The Pay Board, or the body which the Secretary of State could alter it to, could provide such a back-up power. We could abolish the policy. We could alter the whole nature of the Pay Board and Price Commission. We could combine them into one body. Whether there is one agency or two, we could vary their natures and have union and industrial representation. We could operate through a code, or not. The code could be produced by the Treasury, or another Department, or by the Agency itself.

The instrument is potentially infinitely flexible. I am certain that something of this sort is needed by any Government to run any successful policy to counter inflation. It would be folly to throw it away in the manner suggested by the Secretary of State.

I urge the House to reject the order.

6.45 p.m.

Mr. Norman Atkinson (Tottenham)

The right hon. Member for Farnham (Mr. Maurice Macmillan) has just described himself as a midwife in connection with this policy. He is again acting as the midwife of the Pay Board in erecting all the ancient, worn-out monuments, saying that if only we could try all these things again perhaps we could somehow find a solution to the present problems.

The right hon. Gentleman half hinted that the unions were not quite honouring their obligations within that social contract. We cannot talk about the social contract in isolation. We cannot discuss it without knowledge of what the Chancellor of the Exchequer is likely to say next week. We cannot discuss the social contract in the absence of the knowledge of what revenues will be available, what the Government are prepared to do about the social services, what the Government are prepared to make available from their resources to increase wages as a result of various reviews now going on. All those are extremely important elements within the social contract. Therefore, we are being a little premature at the moment to talk about the responsibilities of particular sections.

The right hon. Gentleman went on to talk about the necessity of having a Pay Board without perhaps statutory powers. I want to return to that in a moment because there is no purpose in having a Pay Board unless it has the statutory powers that he is so worried about.

There are a number of aspects of the debate which I think we ought to try to clarify. We should expose the dishonesty, which seems to me now to be apparent from the remarks made by the right hon. Member for Lowestoft (Mr. Prior). It would seem that there is an understanding among hon. Gentlemen opposite that if they were successful in being returned to power as a Government following the election they would introduce a statutory policy. That is implicit in the remarks already made. They would support the idea of a Pay Board, perhaps of a slightly different kind from the structure we now have.

The Liberal Party is also in favour of a statutory wage policy. It has said so quite openly and very clearly. Therefore, this seems to be the basis of an anti-wage, anti-trade union coalition which could arise if there were a repeat of the electoral situation we have now. That, I would think, is the purpose of the coalition.

The only thing to worry me in that situation is that it would be necessary, if that type of coalition were to succeed, for it to attempt to attract either trade union leaders or hon. Members from this side who could perhaps deliver some kind of trade union loyalty, to carry out some kind of trading arrangement of that sort, and to make overtures of that kind, in order to succeed in either an anti-trade union or an anti-wage coalition of the kind which I now suspect is beginning to be formulated opposite.

We can now see the plans which are taking shape. The purpose of a coalition as described by hon. Members opposite would be to contain the trade unions within the rigidities of a statutory wages policy, hoping that they can make such a coalition respectable by attracting hon. Members from this side of the House or people from the trade unions to take part in a charade of that kind. That is how, from the remarks made by the right hon. Member for Lowestoft, we would see the policy he has outlined.

Further to the dishonesty which I suggest is implicit in the remarks that the right hon. Gentleman has made, he says he would want a Pay Board without statutory powers. But there are no circumstances within which I could conceive of a Pay Board existing without statutory power to impose on society some form of compulsory wage restraint. If we are to have a Pay Board which has any function it must either act as a mechanism for arbitration, for bringing opposing sides together, or have a job to do similar to the one outlined by my right hon. Friend the Minister when he said there is a need to examine the relativities between various industries and sections within those industries. If hon. Members opposite are talking about a Pay Board to perform that function, I would think that if they were honest they would support the outline proposals made by my right hon. Friend the Minister for the arbitration arrangements under the leadership of Jim Mortimer or under the commission to be set up under the leadership of Lord Diamond. That would provide the very mechanism of the Pay Board envisaged by hon. Members opposite.

The second point was that the Labour Party in government and in the local authorities had always and continuously given way to the trade unions' wage demands, and that that had either led to unemployment in such areas or was the basic cause of current inflation. All the evidence points the other way. I know of no employer anywhere who has conceded totally to trade union demands. I know of no employer who stands at the works gate handing out bonus packets and saying to the men "Thank you very much for being here. Have a little more on the way out." I have never known an employer who has not rigorously opposed trade union demands. The engineering employers have almost ruined their industry by their reluctance to concede even the base demands of the engineering unions. There is, therefore, no sign anywhere of employers throwing their money around in this fashion and giving in to the unions.

The situation concerning low pay, particularly as it affects teachers and nurses, is disgraceful. The public sector has been used regularly by successive Governments to regulate the economy. The first casualties of wage restraint have always been the workers directly employed by the Government, and they happen to be in a labour-intensive sector of the economy which leads the Government to believe that they provide a good, convenient and economically wise method of regulating wage demands. Governments, including Labour Governments, have, therefore, wrongly exploited people in the public sector to regulate the economy. That is one of the reasons why we demand free collective bargaining, particularly for the public sector. All low-wage workers nowadays are employed in the public sector and are in the main employed directly by the Government. The Government are principally responsible for low par in this country—

Sir Keith Joseph (Leeds, North-East)

indicated assent.

Mr. Atkinson

I am glad to see that the right hon. Gentleman agrees with me. It is resistance of the Government's—

Mr. William Hamilton

And the farmers.

Mr. Atkinson

The farmers have exploited the poor organisation of agricultural workers, but in the main low pay in this country is a direct result of successive Government policies to exploit the people they employ.

The right hon. Member for Lowestoft was attempting to back every horse in the race. He spoke about strike action and said that there were concessions all the way along the line. If there were concessions by the employers, what was the need for the strikes? Why did he bother to raise the strikes bogy? What are the men striking for if the employers are conceding all the time? If the Government are conceding, why are the London teachers on strike? If the London weighting claim has been conceded all the way along the line, why are we faced with mass disruption of London industry and London services? Why are our kids being prevented from going to school? Why are there problems in the hospitals, and why are disputes cropping up in the way that they are? The reason is that this Government, like all other Governments, are reluctant to meet their obligations, in this case within the social contract. The Pay Board's report is now a very good reason for sacking the board as we are now about to do because it is an instrument of exploitation which has brought about the situation we now face.

I turn now to the effect of high wages on the economy. What has happened in phases 1, 2 and 3 of the pay policy we are now getting rid of? Here again the right hon. Member for Lowestoft wants to back every horse in the race. He says that as the level of demand rises that produces a propensity towards unemployment. Yet he is already on the record, like the right hon. Member for Altrincham and Sale (Mr. Barber), who used to back every horse, as saying that low demand causes unemployment. So they go on, and whatever the situation, it produces, according to them, unemployment. The fact is that the base causes of the unemployment and the imbalances to which the right hon. Gentleman refers are endemic within the system.

The right hon. Gentleman spoke at great length about 20 per cent. and 30 per cent. wage increases, but let us consider carefully the effect of those increases on the level of demand. The important point is: 20 per cent. of what? If it is 20 per cent. of £25 a week, which represents only £5 increase for the individual, that is very different from 20 per cent. of a much higher wage. The whole question of inflation and wages is linked with the level of demand, and in those circumstances it is dishonest and totally misleading to use unweighted percentages in the way that the right hon. Gentleman did. The important points are how much money is being generated by the wage increases, and what the effect of that money is upon the level of demand. It is meaningless just to talk of percentages. The effect on the economy of a 25 per cent. increase in a nurse's wage is minimal compared with the effect of the 25 per cent. increase for a highly-paid worker. If the right hon. Gentleman wants us to take his economics seriously so that we may come to some conclusion about advice we can give to the trade unions he should not put forward misleading arguments like that.

Mr. Burden

Does the hon. Member not agree that one demand this country must generate is a demand in export markets for British goods? Does he accept that if we are not competitive abroad, irrespective of which Government may be in power, the standard of living at home will decline, unemployment will rise and the nation will be in absolute economic peril?

Mr. Atkinson

The hon. Member is absolutely right. I do not want to delay the House by going into detail on that point, however. Of course British manufacturing must be competitive; of course it is capital-intensive; of course over the last five years, particularly in engineering, the unit labour cost has gone down and the proportion paid in wages has dropped in relation to output; and of course there have been massive reductions in the numbers employed in manufacturing industry with a consequent shift into the service industries; of course the hon. Member is right that our prices must be competitive. But if there has ever been one massive trade union contribution in this country it has been towards the competitiveness of British goods overseas. The trade union contribution has been the biggest single factor. Production figures in Britain are some of the finest in the world, and we have maximised the capitalisation of industry.

Mr. Burden

indicated dissent.

Mr. Atkinson

The hon. Member shakes his head, but, whatever the analysis of manufacturing industry, there is not one point of blame to be laid against trade unionists and the wage agreements they have negotiated. Their slate is clean. The problems in this country stem from the labour-intensive sectors of the economy—the public services.

It is here that difficulties start to arise, on the figures which the right hon. Gentleman was trying to use in his case against trade unions—that they nave been irresponsible in demanding wage agreements to which they are not entitled, that they have been greedy and have taken a bigger proportion of the cake than they are entitled to. I am sorry that the right hon. Gentleman is not here to answer a challenge I would like to put to him on some of the claims he has made, because they are bogus and misleading. I claim, and I will present the figures to him at any time, that the opposite is the case.

I we take phases 1, 2 and 3 of his own policy we find that the opposite applies. In phase 2, workers' standards in this country in terms of take-home pay went down. There was a 1 per cent. drop in the level of demand. We can see the figures in retrospect. We know what has happened in phase 3. My right hon. Friend has confirmed this afternoon that by November we can expect that in the preceding 12 months prices and incomes will have risen by a phenomenal amount, about 17 or 18 per cent.; but we also now know that, because of the three-day week and all the problems of taxation drift and so on, because of increased insurance costs and other things, if we take away all these deductions from the workers' pay packet and look at the take-home pay we shall find when we get to the end of the 12 months period in November that the workers will be very lucky if they have improved the total amount of their take-home pay at the end of the year by anything like the 12 or 13 per cent. increase last year.

Comparing that with the prices index figure of 18 per cent., the level of demand in this country has fallen by a phenomenal amount and is still going down. I am glad the right hon. Gentleman agrees, because the figures are there for all to see.

Mr. Ian Lloyd (Havant and Waterloo)

rose—

Mr. Atkinson

I cannot give way because I do not want to delay the House longer than is necessary but it is important that before such accusations are levelled at trade unions, and before people start saying trade unions leaders are deserting their responsibilities in demanding these phenomenal amounts, they should look at what is happening to the living standards of the members whom those leaders represent.

Mr. Ian Lloyd

rose—

Mr. Atkinson

So far as phase 3 is concerned we can expect the people of this country to have taken a drop in their living standard of, on average, about 5 per cent., and when people start making accusations we should bear that in mind and perhaps feel a little humble about the policies that have created that fall in living standards.

Mr. Ian Lloyd

The hon. Gentleman has asked us to take account of the facts. As OECD has pointed out, the real national product could well fall by 1.5 per cent. this year according to the best possible estimates. A vital contributory factor has been the withdrawal of real wealth from this economy by Arab oil producers. How is this factor of real wealth to be dealt with effectively if wage increases average 20 per cent.?

Mr. Atkinson

I promise faithfully, and I hope it will not be held against me, that I will not take up that challenge because I have said enough about the situation the Arabs are pushing us into, and beyond, and what has happened. But I believe that we have to get our domestic economy right and not try to use the manipulation of our domestic economy to solve our overseas balance of payments problem, which is what we have consistently done.

On the point raised by the hon. Member for Havant and Waterloo (Mr. Lloyd), I at any rate accept all the implications of saying that we must have selective import controls, understanding what it means within GATT and the European Market conditions and so on. But it is no good the Conservative Party laying the foundation for making the situation worse by having oil-burning power stations and increasing the use of oil domestic heating. We have to take all these problems into account. That was why I said at the beginning that we can judge the efficacy of a social contract only if we can see the picture as a whole.

I would love to take up the points made by the hon. Member and put a trade union point of view in answering some of the accusations implicit in all these remarks but I know that my hon. Friends are anxious to make a much more valuable contribution, anyway. I say that very genuinely because I believe that after all the mistakes this place has made we should be extremely humble in talking about people outside and the contribution they have to make.

If we are to be critical of people who are working down a pit or in a factory or wherever they are producing the real wealth, a bit of humility on our part would be a good thing. It has to be recognised—since you, Mr. Speaker, were in the saddle—that we have been blamed more than anybody else but we in this place have a long record of failure and it is about time that we started to face the real world and come to decent conclusions. Then perhaps we can talk about a genuine contract between labour and capital. If that is what the House requires, let us talk about it totally and not pick out sections of the community and make false accusations against them.

7.6 p.m.

Mr. Cyril Smith (Rochdale)

I shall not attempt to follow the hon. Member for Tottenham (Mr. Atkinson) except in one respect—that is, his reference to his dream about the basis of some future coalition being a kind of anti-trade union party. He had better leave fairy stories to those better able than himself to write them.

Before getting to the substance of what I intended to say, I must turn to the attack made by the Secretary of State for Employment on myself and my Liberal colleagues. I believe I am entitled to reply to some of those comments. The first thing I am bound to say is that the right hon. Gentleman was rather carried away with the exuberance of his own verbosity, as he so often is when he gets to the Dispatch Box. I suspect that the support he was receiving from some of his hon. Friends behind him tended to carry him away and led him to quote an example which clearly, after my intervention, he had no intention of quoting.

Since the right hon. Gentleman has quoted it and since it is on record, I have now to divulge to the House the full situation in the case to which he referred. He stated that I had written to him urging a settlement in the engineering dispute which was outside the prices and incomes policy that my party sought to oppose. A Minister of State had been approached by Sir Arnold Weinstock of the General Electric Company asking for a meeting with the Employment Minister so that as an employer of over 40,000 people in the engineering industry he could make the situation clear in relation to that claim.

I had never in my life met Sir Arnold before meeting him for that purpose and I have never met him since. But as the Secretary of State for Employment, despite the intervention of another member of the Cabinet, had not been able to meet Sir Arnold, I was contacted by the leader of my party and asked if I was prepared to meet Sir Arnold so that his views could be conveyed to the Government. That I did. I made it absolutely clear in correspondence that I was in no way supporting the case Sir Arnold was putting but was merely acting as an intermediary between him and the Minister whom he had attempted to see, and was still willing to see, to put his point of view concerning that settlement.

It is a gross breach of courtesy and etiquette for the right hon. Gentleman to stand at the Dispatch Box this afternoon and quote against me, as an individual Member of the House, without even having given me notice of the fact that he proposed to do so, an instance of that kind as being something in support of the policy he put before the House this afternoon. I consider it not only an utter, gross discourtesy but, more than that, an utter and gross distortion of the facts.

The Secretary of State then proceeded to deal with my colleagues. For example, he took to task my hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel). I happen to have before me the correspondence that passed between the right hon. Gentleman and my hon. Friend. In that correspondence my hon. Friend said: I am disturbed by his answer in the first place because any fair approach to prices and incomes must surely include special consideration for the lowest paid regions. In his letter to the Secretary of State for Employment on 14th May, my hon. Friend said: This underlines the point I made in relation to … wages which so far remains unanswered, namely, that in such a low wage area of the country any sane prices and incomes policy should be operating to secure greater social justice and equity in wage levels as between one region and another. Yet the right hon. Gentleman said that the letter suggested that there should be no prices and incomes policy.

