Social Contract (Hansard, 22 April 1975)

§ 3. Mr. Peter Morrison
asked the Secretary of State for Employment whether he remains satisfied with the working of the social contract.

§ 16. Mr. Skinner
asked the Secretary of State for Employment if he is satisfied with the current operation of the social contract.

§ The Secretary of State for Employment (Mr. Michael Foot)
As I told my hon. Friends the Members for Stoke-on-Trent. South (Mr. Ashley) and Aberdare (Mr. Evans) and the hon. Member for Derbyshire, South-East (Mr. Rost) on 18th March—[Vol. 888; c. 1437–9.]—progress has been made on both the Government's side and the trade unions' side in fulfilling the social contract, which covers a whole range of policies. But firmer adherence to the spirit of the TUC guidelines is certainly required if we are to avoid higher unemployment and curb inflation.

§ Mr. Morrison
Does the right hon. Gentleman agree with the Chancellor of the Exchequer that wages are rising too fast, which, in effect, means that the social contract is no longer working? Will the right hon. Gentleman list those major settlements which are lower, thanks to the social contract?

§ Mr. Foot
To answer the hon. Gentleman's last question first, I have said on a number of occasions why I do not think it appropriate, right or desirable that the Government should list individual settlements in the way the hon. Gentleman asked. It is true that wage settlements have been running ahead of the retail price index—that is one of the 1217 factors which led to the proposals of my right hon. Friend the Chancellor in his Budget—but I certainly do not agree with the hon. Gentleman's second point, that that means that the social contract is no longer working, because, as I said in my reply, it covers many other factors apart from wages. Moreover, in many cases the guidelines are being followed.

§ Mr. Skinner
Does not the social contract also cover the question of job security, about which the TUC and most of us on the Government side of the House—all of us, I assume—are very concerned? Does not my right hon. Friend take the hint even from the speech of my right hon. Friend the Chancellor last Tuesday, when he seemed to declare that the new and further development of the social contract and economic strategy is to create a greater pool of unemployed? Does that not lead us to the conclusion that the social contract is a contract to join the dole queue?

§ Mr. Foot
I do not accept my hon. Friend's description of the social contract, particularly in the latter part of his last sentence. I agree with the implication of what he says in the first part of his question—that two other important strands of the social contract are that the Government should do everything in their power to prevent the rise of unemployment and to curb inflation. Both of those matters are also part of the social contract. But what my right hon. Friend the Chancellor was seeking to deal with in that part of the proposals was the fact that continuation of the rate of inflation in this country at a considerably higher rate than that in many other countries would also threaten jobs in this country. That is one of the reasons why action must be taken to deal with it.

§ Mr. Cyril Smith
Will the right hon. Gentleman explain to some of us how we determine whether a wage settlement is within the social contract or outside it? Is it inside when an increase of 30 per cent. is allowed, or an increase of 20 per cent.? How do we know what is the Government's measuring stick to decide what percentage increase is within the contract and what is not?

§ Mr. Foot
The hon. Gentleman should study the guidelines laid down by the TUC. One of the important aspects of 1218 those guidelines is keeping up with the cost of living, but there are other guidelines, such as the 12-months' rule, the possibility of restructuring that can be taken into account in some cases, and the special provision for meeting the target on dealing with the problem of low pay. For those various reasons it is not possible to summarise the guidelines in terms of a simple, single percentage.

§ Mr. Heffer
Does my right hon. Friend agree that the wage element is by no means the main one in the rise in inflation, and that therefore what is needed is a new turn in the Government's economic strategy to deal with inflation other than by putting the main burden on the shoulders of working people?

§ Mr. Foot
I agree that wages are not the only item contributing to inflation. It is wrong that the problem should ever be stated in that way. As I have said many times, at this Box and elsewhere, there are many other contributory factors. But nobody can deny that over recent months the rate of wage settlements has run strongly ahead of the cost of living. If that continues, particularly at this period—it may be that at other periods it could be borne—it will undoubtedly feed inflation in the future. That is fully accepted, not merely by the Government but in the TUC's Economic Review. Therefore, in that respect I agree with the TUC on the subject.

§ Mr. Prior
We are very sorry that the right hon. Gentleman has to go into hospital, and we all wish him a speedy recovery.
Now I wish to say something that I do not think the right hon. Gentleman will receive quite so readily. We regard the social contract as now being nothing but a busted flush. We do not understand how the right hon. Gentleman can still tell us that the purpose of the social contract—[HON. MEMBERS: "Question."]: Is the right hon. Gentleman aware that we do not understand how he can say that he believes that the social contract is preventing unemployment and keeping down the level of inflation, because it is so plainly not doing either of those things? Is he aware that to us on the Opposition side of the House it seems that the contract binds the Government and places the nation in bondage?

