Social Contract (Hansard, 21 January 1975)

§ 3. Mr. Atkinson
asked the Secretary of State for Employment if he remains satisfied with the operation of his policy on wage levels; and if he will make a statement.

§ 5. Mr. Stanley
asked the Secretary of State for Employment whether he is satisfied with the working of the social contract.

§ 7. Mr. Tebbit
asked the Secretary of State for Employment what progress he has made in ensuring the success of the social contract.

§ 24. Mr. Arnold
asked the Secretary of State for Employment whether he is still satisfied with the working of the social contract.

§ 31. Mr. Cyril Smith
asked the Secretary of State for Employment whether he is satisfied with the operation of the social contract.

§ The Secretary of State for Employment (Mr. Michael Foot)
The social contract covers the whole range of Government economic policies, and the degree of progress in its fulfilment cannot be covered in the answer to one Question. If Questions are referring more specifically to the TUC guidelines about wage negotiations involved in the social contract, my reply is that it has had a considerable measure of success and continues to provide the best basis for the conduct of Government policy.

§ Mr. Atkinson
Will my right hon. Friend stiffen his resistance to the goo-like 1206 blandishments coming from the Opposition Front Bench and from my right hon. Friend's colleagues in the Treasury, to the effect that Britain could solve its economic problems by this Government sacrificing the living standards of the workers they represent? Will my right hon. Friend circulate his Cabinet colleagues setting out the terms of the social contract, which are, as the TUC believes, that there should be one wage increase per year based on take-home pay and not gross pay, and equated with the rise in the retail price index, and that this in itself will ensure that the living standards of workers represented by trade unions will be maintained? Many people feel that in this way my right hon. Friend could now make a contribution towards a wider understanding of current wage agreements.

§ Mr. Foot
I hope that I shall resist such blandishments from any quarter, including that of the right hon. Member for Lowestoft (Mr. Prior) and his friends. We have had constant discussions with the TUC, including the discussions this week. I believe that there is a full understanding between the TUC General Council representatives and the Government about what we mean by the guidelines, and that there is agreement that one of the ways in which we can assist in dealing with the country's economic problems is to secure the best possible allegiance to those guidelines.

§ Mr. Stanley
Is it not clear that the huge pay settlements supposedly within the social contract represent the biggest single threat to full employment at present? Will the right hon. Gentleman take immediate measures drastically to revise the guidelines within the social contract so as to secure a major reduction in the average level of wage settlements?

§ Mr. Foot
I do not think that what the hon. Gentleman suggests is the right way to go about it. Any attempt to rewrite the guidelines along the lines he suggested would only cause confusion and injustice. It certainly would not contribute to the end we have in mind of a successful fight against inflation. I believe that the best way is by securing a strict allegiance to the guidelines as they stand. I also believe that that is the desire of the trade unions, along with ourselves.

§ Mr. Tebbit
Will the right hon. Gentleman say—preferably in two words, if not in two sentences—whether the present rate of wage settlements, to which the Chancellor of the Exchequer has drawn attention, is a mark of the success or the failure of the social contract?

§ Mr. Foot
Some of the settlements are successes and some are failures. We have not sought to conceal that. I have had a correspondence on the subject with the right hon. Member for Lowestoft, who accused me of having in some mysterious way concealed these matters. I have not done so. I hope that our exchange of letters on the subject will be published in the Official Report. Then the hon. Gentleman may see even more clearly what view we take of these settlements.

§ Mr. Skinner
Does my right hon. Friend appreciate that he should not get involved in appearing to lay the blame for inflation upon workers and their attempts to improve or even maintain their standard of living, especially in the light of the recent announcement by the Government that they will agree to salary increases of up to £8,000 a year for those at the top of the armed forces and in the higher echelons of other institutions within our Establishment? Surely my right hon. Friend cannot reconcile that sort of increase with some of the paltry rises that my right hon. Friend, in particular, constantly talks about—and seemingly talked about again last night.