The Secretary of State went on to deal with my hon. Friend the Member for Cornwall, North (Mr. Pardoe). Let me draw the right hon. Gentleman's attention to the proceedings on the Counter-Inflation Bill and to Amendments Nos. 31 and 32 appearing on the Amendment Paper on 27th February 1973. Those amendments were in the names of my right hon. Friend the Leader of the Liberal Party, my hon. Friend the Member for Cornwall, North, my hon. Friend the Member for Roxburgh, Selkirk and Peebles and my hon. and learned Friend the Member for Montgomery (Mr. Hooson), to whom the Secretary of State also referred.

Amendment No. 31 read as follows: after 'remuneration', insert— 'other than a remuneration which is less than £22 a week'". Amendment No. 32 read as follows: after 'remuneration', insert— 'other than a remuneration paid to any person working within a development area'". The Committee was unable to reach those two amendments, but had they been carried they would not have been contrary to the policy which was propounded in the letters sent to the Minister by my hon. Friends the Members for Cornwall, North and for Roxburgh, Selkirk and Peebles.

The Secretary of State went on to refer to my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond). Here he made a grave error, because my right hon. Friend was the one member of the Liberal Party who refused to go into the Lobby with us.

I very much hope that when in future the Secretary of State chooses to attack me and other members of my party he will at least get his facts straight and follow the normal etiquette and courtesy of the House. I hope he will not quote exchanges of opinion between one hon. Member and another and that he will not insult my hon. Friends as he chose to do this afternoon.

In introducing the Counter-Inflation Bill 1973, the Minister said that the object of the Bill was the control of inflation and steadier prices; … particular help for the lower paid; and … the continued growth of the economy ".—[OFFICIAL REPORT, 29th January 1973; Vol. 849, c. 953.] Clearly, the Act and its implementation have failed on all four counts. I do not lay the blame on anyone. A great deal of hot air is generated in talking about which party is responsible for what. The views of the parties on prices and incomes policy are often determined by the side of the House on which hon. Members sit when a vote is taken. I have here the record of the votes in 1966 on the Prices and Incomes Bill introduced by the Labour Government. The right hon. Member for Ebbw Vale (Mr. Foot), who today is Secretary of State for Employment, went into the Lobby supporting a prices and incomes policy in 1966. Several hon. Members who share the Opposition side of the House with me went into the Lobby against a prices and incomes policy in 1966.

In 1972 the position had changed, and the votes changed too. If I or my hon. Friends are accused of doing a U-turn, hon. Members on the Government benches cannot gay much on that score.

It is clear that the policy failed and that its aims were not achieved. Successive Governments have struggled with prices and incomes—

Mr. Stanley Newens (Harlow)

I take it that the hon. Gentleman is not maintaining that all Government supporters executed a U-turn because I and several of my hon. Friends opposed the statutory incomes policy put forward by the Labour Government, just as we oppose it now.

Mr. Smith

I accept entirely what the hon. Gentleman says and the implication behind it, although I understand that he was not a Member of the House in 1972.

Mr. Newens

Before 1972.

Mr. Smith

I entirely accept the hon. Gentleman's intervention.

The Liberal Party has always believed and still believes in a statutory prices and incomes policy. The reason for the failure of the present policy—and of any policy which is based on the present pattern—is that it produces only partial control. The Labour Party is anxious to control prices but is not too anxious to control wages. The Conservative Party is anxious to control wages but not too anxious to control prices. One reason for the failure of the past policies of successive Governments is their deliberate failure to grasp the nettle of their side of the coin.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

The hon. Gentleman speaks of grasping the nettle, but what has happened to the Liberal policy of drastically increasing the national insurance contributions of groups of workers who obtain excessive wage increases? When will the hon. Gentleman advocate that policy for miners, engineers, nurses and all the workers who have big in-ceases coming to them? Is that suggestion being dropped from the Liberal Party policy? It was a policy on which the Liberals fought the last election.

Mr. Smith

Of course it has not been dropped. Liberals do not put forward one policy at one election and a different one at the next. Our policy of worker participation has been constant since 1929, not since 1970. Our policy on increasing national insurance contributions is exactly the same. If time allowed I should be happy to develop the argument, because we accept that within a prices and incomes policy it is necessary to give greater emphasis to the lower paid and less emphasis to the higher paid. That policy was followed by the Relativities Board. Under the Liberal Party such relativities could be taken care of within the policy to which the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has referred.

In 1965 the TUC set up its own wage vetting system. [Interruption.] The hon. Member for Bolsover (Mr. Skinner) would do well to listen.

Mr. Skinner

I am listening, but it is difficult to follow the hon. Gentleman.

Mr. Smith

I understand that the hon. Gentleman takes an interest in what is happening now, but I am not sure of his command of history, so let me give him a little history lesson. I shall try to do it slowly so that he can understand it.

In 1965 the TUC set up its own wage vetting system in response to the Labour Party's prices and incomes crisis. That policy worked for a time, but it did not last. [Interruption.] If the hon Member for Bolsover wishes to interrupt he should go and talk to his brother at Clay Cross, from whom he will receive more attention than he is likely to get from me.

The fact is that the 1965 policy worked for a short time but it did not last. The key issue in the context of the social contract is that however excellent, honest or real is the desire of the TUC to have some sort of wage policy, the problem is that the TUC has not the power to implement the policy which it seeks to achieve. It can persuade and cajole, but it does not have the power within the trade union movement. If it had that power many of us would be happier than we are and far more willing to consider a voluntary policy of price and wage restraint.

Mr. Skinner

Will the hon. Gentleman give way?

Mr. Smith

No.

Mr. Skinner

But the hon. Gentleman referred to me.

Mr. Smith

The fact is that the present Government have delivered the carrot to the trade union movement. We are waiting to see the result of the social contract. We hope that the social contract will work and we wish it well, but we view with some alarm, though not with despondency, the level of wage increases which are now being settled. We know that there has been an ICI pay increase of 17 per cent. and that the Shell refinery workers have been offered 25 per cent.—although in that case there is some ambiguity about the percentage. The Post Office workers have settled for 11 per cent. There have been local settlements at Perkins of Peterborough of £2.75 per week when stage 3 ends. Cannon Industries, at Bilston, have given £2.57 per week and promised another £1.75 at the end of stage 3. There is a distinct possibility of a flood of wage demands when the policy has ended and the Pay Board goes. That surely must give rise to concern.

It is interesting to note that at a time when the nation is concerned about inflationary wage increases the Labour Government are talking about having a General Election. This was one of the contributory factors in determining the date of the 1970 General Election. The Labour Government in 1970 were well aware of the high inflationary wage increases which were round the corner, and undoubtedly that had an effect on determining the date of the election. In our view, the essence of a good prices and incomes policy is social justice. We believe that if workers are to be expected to show restraint—

Mr. Skinner

Will the hon. Gentleman consider, within the general overall Liberal package which he says involves social justice, whether there should be a comprehensive system of controlling all the points at which the policy could be broken by groups or individuals? Will he include in that package a proposition to prevent the Leader of the Liberal Party, as a director of several companies, being able to obtain 10,000 incentive shares for doing little or nothing, at a time when we were in the middle of a wage freeze? If he agrees that proposition, will he also remind the House that the new acquisition of the Liberal Party, the hon. Member for Woolwich, East (Mr. Mayhew), canvassed against an incomes policy?

Mr. Smith

I understand that in his election address my hon. Friend the Member for Woolwich, East (Mr. Mayhew) supported the policy which I am now propagating.

Mr. Skinner

The hon. Member for Woolwich, East fought on the Labour manifesto.

Mr. Christopher Mayhew (Woolwich, East)

I did not.

Mr. Smith

There should be all sorts of restraints in any package deal. However, I shall treat the intervention by the hon. Member for Bolsover in the way in which it deserves to be treated—namely, by ignoring it. If workers have to show restraint, people in superior places and positions must also show restraint; there must be sacrifices all round. There must be positive measures to redistribute wealth and a policy of helping the lower paid. I hope that I shall be able to carry many Labour Members with me on that proposition.

It has been Liberal policy for some years that there should be a guaranteed minimum wage. It is intriguing that many wage councils have not taken up the option of threshold wage agreements. The wage councils concerned are often those that deal with the lower paid, and indeed with the lowest paid. We believe in a minimum wage for industry—[Interruption.] Let me say this to Labour Members who constantly interrupt from seated positions. I hope that this policy will commend itself to the Labour Party since it is the policy of the Transport and General Workers Union. I recently had the pleasure of reading a booklet published by that union during the past month in support of that policy, and I wrote to the union complimenting it on its views.

It is clear that a minimum wage policy and its introduction would take some time. We do not believe that this can be done at a stroke, but we believe that one can set a target and reach it within a period of three years—in other words, during the life of a five-year Government. I believe that the introduction of a minimum wage throughout the country would be one of the surest ways of combating poverty, especially if it was understood that people higher up the ladder must stand still until the people on the bottom rung had a chance to get their foot on to the second rung of the ladder. We accept that the Pay Board is a dead duck—indeed, half its staff have already left Even if some order were brought in to retain the Pay Board in sheer organisational terms, it would be difficult to keep it in existence. My colleagues and I will go into the Lobby tonight with the Government to support the scrapping of the board. The hon. Member for Bolsover, having intervened in my remarks, has now been rude enough to leave the Chamber without hearing me complete my speech. Just as we saved the Government by three votes last night, the possibility is that we shall be able to save them again tonight. We believe that it is the Government's job to assist the pay policy of the country in the light of our economy and that it should be done not by an agency set-up but within the precincts of the House of Commons.

In closing, I wish to pay tribute to the staff of the Pay Board, as indeed did the Secretary of State. I urge the tight hon. Gentleman to do all he can to rehabilitate the staff and to absorb them into new organisations where possible. This will ensure that their expertise and knowledge, built up during their Pay Board service, are put to the best use. We very much hope that the Government are right in their hopes for the social contract. We look forward to hearing details of the work of the proposed Royal Commission on the Distribution of Income and Wealth. Meanwhile we agree to the scrapping of the Pay Board, not because we believe that the principle is wrong but because we feel that the method of working has become impracticable. For that reason we shall support the Government in the Division Lobby.

7.30 p.m.

Mr. Tom Boardman (Leicester, South)

I was extremely pleased to hear the hon. Member for Rochdale (Mr. Smith) exposing the distortions made by the Secretary of State, which were typical of so many of the right hon. Gentleman's remarks. I am surprised, however, that the hon. Gentleman and his party, who have been such firm advocates of a permanent statutory policy, should nave decided to cast their votes tonight in support of the Government.

The issue is not whether we like the Pay Board. The issue is the one fairly presented by the Secretary of State, whether we want any form of parliamentary control over these matters or whether they are to be left to a free-for-all. As I understand it, the hon. Member for Rochdale did not advocate a return to a free-for-all. His policy is one of considerably more severity than has been advocated by the Conservative Party.

I want now to refer to the speech of the hon. Member for Tottenham (Mr. Atkinson). In it I found a number of matters with which I agreed. I agreed with what he said about the public sector having been left behind for a very long time. I agreed very much when he said that we had to have humility in this House, and on both sides of it, because all parties had failed, tragically in many ways, to find the right solution. We must endeavour to find the answer.

The problem that we have is not whether we wish to have a form of incomes policy for the sake of it, but how we tackle the problem of inflation. We must all recognise that inflation is the greatest social and economic evil that there is, and we must cure it. I do not want to rake over the ashes of the past—that is the rôle of the economic or political archaeologist—but we must learn lessons from what has been happening in recent years. We have to learn from our mistakes.

The Secretary of State justified the order removing the Pay Board largely on the ground that he was restoring to Parliament its authority over these matters and over the control of inflation. I find it impossible to accept the right hon. Gentleman's argument. I believe that the authority of Parliament, not necessarily because of the existence of the counter-inflation policy, although it has a rôle in it, has been sadly eroded not just over the past few months but over a number of years past. Our first duty must be to restore the authority of Parliament and to find out why it has been eroded. If it continues to slide as it has done in recent years, especially if it continues the slither that it has taken in recent months, we shall move rapidly to a state of anarchy.

The rot started back in the time of "In Place of Strife", when the Conservative Opposition were prepared to support the approach of the Government, although we had misgivings about some of their policies towards the trade unions. However, the Labour Government of the day surrendered and withdrew that policy. From that moment the relationship betwen this House and the trade union movement changed. The balance shifted dramatically.

If the Labour Party had adhered to its policy in "In Place of Strife" it would have won the 1970 election. I think I would have lost my seat. Painful as that might have been for me and perhaps for some others it would been in the longer-term interests of Parliament that that result came about and the authority of this House was reaffirmed.

In 1970, when the Conservative Party returned to Government, we relied on the policy of free collective bargaining. We coupled that with what we believed to be the fair regulation of industrial power. We believed this to be an essential pairing and that we had first to achieve the fair regulation of industrial power, with which free collective bargaining could operate fairly and control inflation. Tragically, the Labour Opposition joined the trade union movement in resisting that fair regulation of industrial power. The result was mounting inflation, and we were unable to go ahead and hold to free collective bargaining. That was our conversion to statutory control. After every effort had been made by the then Prime Minister to get a voluntary agreement, we were forced to accept statutory policies.

Most of my right hon. and hon. Friends hated those_ policies, but we saw no alternative. We believed that it was necessary to impose them in order that the inflationary trends could be halted and in order that we might provide greater protection for the weaker sections of society.

Mr. William Molloy (Ealing, North)

I accept what the hon. Gentleman says about "In Place of Strife" and what happened afterwards, but if we are to be frank we have to go all the way. There were other factors which irritated the working man. He saw, for example, colleagues of the hon. Gentleman giving millions of pounds to the wealthy. Then he read about the people involved in the Cayman Islands deal. All these matters were discussed on shop floors up and down the country, and working men felt that if rich people could get away with it, why should not they have a go? It appeared to them that the well off seemed to be able to behave as they liked.

Mr. Boardman

I do not want to delve into the reasons or the motives of the trade union movement. I want merely to explain the reasons for the imposition of statutory policies, and how matters developed from there.

I hated the statutory policies, but I believed them to be necessary at the time. We were determined to get rid of them as soon as an alternative means could be provided. Every policy of the previous administration was directed to that end. We recognised the anomalies and distortions that the system created, and the unfairness of rigid controls. We knew that the ways in which they could be evaded by means of promotions and changes in job titles were abuses of the spirit and the intention of the Act.

If we had been able to continue with the development of phase 3, moving into phase 4 with greater flexibility and a fairly rapid move back to a large measure of collective bargaining, I believe that we could have achieved relationships of the kind that I would have supported and, at the same time, that we could have controlled inflation. Tragically, that was not to be so, I believe because of the subservience of the Labour Party to elements in the trade union movement which made them decide to oppose us.

The Secretary of State makes repeated references to the miners and their strike. The Prime Minister never fails at Question Time to refer to the three-day week. I ask Government supporters to cast their minds back to that time. Knowing that there was machinery established under the Counter-Inflation Act which had been approved by Parliament to see that the miners got a fair settlement—the Relativities Board—and knowing that it was the intention of a number of the miners' leaders, though not all of them, to bring down the Government of the day, was it a responsible attitude for the present Prime Minister to support their attempts to overthrow the Government? Recognising, as he has admitted on a number of occasions, the great damage that the strike would do the country, on no occasion did the Prime Minister ask the miners to return to work so that their claim could be looked at by the Relativities Board to see that they got a settlement which, when the report came, would be seen to be fair to them.

The fact that the Prime Minister decided to back those who wanted to bring down the Government has significantly undermined the authority of Parliament. It resulted in the Labour Party getting the lowest vote for some 40 years. Since then, the Prime Minister has found his position and that of the authority of Parliament eroded in a way which has not been seen before.