§ Mr. Foot
I thank the right hon. Gentleman for his first remarks, about my illness, which, like Mark Twain's death, has been greatly exaggerated, through no fault of my own. None the less, I thank him for his kind remarks.
As for what the right hon. Gentleman said about the social contract, there have of course been stresses and strains on it. Nobody who ever studied the matter would imagine that one could simply solve the whole problem of the relation between wages, unemployment and inflation, which is what the social contract seeks to do. It will take a long time before the processes of persuasion are successful in doing it. But in the meantime it does not assist for people to say that it is a busted flush because it has not succeeded already.
Representatives of the Government had very good discussions yesterday with representatives of the General Council of the TUC, who clearly indicated to us the strains on the contract, some of them resulting from the measures which my right hon. Friend the Chancellor felt compelled to adopt in the Budget. We discussed them, and I believe that the social contract came out of that discussion stronger than when we went into the discussion.

§ 5. Mr. Brittan
asked the Secretary of State for Employment whether he will now seek to negotiate a revision and tighter definition of the terms of the social contract.

§ Mr. Foot
No, Sir. What we should like to secure is more effective application of the terms of the existing contract, but naturally we have had and will continue to have discussions with the trade unions about all aspects of the subject and how we may deal with it in the future.

§ Mr. Brittan
As the Secretary of State insists on recognising a dead creature as a live one, will he at least confirm that it remains Government policy in no circumstances to resort to statutory intervention in wages?

§ Mr. Foot
Yes. The sense of the hon. Gentleman's last remark was indicated by the Prime Minister to the representatives of the General Council of the TUC in our liaison committee yesterday, so I hope that the hon. Gentleman is 1220 satisfied on that account. We have no intention of returning to a statutory policy, because that was an utter disaster. That is why we think it is irresponsible for those who led us to disaster under the statutory policy to pour scorn, and anything else on which they can lay their hands, on the social contract as it operates now. It is a pity that Opposition Members cannot rediscover some of the virtues of democracy which lie at the heart of our voluntary policy.

§ Mr. James Lamond
Is it not obvious that Opposition Members who denied the existence of the social contract now demonstrate by every question that they have not grasped the concept of the social contract? Would it not be advisable for those Opposition Members to read the able speech which was delivered by my right hon. Friend in Aberdeen last Wednesday, in which he outlined what has been achieved and what has still to be achieved by the social contract?

§ Mr. Foot
If my hon. Friend provokes me too far I may try to deliver that speech again now, but, if I did that. Mr. Speaker, you might call me to order. I fully appreciate what my hon. Friend says.

§ 7. Mr. Michael Latham
asked the Secretary of State for Employment whether he will now make a further statement on the operation of the pay guidelines of the social contract in the public sector.

§ Mr. Foot
As I have explained to the House on several occasions, we do not maintain a detailed monitoring system on adherence to the pay guidelines in either the public or the private sector. If the hon. Member will indicate upon which aspect of the matter he wishes me to comment further, I shall do my best to assist.

§ Mr. Latham
In view of the Chancellor's policy of reducing deficits in nationalised industries, will settlements outside the guidelines in the public sector be paid for by increased prices or by a reduced work force?

§ Mr. Foot
When it is negotiating, each nationalised industry has to take into account the desirability of allegiance to the guidelines and the economic consequences of going beyond them. In some cases a nationalised industry may 1221 choose to go beyond the guidelines, but it has to accept responsibility for that settlement, which will have financial implications which have to be taken into account. On several occasions the Government have indicated that.

§ Mr. Ioan Evans
As the Opposition do not wish to bring in a compulsory wages policy and have not suggested an alternative, surely all we have is the social contract, and it behoves all of us in the House to see that it works?

§ Mr. Foot
Yes, but there are some parts of the social contract about which we could hardly expect Opposition Members to be enthusiastic. As I said in my Aberdeen speech to which my hon. Friend the Member for Oldham, East (Mr. Lamond) referred, a large part of the social contract is unfinished business that we want to finish as speedily as we can. There is a whole series of legislative measures that we think can contribute greatly to the health of industrial relations. That has to be taken into account as well.

§ Mr. Hayhoe
Why cannot the Secretary of State answer the supplementary question put to him earlier by my hon. Friend the Member for City of Chester (Mr. Morrison) and indicate at least one major settlement which as a result of the social contract was lower than it would otherwise have been—or is the essence of the social contract that the Government do what the TUC wants them to do and get nothing in return?

§ Mr. Foot
I know that that is the kind of imbecile slogan that is repeated by Opposition Members throughout the country in their attempt to assist the Government in overcoming our economic problems, but it has nothing to do with the facts. If I responded to the hon. Gentleman's invitation about one settlement, no doubt the Opposition would ask why, if I have done it in respect of one settlement, I have not done it in the case of all the others. In January I gave the House an indication of the overall position when I said that I thought that 75 per cent. of the people covered in the settlements were within the guidelines. But when I said that, I also made clear what were the limitations in the declaration I was making—because the Government do not have available full statistics about every settlement. That has to be taken 1222 into account as well, and that is another reason why it is not possible to give the statistics for which hon. Gentlemen clamour. I do not think that they clamour for the statistics because they think they might help; they do so because they hope that they will be able to cause more disruption.