§ Mr. Foot
The Boyle Report—if that is the document to which my hon. Friend is referring; I expect it is—certainly presented the Government with great difficulties, because it did not take account of the TUC guidelines and, in a sense, was produced without relevance to them. The Government did not accept the report in anything like its full degree. For any further comment on that matter, however, I refer my hon. Friend to the statement made by my right hon. Friend the Prime Minister on the subject.
I hope that my hon. Friend will not wish to abandon the guidelines, because we believe—there is no difference between me and my right hon. Friend the Chancellor on this subject—that the maintenance of the guidelines is important not only from the point of view of ensuring that we assist lower-paid workers, which 1208 is part of the guidelines, but in order to prevent what would be the greater danger of unemployment if they were not adhered to.

§ Mr. Arnold
Will the right hon. Gentleman explain how his oft-repeated plea for free collective bargaining can be reconciled with policies aimed at achieving full employment?

§ Mr. Foot
Yes, Sir, but that is a much bigger subject than anyone would seek to deal with in a short answer. We are trying to work the matter out in this way because the attempt to combine statutory policies with any policy of maintaining full employment collapsed completely. We are not going back to the statutory method of trying to control these matters.

§ Dr. Bray
Will my right hon. Friend draw the attention of the Press to more meaningful figures than those given such publicity in the newspapers this morning? In particular, will he draw attention to the real income after tax, which is the figure with which hon. Members on the Government benches are concerned?

§ Mr. Foot
The worst example of misleading figures in the newspapers this morning was the headline in The Times saying, Earnings may be rising by 37 per cent. a year, figures show". To express the recent monthly rates of increase in wage rates or earnings in annual terms is misleading nonsense—[Interruption.] That is what the Leader of the Opposition did in the election, with his figure of 40 per cent. That figure was based on statistical bosh, and the figure in The Times is also based on statistical bosh. The newspapers should be more careful in printing these figures.

§ Mr. Smith
If the social contract is concerned with lower-paid workers, why did the Government reject the idea of a statutory minimum wage within the social contract? Is 28.5 per cent. taken as being within the social contract, in terms of average wage increases?

§ Mr. Foot
I shall take the hon. Gentleman's last point first. It is a very important matter, and nobody minimises its significance. About two-fifths of the 28.5 per cent. annual increase quoted in the reports today and in the figures published by my Department is the result of 1209 threshold agreements reached in accordance with the stage 3 code. A further 0.5 per cent. stems from the London allowance, in accordance with the recommendations of the Pay Board. In addition, nearly 2 per cent. is attributable to special cases for coal miners, railwaymen and postmen, leaving roughly 14½ per cent.—about the same as the figures we were getting under the basic stage 3 rules—[Interruption.] These are the facts of the matter. My figures happen to be correct—very different from those used in The Times.
The question whether assistance for the low-paid could be achieved by a statutory minimum has often been debated. There are grave difficulties. The TUC agreed at its last congress to set a £30 target for the low-paid. The Government have done their best to go along with that aim and I believe that under those arrangements the low-paid have had better assistance under the present Government than they have had for many years.

§ Mr. Prior
In his last answer the right hon. Gentleman has shown that he either does not understand what is happening or is deliberately trying to mislead the House on the information available. Does he not know perfectly well that the 28.5 per cent. includes the threshold payments, which should have been taken into account in the assessment of new wage increases? Were the figures given by the Chancellor of the Exchequer on Panorama last night—when he said that one out of four settlements fell outside the social contract—based on information available to the right hon. Gentleman's Department, or was what the Chancellor said just speculation? If it was based on figures available to the Department, why cannot the House have the same information?

§ Mr. Foot
If the right hon Gentleman had done me the courtesy of listening to the past two speeches that I have made in the House he would have learnt that I referred to 75 per cent. of settlements having been within the social contract. That is exactly the same figure as was referred to by my right hon. Friend the Chancellor. Perhaps I should translate these percentages into other kinds of figures for the benefit of the right hon. Gentleman. What the Chancellor said in 1210 that respect accords exactly with what I said on previous occasions. If the right hon. Gentleman is asking whether and how we should give futher figures on these matters, I must point out that many of the figures are given, with some of the details, in the Department of Employment's statement which was published yesterday. Everyone who knows anything about the figures knows that. If the right hon. Gentleman will study the reply that I sent to his letter, on the question why we think it would be wrong for the Government to adjudicate on every settlement, we may be able to have a proper discussion of the subject. I repudiate entirely the argument that the Government are withholding any figures from the House. We publish the figures on the same basis as did the previous Conservative Government.