There has been, despite the point repeated by the Secretary of State, an abject submission to almost every demand made by the trade union movement on the Government. The order we are debating has been brought forward in direct response to the trade unions' demand that the Pay Board should be abolished. There are those such as Mr. Scanlon who today have more authority than members of the Cabinet, more authority, for instance, than the Secretary of State for Education who, when in Opposition, made some brave speeches in support of parliamentary authority prevailing over extremism outside.

I do not wish to detain the House by recalling the slide that has taken place since February. I wish to look at the future and at the order which we are debating. The consequences of the order mean a free for all, no restraint and, I fear, a big boost to inflation. I accept that rigid pay controls can never continue for long. I support free collective bargaining. I support that wherever we can be satisfied that both sides are free and have reasonably equal bargaining power.

I believe that in most of industry and commerce there is a growing recognition that the interests of employers and employee are complementary. There is a recognition by those employed that their jobs, homes, holidays and pensions depend on their employer not only remaining in business but remaining prosperous. There is a recognition that by overpricing their demands they can price themselves out of jobs. We have seen a number of illustrations of this.

I accept that we should have free collective bargaining in the areas of which I speak, provided that the Government accept that if employees are greedy—

Mr. Molloy

Or if the employers are greedy.

Mr. Boardman

—or if employers are weak the taxpayer is not left to pick up the bill. If we are to have free collective bargaining the consequences of overpricing demands and of weaknesses must fall on those who are at fault and must not be left to be met by the taxpayer.

I recognise that one of many weaknesses of a statutory policy is that it can itself be inflationary. The ceiling of a statutory policy becomes the floor, and the House will recognise that, in the result, the phase 3 ceiling was inflationary. Yet there are areas where free collective bargaining cannot fairly operate, where power is all on one side, where the employer cannot go bankrupt and where the public cannot do without the goods and services supplied. This is mainly, though not necessarily, in the public sector. The criterion is monopoly, not ownership of the enterprise. In this area the Government have a rôle—indeed, a duty—to keep a balance. There cannot be free collective bargaining where an employee can say "Pay up or else"—where the "else" is national ruin. In these circumstances there must be an umpire, some form of arbitration body. This is a rôle which the Pay Board, or some similar, independent body, could well fulfil.

This rôle the hon. Member for Tottenham said, could be fulfilled by the Royal Commission, but hon. Members will know of the slowness with which Royal Commissions come to their conclusions, and in this instance the Royal Commission is not equipped for the job. There must be a body which, where there is a monopoly of power, is able to say whether a decision or agreement is fair to both sides and to the public. There must also be sanctions imposed and upheld by Parliament and applied to those who defy the rules. The rules and terms on which findings or rulings of arbitration must be conducted must in these areas—I am talking purely of areas where there is monopoly power and where an employer cannot go bankrupt and the public cannot do without the goods and services supplied—must be such that the employer, the employee and the public are not exploited.

I agree with the hon. Member for Tottenham that in the public sector employees have often been exploited. I do not want to make party points, but the miners were kept at a low wage relative to the rest of the community in the period when the Labour Party was previously in Government. I must concede that the miners got an increase as a result of pressure on us which we endeavoured to resist. If we look at the whole public sector we find that employees have been exploited, but now they have found they have the power to exploit the public.

In these areas we must have a way of ensuring that terms are fixed which are fair to both sides. In so far as sanctions restrict the freedom of those employed in these areas there must be an assurance that the terms offered to them will be at least comparable to those offered to them who are not subject to such restrictions. Employees should also be entitled to some premium for accepting restrictions which are not applied generally outside. There must be some board or body to ensure that we get a smooth transition from what has been the position into the free collective bargaining which, I hope, we can have.

We are debating the order at a time when figures announced this morning show that weekly wage rates in the past two months have risen at an annual rate of 42.6 per cent. This is a time when party doctrinaire policies must be put on one side so as to achieve, if we can achieve, a sensible policy of restraining wage demands which would otherwise spark off hyper-inflation. I accept that a large element of rapid pay increases has been due to the threshold agreements which we introduced when in Government and which were supported by the Labour Party. but the free for all that can so easily follow the removal of all control, by means of the order, piled on top of the threshold agreements, with no control over intervals between wage demands, can lead to a type of hyperinflation which this country must never see if it is to survive.

The sole protection offered is the social contract, a very conditional contract to which many trade union leaders have paid only scant lip service. Mr. Scargill, for instance, has said: The National Union of Mineworkers has only one social contract—a loyalty to the membership. There can be no contract with a capitalist system. There are other examples of this attitude. I wonder to what extent we can place all our economic future upon the keeping of that social contract. I accept that there are many trade union leaders and a large part of trade union membership who will wish to see that contract honoured to the full and who will do-their utmost to bring their colleagues into line with them.

I wonder also what further prices the Secretary of State will be prepared to pay to ensure that the social contract is kept. He paid some big prices to get it made. Are there further bills to be picked up so that it is kept? I wonder how much longer the so-called moderates like Mr. Joe Gormley of the NUM will override the more strident voices of the Mick McGaheys. I use them only as examples, but hon. Members know that there are those who will seek to destroy the social contract. I wonder whether they will all be good boys till the next election and, if so, what will happen then.

The order removes the only instrument to contain unreasonable demands and to resist undue pressures—some may say blackmail—by those with monopoly power, and the only means of resisting an unfair distribution. I recognise its imperfections and I hope that we can operate without it, but to remove the power to have a Pay Board, a body to fulfil whatever rôle the Government of the day believe proper in the interests of all the people, is a matter of grave regret and shows immense irresponsibility. It yields to those who are able and prepared to use industrial power at the expense of those who are too weak or too responsible or unable to do so. For that reason and that reason only, not because I love pay boards or statutory counter-inflation policies, I must oppose the order.

7.52 p.m.

Mr. Stanley Newens (Harlow)

The hon. Member for Leicester, South (Mr. Boardman) talked of trade unionists exploiting the public. Like his right hon. Friend the Member for Lowestoft (Mr. Prior) and several of his hon. Friends, he argued as though wage increases—

Mr. Arthur Lewis

On a point of order, Mr. Deputy Speaker. I know that one must not criticise the Chair, but I want to make a statement, with your permission, Mr. Deputy Speaker. I have sat—

Mr. Deputy Speaker (Mr. George Thomas)

Order. The hon. Member may raise a point of order but not make a statement.

Mr. Arthur Lewis

Then I want to raise a point of order. I have sat in the Chamber from 2.30 except for three minutes when I went out to make a phone call. I have seen right hon. and hon. Members on both sides come in, get called, speak and walk out. I am not objecting to my hon. Friend the Member for Harlow (Mr. Newens) being called but I strongly object to the fact that hon. Members who sit here throughout the debate and never leave the Chamber are never called, while the hon. Member for Leicester, South (Mr. Boardman) can say that he was not present to hear the opening speeches and that after he had made his speech he will be leaving and will not be back for the closing speeches. Having said that, I too will now walk out.

Mr. Deputy Speaker

I think that that answers the point of order.

Mr. Newens

I was saying that the hon. Member for Leicester, South and a number of his hon. Friends had argued as though wage increases were the major cause of inflation. He spoke of the monopoly power of trade unions and blamed working people as the root cause of inflation. That argument is insupportable because it completely neglects the other causes of inflation, such as increasing unit costs, shrinking demand, the rapid increase in world commodity prices, the great upsurge in rates of interest and soaring land values, pushed up by speculators. All these factors have played a considerable part in causing inflation.

The right hon. Gentleman and his hon. Friends are totally unfair when they suggest that throughout this period wage inflation has been the major cause of inflation.

Mr. Prior

Since the hon. Gentleman has mentioned me as saying this, I should point out that I read a quotation from the Chancellor of the Exchequer, which I no longer have with me, having sent it upstairs. That quotation said plainly that, now that commodity prices were evening out, the main source of inflation in future would be wage inflation. I was merely quoting the right hon. Gentleman, but I think we all know this to be true.

Mr. Newens

I heard a good deal of what the right hon. Gentleman said, but he is dodging my point by sheltering behind my right hon. Friend's quotation. Far too many hon. Members opposite say that the major cause of inflation is increases in wages. This is a class argument. The Conservatives argue that some of us on this side talk in class terms. But they are talking in class terms when they suggest that working people are the major cause of inflation. I find it odious and repellent to any sense of justice and equity that men earning £50,000 to £100,000 a year, or even, like all of us in this House, £5,000 a year, should complain about the effects on the economic health of this country of those who earn the most paltry wages, under £20 or £30 a week.

It is sanctimonious humbug for people to talk in those terms who could not live on 10 times the income that they expect to be sufficient for others—particularly when much of the income drawn by the wealthier class of the community is unearned income, for which they do not have to exert themselevs in any real labour.

Mr. Michael Marshall (Arundel)

Would the hon. Gentleman not agree that this is a matter not of class but of simple arithmetic? We do not wish to make a party point, but surely he should be willing to do his sums. If he takes the rate of wage increases gained by 9 million trade unionists and compares the total with the kind of wage increases that he may care to take from among the over-£5,000 a year executives, he will find that the two sums do not compare. We have to look at where the greatest weight of wage increases falls.

Mr. Newens

But is there any equity or justice in people saying "If I get my salary increase or my unearned income goes up by £10,000 a year, I am only one and that will not affect the economy; what matters is when 9 million trade unionists get their much smaller increases."? One cannot expect trade unionists or those who are not unionists but belong to the lower-paid sections to accept that it is a law of society which they should not seek to change that their incomes should be restrained while the incomes of much better off people are not so restrained.

Inflation would have occurred under the Conservative Government from 1970 even if the working class had accepted wage cuts. Inflation occurred during the freeze, when the major causes of inflation were imported. Those who blame the trade unions and bleat about the lower paid, for whom they usually do nothing, are in reality expecting working people to absorb rising costs and accept a lower standard of living, which the majority of them are not prepared to do.

The statutory policy did not help the lower paid. It did a great deal of harm to their standards. Experience proves that wages, where they rise, certainly do not rise because of a statutory incomes policy. Wages may rise where there is a shortage of labour and people pay more in order to attract labour. But, generally, wages rise where the front runners, who are often militant trade unionists, have achieved higher standards and others argue for increases in reference to those higher standards. In talking in terms of nurses or teachers, one often quotes ex-examples of what other workers have achieved, very often as a result of trade union struggles.

A statutory incomes policy has done nothing to raise standards, real or in any other respect, of lower-paid workers. The nurses, hospital ancillary workers, teachers and people who have been employed by the State have, as my hon. Friend the Member for Tottenham (Mr. Atkinson) pointed out, been exploited by the community over a considerable period. A statutory incomes policy has restrained lower-paid workers. The freeze did that, and so did the Pay Board.

I want to refer to a particular example which illustrates the perverse way in which the Pay Board could behave. In doing so, I had better declare an interest. I am a director of the London Cooperative Society. This example concerns the wages of Co-operative employees. The Pay Board intervened under stage 2 to restrain the wage increase of Co-operative employees, which caused considerable dissatisfaction. An order was laid in the House. That was prayed against, but the Prayer was then voted down—as a result of the votes of right hon. and hon. Members of the Opposition. Subsequently, an employee of the London Co-operative Society initiated a legal action with the support, as it happened, of her trade union, the Union of Shop, Distributive and Allied Workers. That action against the London Cooperative Society was heard in the county court. The county court found for the plaintiff. Therefore, the Pay Board agreed to allow the increase to be paid, and Co-operative societies throughout the country paid out.

Everyone thought that that was the end of the matter, but in due course, when the settlement under stage 3 was reached between the Co-operative employers and the trade unions, the Pay Board stepped in and ordered that the amount paid out in excess of the stage 2 limit as laid down by the Pay Board—despite the fact that it had been paid out because of the test case in the county court—must be deducted from the stage 3 settlement.

One can imagine the sense of injustice that it produced among low-paid shop workers when they realised that the Pay Board was to deny them the opportunity of having an increase which had been agreed between the employers and the trade unions. Despite everything that could be said, the Pay Board remained firm.

If the Pay Board had remained in existence and been successful, it would undoubtedly have produced a strike among a section of workers who have an excellent record of good labour relations, a strike which would have been caused through no fault whatsoever of the employers. That is not an isolated case, as hon. Members who have followed these matters know very well.

We have at present—but I hope not after today—an institution which has often produced industrial strife instead of mitigating it or doing away with it. In those circumstances there is a very strong case for the abolition of the Pay Board. It has not even been useful in helping to prevent industrial strife in many cases; nor has it been useful in helping to uplift low-paid workers. Even when gross pay increases apparently keep pace with the increases in the cost of living, and when one considers the increased level of deductions in many cases, one finds that those who receive these pay increases are worse off in real wage terms. I believe that is so in the case of the lower-paid nurses at present. If the Pay Board were not abolished now, the industrial disputes produced by the deep sense of injustice felt by many workers would undoubtedly multiply and the situation would become very much worse than it is at present. Many people who belong to the upper and middle-class echelons of society are able to avoid the limitations which are imposed by the Pay Board. It is possible to do this in many cases by changing one's job, or by moving around, with a, certain amount of subterfuge accepted by an employer, when a job is redesignated. It is possible for certain sections of society to do this, but not for other sections. This means that the Pay Board perpetuates injustice and helps to increase dissatisfaction throughout the community.

The hon. Member for Rochdale (Mr. Smith), who has now left the Chamber with his Liberal colleagues, talked about U-turns. I hope that the hon. Member for Oswestry (Mr. Biffen), whom I see seated on the Liberal bench, is not following the example of the hon. Member for Woolwich, East (Mr. Mayhew), who was previously my hon. Friend. The hon. Member for Rochdale said that there had been many U-turns. I have not made a U-turn on this issue. I have endeavoured to be consistent throughout. I opposed the statutory incomes policy before 1970 and I have opposed it since. That is not because I do not believe in equity and justice. It is because a statutory incomes policy, as we have seen it, militates against equity and justice.

I look forward to a Socialist policy in which there will be a radical redistribution of wealth in society as a whole. In those circumstances there will have to be genuine equity in incomes, but that can be achieved only in those circumstances. Until then I oppose a statutory incomes policy which is a fraud and a decoy. The Pay Board is a part of that fraud and decoy and must go. I shall certainly take great pleasure in voting for the order. I very much hope that we shall see the end of what has been a very unfortunate experience and that we shall learn sufficient not to bring back anything similar in its place.

8.10 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

The hon. Member for Harlow (Mr. Newens) seemed to me to talk a good deal of sense. I agreed with much of what he said. But what has interested me about his speech and about much of the debate so far is the small extent to which we have talked about inflation and the large extent to which we have talked about one group of workers or another, one anomaly, one particular situation, or the effect of wage rises and the speed with which they are taking place.

Where I would cross swords with the hon. Gentleman is on his audacity in suggesting that property speculators were causing inflation. I remind him that the price of property is falling, but inflation still seems to be getting worse. How the hon. Gentleman can blame property speculators I do not know. He also talked about import prices. Does he not know that they are falling too? It might have been wiser if he had concluded that it is not imports, property speculators, trade unions or any other group in society that cause inflation; it is Governments who spend too much money.

Mr. Newens

I agree that commodity prices are going down and that there has been a change in the property market, but I was speaking in a rather longer-term sense. I hope the hon. Gentleman will agree that during the past decade a considerable measure of inflation has been produced by precisely those two factors, increases in commodity prices and property speculation, although I entirely accept that there is a change in the climate.

Mr. Ridley

I do not agree with the hon. Gentleman that the two things he mentioned have had any affect upon inflation. It is a fascinating thought that the only item that was not controlled by the Price Commission under stage 3 was the price of houses, and it is the only item that is falling in price, apart from shares on the Stock Exchange. How those who advocate the control of prices and incomes by law can square that, I do not know.

I want to ask the supporters of such policies an even more urgent and fundamental question. We are on the brink of inflation which will sweep away society as we have known it, our economy as we have used it and the civilised life that has existed in these islands for centuries. We are on the brink of an anarchy which will breed more inflation, which will in itself breed more anarchy.

In the light of the possible impending Armageddon, we must ask ourselves whether we are justified in going on fooling around with the sort of policies we have been employing. My right hon. Friend the Member for Lowestoft (Mr. Prior) went through the list—the Three Wise Men, the guiding lights, the norms, the nil norms, the prices and incomes boards, the pay boards, all the paraphanalia. My right hon. Friend the Member for Farnham (Mr. Macmillan) also mentioned them. My right hon. Friend the Member for Lowestoft came to the wrong conclusion. He said that we must devise a policy which works. The right conclusion is that none of them works. None of them has ever worked, and in my opinion none ever will.

Nor do I think it is all that desirable that they should have worked. For them to have worked would have delivered into the hands of the bureaucrats great power and authority, and it would have caused misallocation of resources. If the miners had been held down in 1972 and again in 1974, so that they received only the permitted increases under the policy, how many miners would we have in the pits today? What would be the work force? How would the distribution of labour in the economy ever be achieved if we were able to hold people to the norms dreamt up in codes and White Papers? I do not believe that it is always desirable that we should seek to achieve the degree of control that my right hon. Friends have been seeking.

I do not think that it matters whether the policy is compulsory or voluntary. By definition, if it is to work it must achieve results of the sort I have mentioned, which would be unfavourable. But all this seems to me to be academic, because the truth is that the policy has not worked. When phase I came in, the rate of inflation was about 7½ per cent. per annum. It is now probably over 20 per cent. We have seen the rate per annum treble during the period when the toughest statutory prices and incomes policy has been in force.

Has anyone come to the conclusion that there is something we can do about the statutory prices and incomes policy to make it more effective? I have not heard during the whole debate one suggestion for rectifying the errors which are all too patent in what we have been seeking to do. If we have the courage to be honest with ourselves, we shall admit that it has not worked.

Of course, it is infinitely desirable that a device should be found that would work. Most right hon. and hon. Members would like to find such a device, as would the National Institute and The Times. They would like a device whereby we could continue to keep the economy going at a high rate, with full employment, and yet stop prices rising. We are seeking a sort of philosopher's stone that we have never yet found.

My right hon. Friend the Member for Lowestoft quoted The Times leader of this morning. He did not go to the end of it, and therefore I should like to quote this passage: The last Conservative government committed a grave error of economic management in trying to control inflation by excessive reliance on wage and price controls, while following recklessly expansionist monetary and fiscal policies. The result was intolerable strain on the chosen instrument, serving to discredit it. I agree with that, except for the last line, which seems to imply that if the Conservative Government had not done what they did statutory control would not have been discredited and therefore in some way would be credible. I do not believe that to be true. The problem is the impossibility of reconciling the need to control inflation with the desire of Governments always to spend themselves out of trouble and out of recession.

It is fitting that we should be discussing the matter today, when three days hence the Chancellor of the Exchequer will put forward a further reflationary package, or—if I may translate that into simple language for all to understand—a further dose of inflation on top of what we already have. I do not believe that any hon. Member believes in his heart of hearts that a social contract, a pay board or a prices and incomes commission, whether run by Aubrey Figgures Diamond or whoever, will have the slightest effect. Hon. Members are right, because what causes inflation is the excessive stimulation of the economy by fiscal and monetary means.

Therefore, let us be frank and acknowledge that if we want to curb inflation we must reduce the money supply. We must avoid Monday's extra reflationary package. We must seek to avoid other ways of doing it. In a way we are pretending to ourselves that by passing these laws and by setting out on this path over and over again we have tried to stop inflation. I think that in our heart of hearts all of us know that we shall not curb inflation unless we are prepared to see a rundown in the level of activity and the resulting unemployment which could follow.

I shall be constructive. I shall put forward a policy which might conceivably reduce our rate of inflation. I shall do so in brief outline. First, it seems necessary to isolate the public sector from the private sector. In the private sector I do not believe that any prices and incomes policy is necessary. If the money supply is restricted, firms can pay what increases they can afford. If they are pushed too far, they will go out of existence or they will have to reduce the number of people they employ. That is a discipline both on managers and on employees and trade unions. I think that that would work if it was not for the Secretary of State for Industry trying to shovel the money in at the back end as quickly as employees take it out at the front end. It would be necessary to abandon the policy of rescuing bankrupt companies.

That is all that is necessary to control wages in the private sector. It requires no boards and no civil servants. There would hardly be any need for the right hon. Gentleman. He could go back to his usual charming polemics and not carry the responsibility which he now has on his broad shoulders.

The public sector is very much more difficult. On this matter I must indict the Labour Party. It is its constant desire to add to the public sector—namely, to add to the difficulties. Every time a new industry or a new firm is brought within the public sector, the defence which exists within the private sector is eroded.

In the public sector the Government should have two ideas in mind in trying to work out an incomes policy. The first is that they should seek to ensure that the supply of labour of the right grade is readily and willingly available for all the businesses and occupations which are within the public sector. If the public sector is short of nurses, miners or railway drivers, the Government, I believe, have a duty to increase their remuneration. The worst thing they can do is to use the public sector as a sort of whipping boy, as an example to the private sector. That they should always forbear to do.

Secondly, the Government will not ultimately be able to control the upward movement of wages in the public sector. They may be able to stop them being too low but they will not have the ability to stop them rising too much. The coal mines and the electricity industry have an open-ended ability to tap the Exchequer. It is a difficult argument but we must accept it. I do not believe that there is a way round it. If there is, it must be through selling coal, electricity or hospital treatment at the true market price and allowing those who would overprice their labour to price themselves out of the market.

Mr. Bob Cryer (Keighley)

The hon. Gentleman is putting forward the jungle argument that represents his section of the Conservative Party. Will he explain how it was that when his own administration achieved a record level of unemployment inflation continued and we did not start to deflate? Does he accept that in our present economy, when we have lost an enormous amount of capital investment and when the amount of production sold has begun to decline, the cost of servicing that capital investment inevitably means that prices must increase and not decrease? We are not in the jungle that the hon. Gentleman describes.

Mr. Ridley

I think that the hon. Gentleman and his hon. Friends who have taken part in the debate would be in a wages jungle. I congratulate them on their wisdom in wanting to be in that jungle. I must answer the hon. Gentleman's first point first. It was his right hon. Friend the Member for Birmingham, Stechford (Mr. Jenkins) who deflated in 1968 and 1969 and to a small extent in 1970. The resulting deflation and unemployment came through in 1970 and 1971 The moderation in the rise of prices which followed took place in 1971, when the interest in unit output costs dropped from 11 per cent. to 6 per cent. I believe that if there had been no reflation at that time our rate of inflation might now be as low as 5 per cent. or 6 per cent. It was the reflation of 1971 which brought us to the pitch which we have now reached.

Perhaps the hon. Gentleman will forgive me if I do not take up his second point. Time is short and to take up that point would divert me too much from my argument.

There are difficult tasks to assume in deciding how to deal with public sector pay to keep it in line with pay in the private sector. There is the difficult position in which the Government find themselves as the authority who must control inflation when they are responsible for paying public sector wages. There may be room for a board or advisory committee within the public sector to advise on relationships and to tell the Government when their own incomes policy is conflicting with their duty as an employer. Such a committee should be purely advisory.

I do not believe that there are any modern States which have the machinery to make it possible to control wages in the public sector. No country has been able to do so satisfactorily other than the USSR and other Communist countries in which control is absolute and is enforced by police. I think that the word "policing" which was used by my right hon. Friend the Member for Farnham made clear the truth of what I am trying to say—namely, that it is only by factory police that that sort of iron discipline would be achieved. God save us from that.

Mr. Foot

Hear, hear.

Mr. Ridley

The Secretary of State, who is so kindly saying "Hear, hear", will follow me one tiny step forward if he joins me in thinking that the only ultimate answer is the complete demolition of the public sector and its return to private enterprise.

The funny thing about the speeches from the Government benches has been the extent to which free collective bargaining has been mentioned. Many Labour Members have mentioned those words, and none more than the Secretary of State. I love to hear them. I always love to hear the word "free". Equally, I always love to hear the word "bargaining". I am prepared to let "collective" go so as to further the rapport between the two sides of the House. If there is to be collective bargaining in wages, may I ask why there is not to be free collective bargaining in prices, dividend payments and interest payments? I ask that by the by.

We must note the fact that the trade unions are determined to go on being capitalist so as to operate in a free market and to indulge in free collective bargaining. In this case we will not stop them by laws, legislation, contract or compact or anything of that sort. We will control those market forces only by erecting market forces which are equally powerful and countervailing in order to contain them.

In the light of this, I do not see quite what rôle the Pay Board can continue to play in the future. If my right hon. Friends were to say that they saw a rôle for it in the arbitration of public sector wages, I would feel much sympathy with that view. If, however, the Pay Board is to be retained in their ideas as the instrument through which statutory control of prices and wages right throughout the economy is to be exercised, I fear that I shall not be able to accompany them into the Lobby tonight.

8.30 p.m.

Mr. Dennis Skinner (Bolsover)

It has been a rather strange debate, but that is not unusual for this place. The usual faces have been around. We have just heard another lecture from the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) about his new model mark V or whatever it is. I recall that when I first came here in 1970 he was lounging on the Treasury Bench. Not long after that he was busy rescuing Upper Clyde Shipbuilders, or assisting to do so. It was "To hell with market forces" then.

Of course the hon. Gentleman lost his job, and people change when that happens—or some people do. Now he is back at full circle. When I arrived at the House, in 1970, I was told that the hon. Gentleman was a "market forcer", if that is the right term. He was in the Powell band at the time. He is not really in the Powell band now, of course, because he misses out one important link—not that Mr. Powell himself was always consistent in the matter. I refer, of course, to the Common Market.

Therefore, when the hon. Gentleman gets concerned about inflation and delivers his lecture claiming that all previous speakers in the debate have not gone to the real subject—inflation—I have to inform him that he should now be thinking of doing another U-turn. He should be lining up with his hon. Friends such as the hon. Member for Oswestry (Mr. Biffen), who has decided not to get involved in this matter today because it would split the Opposition forces into even more fragments.

The hon. Member for Cirencester and Tewkesbury, in considering his formula of answers to inflation, should remember what my right hon. Friend the Secretary of State for Trade said on Monday. My right hon. Friend told the House what some of us already knew, that we were running a trade deficit with our Common Market partners—if "partners" is the right word—of £2,000 million after only a few months' membership. If we are to combat inflation, one of the matters which we have to concern ourselves with at the very beginning is the question of the Common Market, and I am thankful that we are going to provide an opportunity for the British people to decide that argument once and for all.

Therefore, although the hon. Gentleman has some clever ideas about solving the problem of inflation, the fact is that he cannot solve it unless he helps to get off Britain's neck the massive inflationary deficit which is increasing even at the present time as a result of our membership of the Common Market.

Then we were graced with the presence of the right hon. Member for Farnham (Mr. Macmillan). He has been described, I am told, as one of the members of "Dad's Army". A nucleus of Tory ex-Ministers, some of whom have dashed off to the City and some of whom are still awaiting appointments there, have banded together in a kind of Tory grouping to try to suggest euphemistically to their colleagues that one of the ways in which to get rid of the Leader of the Opposition is to talk about having a coalition.

They fear that the Labour Party will form the next Government with an overall majority and, since they have no other weapons at their disposal, they and most of the media and the national Press, with a few honourable exceptions, are trying to brainwash the British people into believing that the crisis is of such dimensions that it will not be solved unless we get Dad's Army to come along, perhaps with Dad himself.

I listened intently to the observations of the right hon. Member for Farnham. I noticed that for a moment—only a moment—the right hon. Member for Chipping Barnet (Mr. Maudling) slunk into the Chamber and parked himself at the very end of it. I imagined for a moment that we were to be delivered of one of those grandiose lectures of his. I notice that he has written another article to The Times. I do not know how much he is paid for them but I have no doubt that it would not fit into phases 1, 2 or 3. However, he was not to do his usual Stint.

Perhaps the right hon. Gentleman and some of the others on the serried ranks of the Opposition benches cannot find it in their hearts to make an outlandish attack upon what my right hon. Friend the Secretary of State has brought to the House today.

I do not want to spend too much time on the latest acquisition of the Liberal Party. I shall merely say that I do not know what the hon. Member for Woolwich, East (Mr. Mayhew) is doing tonight. He may vote; it is not a common characteristic of his. If he does, I hope he will bear in mind the election manifesto upon which he fought only four months ago. If anyone should be prosecuted under the Trade Descriptions Act, it is the hon. Member. He fought on a platform of free collective bargaining, the abolition of a prices and incomes policy, renegotiation of the terms of the Common Market entry—[Interruption.] I have no doubt he put out a little slip of paper as his own, as a cover note.

The fact is that the hon. Member for Woolwich, East was not principled enough to stand up and say "I do not accept the Labour Party manifesto that has been drawn up by the National Executive Committee and the Parliamentary Labour Party, and I am delivering my own because it is different here and there in certain respects."

The hon. Member wants the best of all worlds. We have to ask why he did not join the Liberal Party at the time of the last election. There are theories about that but they do not have a great deal to do with the order that is before us. I am referring also to people who have taken part in this debate, and to some who should have taken part—

Mr. Paul Tyler (Bodmin)

rose—

Mr. Skinner

You have had enough trouble today. I am referring to people like the right hon. Member for Orkney and Shetland (Mr. Grimond), the ex-Leader of the Liberal Party, who is so often telling the workers what to do and voting in Parliament to keep down their wages. At the same time he has a string of directorships behind him.

Mr. Tyler

Is the hon. Gentleman aware that when a Member is elected to the House he is elected by the people of his constituency upon his election address? I am sure that the Secretary of State, who is a noted constitutionalist, would bear me out that a parliamentary candidate puts his proposals before the electorate. In accusing my hon. Friend the Member for Woolwich, East (Mr. Mayhew) in this way without warning the hon. Gentleman is doing himself and his party a disservice.

Mr. Skinner

rose—

Mr. Deputy Speaker

Order. I hope that the hon. Gentleman will not be tempted. The conditions in which we are all elected are not for the time being the question before us. We are here, and I suggest that we deal with the order.

Mr. Skinner

I agree, Mr. Deputy Speaker. I am not suggesting that you are that good that you ought to get measured for the wig yet.

I have been attacked on a number of occasions in this House and never been notified of what was to be said. But, more important, I do not care. It is time that the hon. Member for Bodmin (Mr. Tyler) and many more hon. Members in this Chamber understood that changes are taking place. Many of us on these benches are fed up, sick and tired, of some of the silly conventions which exist in this place to protect and give privilege to Members of Parliament when it suits them. Of course it was based on the Eton Debating Society, but it is changing, though perhaps a little slowly. I hope that others will copy me —certainly they will—in their attitude towards debates in this Chamber.

The operation of the Pay Board and stages 1, 2 and 3 during the last two or three years—not three years, but almost three years—has shown that the lower paid—those who are not as well organized as others—have been hit hardest by this form of incomes policy.

When I spoke to the nurses in Nottingham a few weeks ago at a demonstration, which three or four years ago I could never conceive happening, I had to tell them and their leaders, particularly their leaders, that one reason for their being on the streets that Saturday morning with the radiographers and hospital technicians was that they, above all others of the lower-paid, had been subject to incomes policy after incomes policy and as a result they had gone lower and lower down the scale.

This is one of the most important promises that the Labour Government have kept. They have not kept them all. I do not want to refer to them tonight. But we shall be able to tell the electorate in the ensuing election that this and several other important promises that we gave at the last election have been kept. The people will recognise that we have kept our promises because, throughout the exercise on the last incomes policy, they saw how many people were allowed to escape. Property developers were able to make fortunes. They are now squealing because rents have been frozen for a short period. That is despite the fact that in Committee on the Finance Bill they had an amendment moved by the Tories and the Liberals in concert which- reduced the rate of Mk to be paid from 83 per cent. to 43 per cent. They were not subject to any incomes policy. Neither were a good many other people.

The building societies were never subject to it. They were able, throughout that two-year period, to raise mortgage interest rates from 8½ per cent. to 11 per cent. Why did that happen? Because at the same time as the previous Government were inflicting an incomes policy upon the workers they had a £4,000 million deficit in the 1972 Budget, the net result of which was that interest rates rocketed sky high and local authorities also had to foot the bill. When the ratepayers' representatives ask why rates have rocketed during the past two years, we should tell them that the Tory Government, in an Act, caused the borrowing rates to rise to 15 per cent., 16 per cent. and even 20 per cent. on occasion for borrowing by local authorities. That is why the people know that these matters relating to an incomes policy must be destroyed once and for all.

They saw the commodity speculators making handful after handful even during the course of the election. They witnessed during the election that whilst they were subject to the pay restraints the four major banks made profits of up to 150 per cent. in some cases. They have also noticed Sir William Armstrong, one of the highest members in the echelons of the establishment, receiving £34,000 to do a little bit of work on -behalf of the Midland Bank, besides receiving £8,000 from the taxpayer through the pension he receives as a result of working as a civil servant for a few years.

The people recognise the hypocrisy of the incomes policy. They recognise that hundreds of thousands of people at the top end of our society have been able to escape. After this long exercise, extending over 20 years or more, they realise at long last that they have had enough.

Not only are we getting rid of this order tonight; we are getting rid of a legacy, which has hung round the neck of the Labour movement for almost two decades. When we have finally got rid of it we can make some changes. That is why this is one of the most important measures we have had to deal with in the short lifetime of this minority Labour Government.

That is why the Opposition do not have the audacity as a combined force to oppose the order tonight. That is why we shall win when the election is called very soon, in the autumn, and when a Labour Government with a full parliamentary majority is returned.

8.47 p.m.

Mr. Douglas Henderson (Aberdeenshire, East)

I am delighted that hon. Members should have the opportunity to hear a Scottish voice tonight, because after the next General Election, when the SNP wins in Scotland, the only place this voice will be heard will be in the Scottish Parliament, to which you, Mr. Deputy Speaker, will always be a distinguished and welcome guest.

I had a slight disappointment at the start of this debate on listening to the speech of the Secretary of State. I listened with great care while he elaborated on the follies of the Conservatives and when he dissected one by one the hon. Members on the Liberal benches. I thought he might have remembered that there were more than two Opposition parties in this House.

Although the Secretary of State did not ask us a question, I will say that our party is opposed to the Pay Board both on practical and on political grounds. We shall be supporting the order which the Secretary of State is putting forward tonight.

It may be that if we were living in a static economy, not subject to outside pressures, with little or no change in technology, and no great increases in living costs, a body such as the Pay Board might be able to operate. But in the situation in which we live the Pay Board has had a malicious and unpleasant effect on the whole future of industry. In the first place it has frozen anomalies existing within companies. Many companies today recognise the need to change wage and salary structures which are totally out of date, and have been prevented from doing so because of the Pay Board.

The second feature is that the system has given virtually no incentive to the improvement of productivity. Under the last phase 3 counter-inflation order the amount available to employees for improvements in productivity is not to exceed 50 per cent. of the increase allowed within the period, which is 31 per cent.

I can say, from my own experience before I entered this House, that I have seen cases where companies and their employees were prepared to co-operate to achieve measures of productivity of 40 per cent., 50 per cent. and more. But they would be restricted to a paltry 3½ per cent. even though there was a willingness and a desire to share the benefits of the increased productivity among the staff. In many areas the restriction has created havoc in industrial relations.

We have spoken before in this House of the Industrial Relations Act and the damage it has done. I would think, however, that the Pay Board runs it a pretty close second in terms of the havoc it has done to industrial relations. There has been much unpleasantness in my constituency where people have been spying on neighbouring companies to see whether they are paying a little over the odds and if necessary, informing.

Mr. Foot

Like the Tory Whips.

Mr. Henderson

It would not do to speculate on the Tory Whips this week.

The question is: could this body ever have worked? If it could have worked it would have required an army of inspectors, one in every factory, permanently watching what was going on. Nowhere has the unfairness of the Pay Code been more apparent than in North-East Scotland, where, with the great developments, there is a rapidly changing economy and where we would be pardoned for imagining that the purpose of the Board was to put existing companies out of business and hand the labour forces over to newcomers, because that is what is happening.

In the building industry established companies -have been compelled to make substantial additional payments to match the money offered by incoming contractors in an attempt to keep their men. Immediately they do that the Pay Board brings the whole of its might and majesty to bear and orders have been served to restrict the payment of higher wages. These firms are prohibited from doing what is natural, to protect the existence of the business. Even a small company in my constituency employing only a handful of people was forced to go through the rigours of the Pay Board and reduce by several pence per hour wages which it was forced to pay to compete with incoming industry.

In the latest Pay Board report, its fifth, covering 1st March to 31st May, there appears the name of AF Engineering, on which the order was served. It is an honour for a firm's name to appear in this document. AF Engineering was ordered to reduce the wages to the men by between £4 and £6 a week, and had it not been apparent that the Pay Board's demise was imminent, that company would have been forced out of business and the fishing fleet it serviced could have been permanently grounded. I take this opportunity to thank the Secretary of State for Employment for the assistance and consideration he gave in this case when we approached him about it.

What has annoyed us in Scotland even more has been the appalling report on London weighting. I have a letter here from the National Association of Local Government Officers' North-East Scotland branch, which that the feeling in its area is that all the arguments used in favour of a London weighting apply there equally well. The feeling is that the Government believe that, compared to London, North-East Scotland has no right to consideration, and I have heard from other trade unions which are alarmed at the way the board has conducted its report.

The last official figures available show that Scottish household incomes are £3 a week lower than the United Kingdom average and £7 a week lower than the London average before weighting. The cost of living in Scotland is 5 per cent. higher than the United Kingdom average. The people of Scotland are being asked to accept the situation in which London pay is on average £7 higher than theirs before weighting and £15 higher after. In the oil areas our costs are probably 10 per cent. above those in the rest of Scotland and our wages perhaps 10 per cent. below.

We believe Scotland has been a poor relation for far too long, with lower wages and higher costs. Either people are going to have to face up to the fact of over-centralisation in these islands—and perhaps instead of a London weighting there should be a London tax to force the decentralisation—or we are going to find that we shall get demands from all over for similar treatment and similar consideration.

We are not unsympathetic to the cost of living in London. We are certainly aware of it every week when we come here. But it would be extremely wrong for the Government to single out London as the object of special consideration. I hope that when the Minister of State sums up at the end of this debate he will give this proposal very serious and sympathetic consideration and that proper consideration will be given to other areas of the United Kingdom, and in particular Scotland and areas within Scotland. The North-East, which I have the honour to represent, would feel itself particularly hard done by if we did not get from the Minister of State some assurance of a sympathetic understanding of our problem.

There was a proposal in 1971, in the days of the Conservative Government, that there should be a separate cost of living index for different parts of the United Kingdom. That might form a base for giving us real information on a continuous basis on the costs we have to suffer, just as there is information now on the costs that people in London are suffering. We welcome the Government's early action in implementing their promise to abolish the Pay Board, and hope and expect that people who see it will respond to the Government's initiative in this way. Governments of both parties have attempted to deal with this problem over several years and I believe it would be freely admitted that many mistakes have been made by both parties. No one here can be certain he knows all the answers, although some would have us believe that they do. But the Government are entitled to a chance on this; they are entitled to get support on this order. I hope they will get support throughout the country if they go about it in this constructive way.

If we are to control inflation and do all these other things the Government will need support from board room to shop floor behind this type of approach. They have a big educative job to do—and let it not be under-estimated—to get home to people that it is not the number of pounds in their pocket but the value of the pound note which is the crucial factor. That is very important but it is very difficult to convey, as all of us, in whatever party, who have tried to convey it at public meetings and elsewhere will know. The Government have the machinery at their disposal. We wish them well with this policy, which we will support.

The Deputy Speaker

Before calling the hon. Member for Accrington (Mr. Davidson), let me say that if lie is brief I shall be able to call another speaker before the winding-up speech from the Front Bench.

8.59 p.m.

Mr. Arthur Davidson (Accrington)

I am grateful for what you say, Mr. Deputy Speaker, but could you tell me what is "brief" so that I may do my best?

The Deputy Speaker

With pleasure. Eight minutes.

Mr. Davidson

Which is exactly the time I intended to speak. I am delighted to follow the hon. Member for Aberdeenshire, East (Mr. Henderson) because at least he has done something unique. He has actually spoken from the benches opposite about the Pay Board. In my naivety I thought this was a debate about the abolition of the Pay Board, and that was what I intended to talk about. There should be no doubt in anybody's mind that when the Conservative Opposition go into the Division Lobby they will be going into the Lobby to keep in existence the Pay Board. That is what they are doing and it is what they intend to do, despite the fact that almost every one of them when they deigned to refer to it said that it had not been a great success.

I shall give an instance in which the Pay Board was absurd and acted not only as an irritant to industrial relations but as a positive humiliation to workers who were subject to the Pay Code. The Pay Code appears to have been drawn up with the deliberate intention of ensuring that those whom it was designed to help are denied that help. Perhaps Opposition Members who support the continuation of the Pay Code will come to my constituency and explain to the workers why they want to perpetuate the monster.

Paragraph 178 of the Counter-Inflation (Price and Pay Code) (No. 2) Order 1973 deals with anomalies. That paragraph, presumably, was meant to help workers who suffered from an anomaly. A group of foremen at the largest factory in my constituency, Piatts International, had always had their wage rates based upon the wages of the shop-floor workers so that the differential was always kept. The employers, the shop-floor workers and the foremen understood the arrangement. Alas, in the middle of negotiations for the annual wage rates, stages 1, 2 and 3 were introduced. The foremen had to fall back on paragraph 178 of the Pay Code. Certain criteria had to be satisfied.

They had to play the delightful game of deciding when an anomaly was not an anomaly. One does not have to prove an anomaly; one has to prove a miracle to come within the terms of the "anomaly" paragraph. One has first to engage in a game which is called "establishing the link". It is necessary to establish that there is a link between the wages of one set of workers and another, although it is known that there is a link. According to paragraph 178, to qualify as an anomaly on the basis of a link the link must have been broken by the standstill. It was broken in this case. Secondly, paragraph 178 provides that but for the standstill the link must have determined the pay of the group concerned. It did that in this case. To satisfy that condition there must be evidence of that link and clear identification of the pay group being followed, and the effect of the link on the pay of the group concerned must have been known, even if not formally agreed, before 6th November 1972 or have been predictable within a narrow range.

I mention paragraph 178 to illustrate its legalistic, rigid and, at the same time, miraculously obscure language which has absolutely no relationship to the day-to-day workings of wage negotiations.

Hon. Gentlemen on the Opposition benches say time and again that we must have respect for law and order. Usually hon. Members who express that opinion have never been and are never likely to be affected by phases 1, 2 and 3 or by paragraph 178 of the Pay Code—

Mr. Fernyhough

Or by the Housing Finance Act.

Mr. Davidson

—yet they are content to draw up legislation in language that invites people to have disrespect for the law because it cannot be understood by anybody, certainly not by those who are supposed to be affected by it. However, Conservative Members will go into the Lobby to support that form of legislation.

At the end of my eight-minute speech, Mr. Deputy Speaker, may I conclude by saying that I have listened time and again to interesting but repetitive economic lectures by Conservative speakers. They said that we had tried the Pay Code and the prices and incomes policy and that it did not work. Then at the end, in somewhat different language, they said "Let us try something very similar"

It is fascinating to hear the Conservatives. If one suggests something which has not been tried before, something a little different, they call it "Wedgery", "Footery" or "Bennery", or something along those lines. On the one hand the Conservatives suggest that they are not in favour of policies which have been dismally tried and have pathetically failed, but at the same time they seek to replace them by something that is the same but is called by a different name. I call that hypocritical and daft.

I think, Mr. Deputy Speaker, that have lived up to your incantation for Members to make brief speeches—and even Section 178 could not obscure that fact. I am happy to end on that note.

Mr. Deputy Speaker

I thank the hon. Member very much.

I call Mr. Raison.

9.7 p.m.

Mr. Timothy Raison (Aylesbury)

I thank the hon. Member for Accrington (Mr. Davidson) for being brief and for giving me the opportunity to make one or two comments.

There is a certain appealing starkness about the way in which the order says: The Pay Board is hereby abolished". My right hon. Friend the Member for Lowestoft (Mr. Prior), however, made a persuasive case for saying that, even though there have been weaknesses and drawbacks in the system, the fact remains that we are at the moment faced with such hideous escalations of pay and economic dangers that it would be foolish to throw aside any measure which might help us. I accept that the Pay Board and the counter-inflationary policy have not been all that effective in stopping pay increases and inflation, and a counter-inflationary policy of the stage 3 type has serious drawbacks. It is rigid, it imposes disincentives, it is difficult for management to operate and it can be unfair, but at times like the present we must use any effective weapon that is to hand.

The real case for retaining the Pay Board for the time being is that the Secretary of State has no idea what to offer in its place. He spoke of the social contract. I asked him what the social contract was and, more specifically, whether the Government were a party to the contract. He produced a remarkably evasive answer. He said that there was no mystery about the social contract. I read in The Times this morning that at a meeting of the Parliamentary Labour Party Several MPs, including Mr. John Dormand (Easington) and Mr. Charles Loughlin (Gloucestershire, West), said the party should make clear what was meant by the social contract'…". I understand that the hon. Member for Easington (Mr. Dormand) is a Government Whip, and if Labour Whips do not know what is meant by "social contract" I should like to know how the rest of the population can be expected to understand what is meant by the term. Is it a deal between the Labour Party and the trade unions, or is it a contract between the Government and the unions? The Secretary of State was evasive. I noticed that he at least used the word "contract". There are those who use the word "compact". I am not sure what the word "compact" means. I thought it was something that ladies carried in their handbags and whose contents they used to powder their noses. I support, therefore, that a "compact" is a cosmetic device.

But the Secretary of State referred to a "contract". When one has a contract the implication is that there is an agreement between two sides. Who are the two sides to the agreement? It is rather optimistic to think that it is possible to have an agreement unless there are genuine parties to it. If the Government are one of the parties to the contract—I tried to press the Secretary of State on this, but I drew no meaningful response from him—very important constitutional questions are raised. I believe profoundly that the Government must never negotiate as an equal with any other party in the land. If they do, they deny the whole basis of parliamentary democracy.

A few days ago I was reading the Second Reading speech of Aneurin Bevan on the National Health Service Bill looking for quotations, which proved remarkably useful, on the subject of pay beds in the private sector. My eye fell on these words: The House of Commons is supreme, and the House of Commons must assert its sup- remacy, and not allow itself to be dictated to by anybody, no matter how powerful and how strong he may be. Interestingly enough, at that point Sir Henry Morris-Jones rose and said: Would the right hon. Gentleman apply that doctrine to the Miners' Federation? Aneurin Bevan's reply was Certainly."—[OFFICIAL REPORT, 30th April 1946; Vol. 422, c. 60–1.] That raises a very important issue. We are expected to depend on a social contract, yet we are never to be told between whom this contract has been agreed.

The crucial thing that we have to do today is not to worry about this contract. We ought not even to worry too much about boards and other organisations. We need to work out across the Floor of the House what kind of policy we wish to apply to counter inflation.

Over the past year or two—I am afraid that the fault lies to some extent with the Conservative Party—we have seen a transfer of power away from Parliament into industry. We ourselves make mistakes at times in being too prepared to negotiate with industry. We may have made mistakes in playing down the importance of the Parliamentary Labour Party as the representatives of the Labour movement and in playing up the importance of the TUC. Those mistakes can be laid in part at our door. But I hope that over the next few years, whichever party is in power, we shall manage to reassert the supremacy of Parliament in these matters.

What kind of policy ought we to try to agree across the Floor of the House? I think that we must agree so far as we can that we cannot for ever go on fuelling inflation with more and more bogus money. The point was made with great eloquence by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). My approach in these matters is different from his. He likes saving money. I like spending it. Nevertheless we have to accept the truth of what he said.

Secondly, we have to refuse to bail out the nationalised industries again and again. Unless we impose some discipline on the nationalised industries, we shall be at the mercy of relatively small numbers of tough people.

Thirdly, if we accept what I have said and if we accept these policies, we have to thrash out in this House how we are to make sure that the sacrifices which result can be fairly borne. I recognise that if we adopt these policies there will be some increase in unemployment. I recognise that some poor people will be hard hit. Therefore, we have an overwhelming moral responsibility to do all that we can to alleviate these hardships and recognise that unemployment is a very serious scourge. I do not belong to the school of thought which says that it does not matter. It matters desperately. But the first priority must be to get rid of inflation, and we have to subject everything to that.

We have also to look at the balance of power as it exists today within free collective bargaining, which I would like to see restored. I believe, like my hon. Friend the Member for Cirencester and Tewkesbury, in free collective bargaining. It is greatly preferable to statutory policies of control. But if we have free collective bargaining we must ensure that it is a genuine form of bargaining rather than one which is too often shackled or which dips too far in one direction.

I believe that the talk of a social con-tract is mythical. We can solve the desperately difficult problems facing us, but the place to do this is in the House of Commons, not outside.

9.15 p.m.

Sir Keith Joseph (Leeds, North-East)

Considering the inflammability of the subject, the debate has been temperate. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) stated a coherent case forcefully and cogently, and the hon. Member for Bolsover (Mr. Skinner), from both standing and sedentary positions, has made a number of trenchant comments.

Passions in the extreme are aroused by an incomes policy. Some people pin exaggerated, almost mystical, hopes on it while some regard it as economic nonsense misguided if not mischievous and perverse.

But we are considering the relatively narrow issue of whether this is the time to abolish a mechanism which, as I hope to argue, can for certain limited purposes and under certain conditions be useful.

The prospects for the people of this country at the moment are worrying. In flation is running at a high level and there is a wage explosion looming ahead far greater than any conceivable increase in output.

Whether it be from wage earners, salary earners or self-employed, it is entirely natural that there should be a desire to preserve their standards of living and that they should want a net increase at least equal to prospective price increases, with a safety margin and, if possible, an improvement in real terms. Nothing could be more natural. Unfortunately, however, this entirely natural wish, when translated into action, does not necessarily produce the desired results.

If the Government of the day submit to pressures to print money to cover wage claims, then, as we all agree, inflation accelerates. If on the other hand the Government do not print money to cover wage claims, unemployment will rise. We all agree about that as well. We shall therefore face in the autumn wage claims which will lead either to accelerated inflation or to an increase in unemployment if the claims go ahead as at present seems probable.

The House is entitled to ask what is the Government's remedy. As my hon. Friend the Member for Aylesbury (Mr. Raison) has reminded us, the remedy has an element of the cosmetic. It is the social contract. There is a mystery surrounding this. Some people say it exists, some say it does not.

I have read again and again the TUC's letter, and there is much in it with which one can strongly agree. I wish to assume for the purpose of the argument that the TUC deserves complete credit and wants to do its best for its members, the country and the Government of the day. I will assume that that is its wholehearted intention. After all the relatively firm things that are said in the TUC document, one part states: priority should be given to negotiating agreements which will have beneficial effects on unit costs and efficiency, to reforming pay structures, and to improving job security". Those are all admirable objectives, yet they amount to a licence to write a blank cheque.

The TUC—assuming that it meant well in terms of the national interests and the interests of its members and the Government—has not laid down any stringent framework within which wages should be negotiated. It has laid down a relatively loose framework within which any union will later find ample excuse to make a special case for its own members.

I do not wish to imply that the Secretary of State is not worried by the prospect which lies ahead. He referred in his speech with evident anxiety to the implications of the wage situation this autumn. But when one listened to his speech to discover what the Government proposed to do about it, one learned nothing. There was a hopeful reference to the new Royal Commission that the Government will set up, but surely not even the right hon. Gentleman would expect that such a commission, which will not be in action yet, could have any effect on the prospects by the end of this year.

I have ransacked the relevant classics to try to guess what is in the right hon. Gentleman's mind and I have stumbled on a relevant document called "The Hunting of the Snark" I see in the right hon. Gentleman a distinct resemblance to a respected and revered character in that story—the Bellman. The House will remember—

Mr. Foot

'Other maps are such shapes, with their islands and capes! But we've got our brave captain to thank' (So the crew would protest) 'that he's bought us the best— A perfect and absolute blank!' ".

Sir K. Joseph

The right hon. Gentleman is denying himself and the House the pleasure of a little praise. My quotation says: The Bellman himself they all praised to the skies— Such a carriage, such ease and such grace! Such solemnity too! One could see he was wise, The moment one looked into his face! He had bought a large map representing the sea, Without the least vestige of land: And the crew were much pleased when they found it to be A map they could all understand"—

Mr. Foot

This was charming, no doubt: but they shortly found out That the Captain they trusted so well Had only one notion for crossing the ocean, And that was to tingle his bell.

Hon. Members

Order!

Hon. Members

Encore!

Sir K. Joseph

The right hon. Gentleman will perhaps also be aware of the next reference that I shall make. It might have been of the social contract itself that Sam Goldwyn said: A verbal contract is not worth the paper it is written on. Labour has no specific incomes policy at all and is proud of it. The right hon. Gentleman and his colleagues boast of it.

The question which the House, particularly this side of the House and my right hon. and hon. Friends, has to ask is to what extent an incomes policy is practicable. My right hon. and hon. Friends and I have tried to learn the lessons of the past. I listened carefully to the speech of my right hon. Friend the Member for Farnham (Mr. Macmillan) who put as good a case as could be put for the general argument for pay policy.

What I want to suggest is that what matters in considering this question—far more important than mechanism—is whether or not there is excess demand in the economy. If there is no excess demand in the economy, if demand and supply are roughly in balance, there is no need for an incomes policy. I agree with some of the arguments of my hon. Friend the Member for Cirencester and Tewkesbury—

Mr. Foot

We know you do.

Sir K. Joseph

Let us consider the position, however, if there is excess demand, as there has been most of the time since the war, and suppose that there is a sustained incomes policy in a condition—[Interruption.] I hope that I may be allowed to develop my argument. Suppose that this sustained incomes policy succeeds in persuading some groups of workers to claim less than they could obtain. That is a policy which would appear to be effective. But what happens? I speak not just from theory but from the lessons of the past. The inflation resulting from the excess demand is simply squeezed from one part of the economy where the control is persuasive to other parts where the persuasion is less effective.

We all know which parts of the economy they are into which the inflation is squeezed. They are the sectors in which labour is just not amenable to that sort of persuasion—the building sites, the secretaries, the self-employed. They are the sections of the economy like land, housing, antiques and pictures, which again are not subject to any control. This is also a method of moving—not that it has been in the least effective in the last few years—resources from earnings towards profit. That has not happened, but it could happen.

Where there is excess demand, it cannot be eliminated at all. It can only be moved from one part of the economy to another. It is no good blaming speculators, landowners, secretaries, building workers or the "lump" for what happens when there is excess demand in the economy.

Those who suffer from excess demand in the economy, which we have had practically without cease since the war, are the people of this country, particularly the poor people, since the standard of living of the country as a whole is lower than it would otherwise have been. I think that the hon. Member for Rochdale (Mr. Smith) will agree on that. We all share humiliation at the fact that so much poverty still exists in this society.

The results of a part-suppressed inflation can be great bitterness and great resentment. No Government of a free society can, even if they want to, control all earnings or all aspects of the economy. Therefore, if and while an excess demand exists, all the miseries and pains of incomes policies do not abate inflation.

I think that we are all, on both sides of the House, veterans of the perennial and unsuccessful effort to quell inflation during times of broadly excess demand. Look at all the White Papers that I have collected setting out from Government after Government efforts to abate inflation in conditions of excess demand. What has been the result? The National Board for Prices and Incomes claimed only a 1 per cent. diminution of inflation, and most people would not agree even with that.

Professor Laidler said to a Select Committee on 26th June this year: Prices and incomes policy has not, since the days of Stafford Cripps, had any measurable effect on the rate of inflation in this country, except for some very short periods. That has been well established. We on the Opposition side of the House are the greatest living experts on the limitations and disadvantages of an incomes policy. We renounced incomes policy from 1966 to 1970. We renounced it in our 1970 manifesto. [An HON. MEMBER: "A U-turn in 1971."] I shall not conceal any of the obvious facts. Perhaps, Mr. Deputy Speaker, you will reassure hon. Members that I do not want to conceal the awkward facts.

In office the entire Conservative Cabinet, with the best intentions, came to believe that, despite all we had said and believed, a pay policy and a prices policy would be less awful than the alternatives as we saw them at the time. We came to regard them as lesser evils. The experience confirmed our awareness of the limits and the miseries. I need only briefly catalogue the limitations and miseries—either too much rigidity, with one set of resentments, or too much flexibility, with another set; anomalies, delays, bureaucracy, distortions and shortages. [HON. MEMBERS: "Oh."] Labour Members have been through this themselves. They imposed it on their own colleagues in the factories and the shops for several bitter years. We on the Opposition side of the House are more magnanimous in admitting mistakes and not always being so sanctimonious and self-righteous.

We are aware of the stimulus to militancy, the opportunity for mischief-makers, the compression of differentials, ceilings on managers, the pent-up demands at the end of each stage, the maxima that become minima, and the norm that everyone expects. It can even be that an incomes policy can be perverse and encourage people to claim more than they would have expected. Moreover, about half the earnings in this country are not the subject of national negotiation at all but are the subject of plant bargainings. In any event, as Sir Frank Figgures has reported, pay control cannot be -applied to building sites and many other groups and can be avoided or evaded by others.

For a sober appraisal of the problems and miseries of incomes policy, I recommend to anyone interested the document produced by Sir Richard Clarke, or the piece by Sir Alex Cairncross in the "Three Banks Review" for 1973. From these we learn the lessons of income policy if there is excess demand in the economy.

However, as I shall seek to show with complete conviction on my part, there are at least two areas in which a Pay Board and a pay policy can play a fruitful part. I come not to bury Czsar—the Pay Board—and not particularly to praise him. I come to make a case, taking into account the lessons of the past, for the survival of the Pay Board, although with a totally different code from that which was in action before.

Mr. Atkinson

rose—

Sir K. Joseph

Will the hon. Gentleman allow me to develop the case?

Mr. Atkinson

rose—

Mr. Deputy Speaker

Order. The hon. Member for Tottenham (Mr. Atkinson) knows that if the right hon. Gentleman does not give way he must sit down. Both Front Benches agreed to take less time to allow back benchers to speak.

Mr. Atkinson

rose—

Sir K. Joseph

I was giving way to the hon. Gentleman as you rose, Mr. Deputy Speaker.

Mr. Atkinson

We have heard that the Liberal Party is in favour of the return of a statutory incomes policy. Is the right hon. Gentleman now going to make a case in support of the Conservatives being open advocates of a statutory incomes policy?

Sir K. Joseph

I am well over halfway through my speech, but I will not omit that part.

I should not like it to be thought that only pay policy has sharp limitations. The Labour Government are finding the disadvantages of their cherished price controls, which are proving a two-edged weapon, eroding confidence, damaging investment and threatening the profits on which jobs depend. I reckon that the present Government have a different view about the implications of prices policy than they had six months ago They may even be wondering whether their panacea of dividend control is all that hot, bearing in mind the effect on occupational pensions.

But I return to the Pay Board and the order. The board on its own is lifeless. Only a code gives it life and functions. The code that we should have in mind as a reserve possibility could provide that the board should be only investigatory and informative. Two specific areas for helpful activity, with no element of sanctions, constraint or power to order, seem to me to justify abundantly, even if there is no more purpose in the Pay Board, the rejection of the order.

I agree very strongly with one of the points made by the hon. Member for Tottenham (Mr. Atkinson) reinforced by my hon. Friend the Member for Leicester, South (Mr. Boardman). They both said that on the whole the Government were bad employers, and they gave reasons. In proportion to their labour force, the Government are the largest employer of the low paid. So overloaded with tasks that they should not be carrying out have successive Governments allowed themselves to become that they have not been able to carry out their prime duty of treating their own employees properly. A Pay Board with an apt code could help the Government to be a better employer. It could use techniques of comparability and relativities to help the Government to do better for their own employees, especially where they are the monopoly employer.

But I come to the second example, which I believe is much more important. The House will agree that in dealing with pay or prices the climate of opinion is very important. It can alter the expectations and desires of whole groups of citizens. The climate of opinion is volatile but potent. I have argued that if there is excess demand in the economy pay policies will not abate inflation but will simply move it. Let us suppose that excess demand is reduced until we have a broadly thriving but not overloaded economy. In this context, excessive wage claims would price people out of jobs. A Pay Board with a suitable code could help to create a climate of opinion such that unions would recognise that wage claims above a certain level would jeopardise jobs. That would lead to enlightened, moderated self-interest.

The time when supply and demand may be more in balance with each other may be upon us relatively soon—within the next year or so. Under the pressure of the realities of balance of payments constraints and inflation, perhaps supply and demand will be brought more into balance for a longer period than this country has enjoyed since the war. In that context, excessive wage claims intended, at a time of falling or, at best, static national real income, to preserve or even improve upon the full real value of earnings will price people out of work. Is this the time to abolish a mechanism which could encourage intelligent self-protective moderation?

The Government will reply, I know, that they plan to set up a new body, but why destroy a perfectly good body—admittedly it is second-hand although it has had only one user—which already exists? If it did not exist it would have to be invented, and the Secretary of State has invented a substitute. By suppressing one body and starting another he has to compensate some staff and recruit new staff, he has to find a new office, he has to buy new carpets and spend a lot of public money on a cosmetic operation. The prospects are too serious for that.

Lewis Carroll had the lesson for us once again. A wage explosion can accelerate inflation and lead to an Italian situation. In that situation wage claims are not the innocent toys that the right hon. Gentleman once imagined. Maybe he is dealing with not a Snark but a Boojam. It will be new carpets not for the commission but for the occupant of No. 10. The right hon. Gentleman will be aware of the last verse of "The Hunting of the Snark": In the midst of the word he was trying to say, In the midst of his laughter and glee, He had softly and suddenly vanished away— For the Snark was a Boojum you see. I hope that my right hon. and hon. Friends will recognise both the limitations and the use of the Pay Board, and will vote to keep this potential modestly useful mechanism in existence.

9.36 p.m.

The Minister of State, Department of Employment (Mr. Albert Booth)

It was to be hoped that we would have heard an indication from those who are opposed to the order of the alternative which they see as being the proper way in which to conduct our affairs relating to wages, conditions and productivity agreements. In fact, no alternative has been put forward by those who are opposed to ending statutory wage controls.

Fears have been expressed. There have been doubts about the validity of, or the possibility of operating, the social contract. I have listened with great care for the alternative, for the counter-proposal. The only original thing that I have heard is a suggestion that instead of abolishing the Pay Board we should put it on the shelf, keep it handy in case it may be needed again. I can think of no course which would be more likely to render the chances of the Government's alternative not working than that suggestion. I believe it was the right hon. Member for Lowestoft (Mr. Prior) who said that we need to keep every weapon in the armoury. I admit that I am not very good at military analogies or analogies involving the use of weapons. If I had to try to pick one to meet the suggestion of putting the Pay Board on the shelf I would say that it is more like having the Sword of Damocles hanging over negotiators for the future than an alternative to our policy.

I am certain that those who are now negotiating in industry are not likely to negotiate with a view to having a sensible long-term process of free negotiation if they think that the Government have the Pay Board waiting on the shelf for use at some early future date. We must make clear in this debate, if nothing else, that the Government have no intention of keeping the Pay Board in reserve. The Government have no intention of keeping its powers, and we shall not do a con trick on the British public by saying that we are abolishing the board without abolishing it. If Conservative hon. Members had believed that the board should not be abolished but kept in existence—possibly under cover or kept ticking over—so as to be ready for future use, they had a course open to them which they could have used. They could have tabled an amendment to the Prices Bill which would have made that possible. But it is not open to the House to decide on that issue tonight because the issue under discussion is only that of power to abolish.

The Opposition, having failed to use their opportunity on the Prices Bill, cannot now logically expect the House to believe that they are seriously proposing to put the Pay Board on the shelf only to bring it down again. Indeed, there was no power in the Conservative Government's 1973 Act for the abolition of the Pay Board, so presumably they intended that it should remain permanently in existence. The only power they provided under the Act was the power to take away the statutory backing for the board, but only in circumstances where the statutory backing for the prices policy was also taken away. That course has not been open to us.

I have listened with careful interest to the concern expressed about the low paid, in which I have a particular interest. If I believed that the existence of the Pay Board and the Pay Code has made any effective contribution to the solution of the problem of the low paid, I would take a different view about the proposition to abolish the board. When this matter was previously debated, it was argued that protection for the low paid existed as a result of the provision for threshold payments. I have examined one sector of low pay to see how far it has benefited from the existence of provision for threshold payments. It is the area covered by the wages councils.

Wages councils cover a very large number of very low paid people. There are 50 of them. Only six have made any provision for threshold payments; another 25 are in various stages of consideration. Those who know wages council machinery know that such consideration can be a very long process. The 19 remaining wages councils are not yet even considering threshold payments. It may be that there is no prospect of any improvement coming about for their workers as a result of threshold payments and the operation of the Pay Board machinery.

But the operation of the Pay Board has had a very important effect upon wages councils. I ask the House to consider the position of those who rely for their wages protection on the Licensed Residential Establishments and Licensed Restaurants Wages Council Order—an important order which covers 31 groups of workers, including certain firemen, stokers, window-cleaners and clerks. Their wages for a 40-hour week range from £17.93 for the highest paid to £10.46 for the lowest paid. But they do not all receive that money; some have deductions made because they are on an hourly rate or they have meals or lodgings in the establishment.

The wages council reached agreement upon these magnificent rates on 3rd May 1973 but they were not put into effect until 4th February 1974. The reason for the delay was that the wages council failed to secure the approval of the Pay Board for implementation of the rates at that level over that period of time. So, whatever other merits the Pay Board and Pay Code machinery may have possessed, it cannot be argued that it has benefited those low-paid workers who come within wages council machinery.

Mr. Fernyhough

My hon. Friend will remember the case of the laundry workers, whose wages are comparable with the pay of those workers whom he has listed. The Pay Board forced the laundry workers' employers to reduce wages by lop a week.

Mr. Booth

That is an appropriate example. It is undoubtedly the case that if wages councils are to proceed to improve the rates of pay of those who rely upon them—I have the greatest doubts whether this is the best way to proceed with the problem of low pay—they will not be helped if this order is defeated.

The right hon. Member for Farnham (Mr. Macmillan) also told us that the Government should be concentrating on the need to produce more rather than ending statutory wage control.

Mr. Prior

Will the hon. Gentleman address himself to this point? He has been talking about wages council employees, the laundry workers and so on. Anyone might think from what he has said that these people had suffered only in the past 18 months. They have been low paid for 25 years, during which time there has been free collective bargaining. He must understand that the operation of the Pay Code would have improved the position of these workers relative to other workers. The imposition of a free-for-all will mean that their position will deteriorate because they do not have strong unions representing them.

Mr. Booth

I do not seem to have made my point clear. What I seek to demonstrate is that the operation of the Pay Board and the Pay Code combined with the operation of wages council procedure has delayed payment to the lower-paid workers. In the case I mentioned, instead of waiting a year for the wage increase—which would have been normal under wage council machinery—workers waited for 20 months before getting an increase. I am not contending that the problem of low pay for wages council workers arose as a result of action taken by a Conservative Government or because of the Counter-Inflation Act. What I am saying is that the way in which the Act has impinged upon the work of wages councils has made the plight of low-paid workers worse than it would otherwise have been.

We have been urged by the right hon. Member for Farnham to consider the need to produce more at the same time as we consider the abolition of the Pay Board and the ending of statutory wage control. It seems appropriate to draw to the attention of the House the fact that the operation of the Pay Board and the Pay Code has in many cases had a detrimental effect upon production.

I have in mind the case of employers' and trades union representatives who came to No. 8 St. James's Square to tell us that the canning factory which they operated had been unable in recent months to use 44 per cent. of its capacity because they had not been able to put up wages, as employers and unions wished, to meet competition from a new industry in the area.

This was a direct result of the operation of the Pay Board working to the Pay Code as it was obliged to do.

We had another instance involving representatives of a paper-making factory. The management pointed out to us that it had reached a perfectly good and valid productivity agreement with the unions. The Pay Board held that the agreement which had been signed with the workers did not qualify under the code. So much trouble arose from that decision that the management thought it would be impossible to continue at a reasonable rate of production unless the Pay Board decision could be set aside.

We have also had the example of English China Clay. There was a very good agreement between the unions and the management. It was so good that by working it well the entire position of the company could have been transformed. Higher production and increased profits were possible. But the Pay Board, on having the position put to it, ruled that an increase could not be paid according to the agreement.

The right hon. Gentleman said that a contract such as the social contract may be worth nothing. He said that an agreement which is not signed, sealed and delivered is of no value. I suggest that he should examine the agreement that was made between the trade union representatives and the management of English China Cay. It was not worth a jot to the Pay Board, but its effect in that company was such that it transformed what was a poor prospect into one of high production and profit making.

The real bargains struck by negotiators in industry might not be understood by the Pay Board or by some hon. Members who like to approach matters in a realistic way, but they are real bargains. The test whether they are real bargains is not words on a piece of paper but the results that flow from them.

The Pay Board was not allowed to apply that test to the Hull freezer trawlermen. As a result of a Pay Board decision, the Hull freezer trawlermen were in receipt of wages much lower than fresh-fish trawlermen from the same port. They were not allowed to adjust an agreement that they had made to take account of a change in circumstances. In consequence a lot of freezer trawlers lay idle, and, had we not stepped in, the price of fish would have escalated even more. Therefore, it cannot be held that the operation of the Pay Board has done anything to improve the prospects of production. I contend that it has stood in the way.

The hon. Member for Rochdale (Mr. Smith) asked what would happen to the staff of the Pay Board. Most of them are established civil servants on secondment, and arrangements are being made for their transfer back to Civil Service posts. Similar arrangements for the termination of contracts are being made with the Pay Board's contract staff as were agreed with the CIR staff. Article 6(2) of the draft order transfers to the Secretary of State for Employment what would have been the liabilities of the Pay Board to its officers and servants if the hoard had not been abolished, other than liabilities for pensions, allowances and gratuities which are transferred under Article 6(7) to the Paymaster-General. Some of the staff who are being transferred will service the inquiry into the pay and conditions of teaches and nurses, so their expertise will not be wasted.

The hon. Member for South Angus (Mr. Bruce-Gardyne) in an interjection asked what, on the passing of the order, would be the position of firms against which restraint orders had been issued by the Pay Board. Given the approval of the order tonight, since there has been affirmation in another place the Secretary of State will be able to sign it and in seven days' time it will become effective. On its becoming effective there will be no continuation of any cases currently before the Pay Board. The responsibility for completing the negotiations, the outcome of which were put to the board, will return to those who have been negotiating between employer and employee. There will be no continuation provision for considerations which lay with the board under the pay code.

The hon. Member for Aberdeenshire, East (Mr. Henderson) asked whether we had considered the problems of North-East Scotland arising from the abolition of the board. We have given considerable thought to this matter. We are aware of the problems not only of the canning industry but of the shipbuilding industry there. Much as we would have liked, by use of a consent procedure, to go some way towards a solution of the problems, it has not been possible to do so. The problems, although intense in that area, are not peculiar to it. We could not in equity have given consents in those instances without providing consents in a large number of other cases.

The operation of the Pay Board has produced in many areas where it is operated a very strong sense of injustice, which stems from the sense of being cheated, which was felt by the many men and women in this country who, having entered into productivity and other bargains with the managements, and having delivered their part of the bargain, were told by the Pay Board that the management could not keep its part of the bargain. Examples of that kind have been put before the House during this debate.

There is another sense of unfairness which has been brought about by the operation of the Pay Board. I take the example given by my hon. Friend the Member for Accrington (Mr. Davidson) of the unfairness which was created between one group of workers and another in the same plant as a result of the operation of the Pay Board. This form of unfairness does nothing to make for better operation within the industry of this country.

Mr. Arthur Davidson

Does my hon. Friend realise that, as a result of that unfairness, supervisors are receiving less than the men they are supervising. That comes about as direct result of the nonsense of the Pay Board.

Mr. Booth

I accept fully that this was the result in a particular case. The House should understand that this was not a peculiar case. There have been many instances all over the country where as a result of productivity agreements made prior to November 1972 the production workers' wages have continued to rise while the pay of those who supervise them was tied by the Pay Board. It is obviously the case, where production workers' wages overtook those of the foremen and chargehands, that the gravest sense of injustice was created. It was very hard, if not impossible, for management to recruit supervisers and foremen in these circumstances.

Hon. Members on both sides have since March drawn the attention of the Secretary of State and myself to the very many problems that have been thrown up in constituencies in all parts of the United Kingdom. Therefore, if we have not been made conscious by direct approaches to us by trade unionists and employers, certainly hon. Members of this House can claim to have done their duty by leaving us in no doubt as to the sort of problems being created.

I am thinking of the way in which I was beseeched by my hon. Friend the Member for Harlow (Mr. Newens) concerning the problems experienced by the shop workers organised by USDAW. I think of the case raised with me most persuasively by my hon. Friend the Member for Keighley (Mr. Cryer). I also have very much in mind, as have a number of hon. Members opposite, very forcibly the problems that arose in their constituencies as a result of this problem. Some hon. Members merely passed the problem on, to draw our attention to it. Others urged us to use the consent procedure, or other weapons to our hand, in order to solve these problems. They urged the use of consent. In many cases, to have given a consent would have created a ground which would have been so widely applicable as to have required consents to be issued like confetti. We might have had to duplicate them in the circumstances of our present difficulties.

The former statutory wage control being abolished tonight has proved unjust in its operation between one group of workers and another. It has done no

thing to solve the problem of high and low rates of pay. The House of Commons can tonight return the responsibility to those who will negotiate in future. Hon. Members opposite can doubt whether the unions will co-operate. But one thing is certain: they cannot cooperate unless this House frees them to do so and to act in the spirit of a whole series of proposals which together form the social contract.

Question put:—

The House divided: Ayes 310, Noes 277.

Division No. 92.]	AYES	[10.0 p.m.
Abse, Leo	Davies, Denzil (Llanelli)	Hattersley, Roy
Allaun, Frank	Davies, Ifor (Gower)	Hatton, Frank
Archer, Peter	Davis, Clinton (Hackney, C.)	Healey, Rt. Hn. Denis
Armstrong, Ernest	Deakins, Eric	Heffer, Eric S.
Ashley, Jack	Dean, Joseph (Leeds, W.)	Henderson, Douglas (Ab'rd'nsh're, E)
Ashton, Joe	de Freitas, Rt. Hn. Sir Geoffrey	Hooley, Frank
Atkins, Ronald	Delargy, Hugh	Hooson, Emlyn
Atkinson, Norman	Dell, Rt. Hn. Edmund	Horam, John
Bagier, Gordon, A. T.	Dempsey, James	Howell, Denis (B'ham, Small Heath)
Barnett, Guy (Greenwich)	Doig, Peter	Howells, Geraint (Cardigan)
Barnett, Joel (Heywood & Royton)	Dormand, J. D.	Huckfield, Leslie
Bates, Alf	Douglas-Mann, Bruce	Hughes, Rt. Hn. Cledwyn (Anglesey)
Baxter, William	Duffy, A. E. P	Hughes, Mark (Durham)
Beith, A. J.	Dunn, James A.	Hughes, Robert (Aberdeen, North)
Benn, Rt. Hn. Anthony Wedgwood	Dunnett, Jack	Hughes, Roy (Newport)
Bennett, Andrew F. (Stockport, N.)	Dunwoody, Mrs. Gwyneth	Hunter, Adam
Bidwell, Sydney	Eadie, Alex	Irvine, Rt. Hn. Sir A. (L'p'l, EdgeHI)
Bishop, E. S.	Edelman, Maurice	Irving, Rt. Hn. Sydney (Dartford)
Blenkinsop, Arthur	Edge, Geoff	Jackson, Colin
Boardman, H.	Edwards, Robert (W'hampton, S.E.)	Janner, Greville
Booth, Albert	Ellis, John (Brigg & Scunthorpe)	Jay, Rt. Hn. Douglas
Boothroyd, Miss Betty	Ellis, Tom (Wrexham)	Jeger, Mrs. Lena
Bottomley, Rt. Hon. Arthur	English, Michael	Jenkins, Hugh (W'worth, Putney)
Boyden, James (Bishop Auckland)	Ennals, David	Jenkins, Rt. Hn. Roy (B'ham, St'fd)
Bradley, Tom	Evans, Fred (Caerphilly)	John, Brynmor
Broughton, Sir Alfred	Evans, Ioan (Aberdare)	Johnson, James (K'ston upon Hull, W)
Brown, Bob (Newcastle upon Tyne, W.)	Ewing, Harry (St'ling, F'kirk & G'm'th)	Johnston, Russell (Inverness)
Brown, Hugh D. (Glasgow, Provan)	Ewing, Mrs.Winifred (Moray & Nairn)	Jones, Barry (Flint, E.)
Brown, Ronald (H'kney, S. & Sh'ditch)	Faulds, Andrew	Jones, Dan (Burnley)
Buchan, Norman	Fernyhough, Rt. Hn. E.	Jones, Gwynoro (Carmarthen)
Buchanan, Richard (G'gow, Springb'rn	Fitch, Alan (Wigan)	Jones, Alec (Rhondda)
Butler, Mrs. Joyce (H'gey, WoodGreen)	Flannery, Martin	Judd, Frank
Callaghan, Jim (M'dd'ton & Pr'wch)	Fletcher, Raymond (Ilkeston)	Kaufman, Gerald
Campbell, Ian	Fletcher, Ted (Darlington)	Kelley, Richard
Cant, R. B.	Foot, Rt. Hn. Michael	Kerr, Russell
Carmichael, Neil	Ford, Ben	Kilroy-Silk, Robert
Carson, John	Forrester, John	Kinnock, Neil
Carter, Ray	Fowler, Gerry (The Wrekin)	Lambie, David
Carter-Jones, Lewis	Fraser, John (Lambeth, Norwood)	Lamborn, Harry
Castle, Rt. Hn. Barbara	Freeson, Reginald	Lamond, James
Clemitson, Ivor	Freud, Clement	Latham, Arthur (City of W'minster P'ton)
Cocks, Michael	Galpern, Sir Myer	Lawson, George (Motherwell & Wishaw)
Cohen, Stanley	Garrett, John (Norwich, S.)	Leadbitter, Ted
Coleman, Donald	Garrett, W. E. (Wallsend)	Lee, John
Colquhoun, Mrs. M. N	George, Bruce	Lestor, Miss Joan (Eton & Slough)
Concannon, J. D.	Gilbert, Dr. John	Lever, Rt. Hn. Harold
Conlan, Bernard	Ginsburg, David	Lewis, Ron (Carlisle)
Cook, Robert F. (Edinburgh, C.)	Gourlay, Harry	Lipton, Marcus
Cox, Thomas	Graham, Ted	Loughlin, Charles
Craig, Rt. Hn. William (Belfast, E.)	Grant, George (Morpeth)	Loyden, Eddie
Craigen, J. M. (G'gow, Maryhill)	Grant, John (Islington, C.)	Lyons, Edward (Bradford, W.)
Crawshaw, Richard	Griffiths, Eddie (Sheffield, Brightside)	Mabon, Dr. J. Dickson
Cronin, John	Grimond, Rt. Hn. J.	McCartney, Hugh
Crosland, Rt. Hn. Anthony	Hamilton, James (Bothwell)	MacCormack, Iain
Cryer, G. R.	Hamilton, William (Fife, C.)	McCusker, H.
Cunningham, G.(Isl'ngt'n, S & F'sb'ry)	Hamling, William	McElhone, Frank
Cunningham, Dr. John A. (Whiteh'v'n)	Hardy, Peter	MacFarquhar, Roderick
Dalyell, Tam	Harper, Joseph	McGuire, Michael
Davidson, Arthur	Harrison, Walter (Wakefield)	Mackenzie, Gregor
Davies, Bryan (Enfield, N.)	Hart, Rt. Hn. Judith	Maclennan, Robert
McMillan, Tom (Glasgow, C.)	Prescott, John	Summerskill, Hn. Dr. Shirley
McNamara, Kevin	Price, Christopher (Lewisham, W.)	Swain, Thomas
Madden, M. O. F.	Price, William (Rugby)	Thomas, D. E. (Merioneth)
Magee, Bryan	Radice, Giles	Thomas, Jeffrey (Abertillery)
Mahon, Simon	Rees, Rt. Hn. Merlyn (Leeds, S.)	Thorne, Stan (Preston, S.)
Mallalieu, J. P. W.	Reid, George	Thorpe, Rt. Hn. Jeremy
Marks, Kenneth	Richardson, Miss Jo	Tierney, Sydney
Marquand, David	Roberts, Albert (Normanton)	Tinn, James
Marshall, Dr. Edmund (Goole)	Roberts, Gwilym (Cannock)	Tomlinson, John
Mason, Rt. Hn. Roy	Robertson, John (Paisley)	Tomney, Frank
Mayhew, Christopher (G'wh, W'wch, E)	Roderick, Caerwyn E.	Torney, Tom
Meacher, Michael	Rodgers, George (Chorley)	Tuck, Raphael
Mellish, Rt. Hn. Robert	Rodgers, William (Teesside, St'ckton)	Tyler, Paul
Mendelson, John	Rooker, J. W.	Urwin, T. W.
Mikardo, Ian	Roper, John	Varley, Rt. Hn. Eric G.
Millan, Bruce	Rose, Paul B.	Wainwright, Edwin (Dearne Valley)
Miller, Dr. M. S. (E. Kilbride)	Ross, Rt. Hn. William (Kilmarnock)	Wainwright, Richard (Colne Valley)
Mitchell, R. C. (S'hampton, Itchen)	Rowlands, Edward	Walden, Brian (B'm'ham, Ladywood)
Molloy, William	Sandelson, Neville	Walker, Harold (Doncaster)
Moonman, Eric	Sedgemore, Bryan	Walker, Terry (Kingswood)
Morris, Alfred (Wythenshawe)	Selby, Harry	Watkins, David
Morris, Charles R. (Openshaw)	Shaw, Arnold (Redbridge, Ilford, S.)	Weitzman, David
Morris, Rt. Hn. John (Aberavon)	Sheldon, Robert (Ashton-under-Lyne)	Wellbeloved, James
Mulley, Rt. Hn. Frederick	Shore, Rt. Hn. Peter (S'pney & P'plar)	White, James
Murray. Ronald King	Short, Rt. Hn. E. (N'ctle-u-Tyne)	Whitehead, Phillip
Newens, Stanley (Harlow)	Silkin, Rt. Hn. John (L'sham, D'ford)	Whitlock, William
Oakes, Gordon	Silkin, Rt. Hn. S. C. (S'hwark, Dulwich)	Wigley, Dafydd (Caernarvon)
Ogden, Eric	Sillars, James	Willey, Rt. Hn. Frederick
O'Halloran, Michael	Silverman, Julius	Williams, Alan (Swansea, W.)
O'Malley, Brian	Skinner, Dennis	Williams, Rt. Hn. Shirley(H 'f' d & St'ge)
Orbach, Maurice	Small, William	Williams, W. T. (Warrington)
Ovenden, John	Smith, Cyril (Rochdale)	Wilson, Alexander (Hamilton)
Owen, Dr. David	Smith, John (Lanarkshire, N.)	Wilson, Gordon (Dundee, E.)
Padley, Walter	Snape, Peter	Wilson, William (Coventry, S.E.)
Palmer, Arthur	Spearing, Nigel	Winstanley, Dr. Michael
Pardoe, John	Spriggs, Leslie	Wise, Mrs. Audrey
Park, George (Coventry N.E.)	Stallard, A. W.	Woodall, Alec
Parker, John (Dagenham)	Steel, David	Woof, Robert
Parry, Robert	Stewart, Donald (Western Isles)	Wrigglesworth, Ian
Pavitt, Laurie	Stewart, Rt. Hn. M. (H'sth, Fulh'm)	Young, David (Bolton, E.)
Peart, Rt. Hn. Fred	Stoddart, David (Swindon)
Pendry, Tom	Stonehouse, Rt. Hn. John	TELLERS FOR THE AYES:
Perry, Ernest G.	Stott, Roger	Mr. John Golding and
Phipps, Dr. Colin	Strang, Gavin	Mr. Walter Johnson.
Prentice, Rt. Hn. Reg	Strauss, Rt. Hn. G. R.
NOES
Adley, Robert	Butler, Adam (Bosworth)	Farr, John
Aitken, Jonathan	Carlisle, Mark	Fell, Anthony
Alison, Michael (Barkston Ash)	Carr, Rt. Hn. Robert	Fenner, Mrs. Peggy
Allason, James (Hemel Hempstead)	Chalker, Mrs. Lynda	Fidler, Michael
Amery, Rt. Hn. Julian	Channon, Paul	Finsberg, Geoffrey
Ancram, M.	Chataway, Rt. Hn. Christopher	Fisher, Sir Nigel
Archer, Jeffrey	Churchill, W. S.	Fletcher, Alexander (Edinburgh, N.)
Atkins, Rt. Hn. Humphrey (Spelthorne)	Clark, A. K. M. (Plymouth, Sutton)	Fletcher-Cooke, Charles
Awdry, Daniel	Clark, William (Croydon, S.)	Fookes, Miss Janet
Baker. Kenneth	Clarke, Kenneth (Rushcliffe)	Fowler, Norman (Sutton C'field)
Balniel, Rt. Hn. Lord	Clegg, Walter	Fox, Marcus
Banks, Robert	Cockcroft, John	Fraser, Rt. Hn. Hugh (St'fford & Stone)
Barber, Rt. Hn. Anthony	Cooke, Robert (Bristol, W.)	Fry, Peter
Bell, Ronald	Cope, John	Galbraith, Hn. T. G. D.
Bennett, Sir Frederic (Torbay)	Cordie, John	Gardiner, George (Reigate & Banstead)
Bennett, Dr. Reginald (Fareham)	Cormack, Patrick	Gardner, Edward (S. Fylde)
Benyon, W.	Corrie, John	Gibson-Watt. Rt. Hn. David
Berry, Hon. Anthony	Costain, A. P.	Gilmour, Rt. Hn. Ian (Ch 'sh' & Amsh' m)
Bitten, John	Crouch, David	Gilmour, Sir John (Fife. E.)
Biggs-Davison, John	Crowder, F. P.	Glyn, Dr. Alan
Blaker, Peter	Davies, Rt. Hn. John (Knutsford)	Goodhart, Philip
Boardman, Tom (Leicester, S.)	d' Avigdor-Goldsmid, Maj.-Gen. James	Goodhew, Victor
Boscawen, Hon. Robert	Dean, Paul (Somerset, N.)	Goodlad, A.
Bowden, Andrew (Brighton, Kemptown)	Dixon, Piers	Gorst, John
Boyson, Dr. Rhodes (Brent, N.)	Dodds-Parker, Sir Douglas	Gow, Ian (Eastbourne)
Braine, Sir Bernard	Dodsworth, Geoffrey	Gower, Sir Raymond (Barry)
Bray, Ronald	Douglas-Home, Rt. Hn. Sir Alec	Grant, Anthony (Harrow, C.)
Brewis, John	Drayson, Burnaby	Gray, Hamish
Brittan, John	du Cann, Rt. Hn. Edward	Grieve, Percy
Brocklebank-Fowler, Christopher	Durant, Tony	Griffiths, Eldon (Bury St. Edmunds)
Brown, Sir Edward (Bath)	Dykes, Hugh	Grist, Ian
Bruce-Gardyne, J.	Eden, Rt. Hn. Sir John	Grylls, Michael
Bryan, Sir Paul	Edwards, Nicholas (Pembroke)	Gurden, Harold
Buchanan-Smith, Alick	Elliott, Sir William	Hall-Davies, A. G. F.
Buck, Antony	Emery, Peter	Hamilton, Michael (Salisbury)
Bulmer, Esmond	Eyre, Reginald	Hampson, Dr. Keith
Burden, F. A.	Fairgrieve, Russell	Hannam, John
Harrison, Col. Sir Harwood (Eye)	Marten, Neil	Scott-Hopkins, James
Harvie Anderson, Rt. Hn. Miss	Mather, Carol	Shaw, Giles (Pudsey)
Hastings, Stephen	Maude, Angus	Shaw, Michael (Scarborough)
Havers, Sir Michael	Maudling, Rt. Hn. Reginald	Shelton, Willam (L'mb'th, Streath'm)
Hayhoe, Barney	Mawby, Ray	Shersby, Michael
Heath, Rt. Hn. Edward	Maxwell-Hyslop, R. J.	Silvester, Fred
Henderson, J.S.B.(Dunbartonshire, E.)	Mayhew, Patrick (Royal T' bridge Wells)	Sims, Roger
Heseltine, Michael	Meyer, Sir Anthony	Sinclair, Sir George
Higgins, Terence	Miller, Hal (B'grove & R'ditch)	Skeet, T. H. H.
Hill, James A.	Mills, Peter	Smith, John (W'wick & L'm'ngton)
Holland, Philip	Miscampbell, Norman	Spence, John
Hordern, Peter	Mitchell, David (Basingstoke)	Spicer, Jim (Dorset, W.)
Howe, Rt. Hn. Sir Geoffrey (Surrey, E.)	Moate, Roger	Spicer, Michael (Worcestershire. S.)
Howell, David (Guildford)	Money, Ernie	Sproat, Iain
Howell, Ralph (Norfolk, North)	Monro, Hector	Stainton, Keith
Hunt, John	Moore, J. E. M. (Croydon, C.)	Stanbrook, Ivor
Hurd, Douglas	Morgan, Geraint	Stanley, John
Hutchison, Michael Clark	Morgan-Giles, Rear-Adm.	Steen, Anthony (L'pool, Wavertree)
Iremonger, T. L.	Morris, Mitchell (Northampton, S.)	Stewart, Ian (Hitchin)
Irvine, Bryant Godman (Rye)	Morrison, Charles (Devizes)	Stodart, Rt. Hn. A. (Edinburgh, W.)
James, David	Morrison, Peter (City of Chester)	Stokes, John
Jenkin, Rt. Hn. P. (R'dge W'std & W'fd)	Mudd, David	Stradling Thomas, John
Jessel, Toby	Neave, Alrey	Tapsell, Peter
Johnson Smith, G. (E. Grinstead)	Neubert, Michael	Taverne, Dick
Jones, Arthur (Daventry)	Newton, Tony (Braintree)	Taylor, Edward M. (Glgow, C'cart)
Joseph, Rt. Hn. Sir Keith	Nicholls, Sir Harmar	Taylor, Robert (Croydon, N.W.)
Kaberry, Sir Donald	Normanton, Tom	Tebbit, Norman
Kellett-Bowman, Mrs. Elaine	Nott, John	Temple-Morris, Peter
Kimball, Marcus	Onslow, Cranley	Thatcher, Rt. Hn. Margaret
King, Evelyn (Dorset, S.)	Oppenheim, Mrs. Sally	Thomas, Rt. Hn. P. (B'net, H'den S.)
King, Tom (Bridgwater)	Osborn, John	Townsend, C. D.
Kirk, Peter	Page, Rt. Hn. Graham (Crosby)	Trotter, Neville
Kitson, Sir Timothy	Parkinson, Cecil (Hertfordshire, S.)	Tugendhat, Christopher
Knight, Mrs. Jill	Pattie, Geoffrey	van Straubenzee, W. R.
Knox, David	Percival, Ian	Vaughan, Dr. Gerard
Lamont, Norman	Pink, R. Bonner	Viggers, Peter
Lane, David	Price, David (Eastleigh)	Waddington, David
Langford-Holt, Sir John	Prior, Rt. Hn. James	Wakeham, John
Latham, Michael (Melton)	Raison, Timothy	Walder, David (Clitheroe)
Lawrence, Ivan	Rathbone, Tim	Walker, Rt. Hn. Peter (Worcester)
Lawson, Nigel (Blaby)	Rawlinson, Rt. Hn. Sir Peter	Walker-Smith, Rt. Hn. Sir Derek
Le Marchant, Spencer	Redmond, Robert	Wall, Patrick
Lester, Jim (Beeston)	Rees, Peter (Dover & Deal)	Walters, Dennis
Lewis, Kenneth (Rtland & Stmford)	Rees-Davies, W. R.	Warren, Kenneth
Lloyd, Ian (Havant & Waterloo)	Renton, Rt. Hn. Sir David (H 't' gd 'ns 're)	Weatherill, Bernard
Loveridge, John	Renton, R. T. (Mid-Sussex)	Wells, John
McAdden, Sir Stephen	Rhys Williams, Sir Brandon	West, Rt. Hn. Harry
MacArthur, Ian	Ridsdale, Julian	Winterton, Nicholas
McCrindle, R. A.	Rifkind, Malcolm	Wood, Rt. Hn. Richard
Macfarlane, Neil	Rippon, Rt. Hn. Geoffrey	Woodhouse, Hn. Christopher
MacGregor, John	Roberts, Michael (Cardiff, N.-W.)	Worsley, Sir Marcus
McLaren, Martin	Roberts, Wyn (Conway)	Young, Sir George (Ealing, Acton)
Macmillan, Rt. Hn. M. (Farnham)	Rodgers, Sir John (Sevenoaks)
McNair-Wilson, Michael (Newbury)	Rosel, Hugh (Hornsey)	TELLERS FOR THE NOES:
McNair-Wilson, Patrick (New Forest)	Rost, Peter (Derbyshire, S.-E.)	Mr. Paul Hawkins and
Madel, David	Sainsbury, Tim	Mr. Richard Luce.
Marshall, Michael (Arundel)	St. John-Stevas, Norman

Question accordingly agreed to.

Resolved, That the Counter-Inflation (Abolition of Pay Board) Order 1974, a draft of which was laid before this House on 9th July, be approved.