ATTACK ON INFLATION

HC Deb 22 July 1975 vol 896 cc301-440

Order read for resuming adjourned debate on Question [21st July], That this House approves the White Paper on The Attack on Inflation (Command Paper No. 6151).

Amendment proposed, to leave out from "House" to the end of the Question and to add instead thereof: supports Her Majesty's Government's belated commitment to reduce the disastrous rate of inflation and their acceptance of the need both for strict cash limits throughout the public sector and for a substantial reduction in the level of pay settlements; regrets, however, Her Majesty's Government's prolonged failure to reduce public spending and to promote the prosperity of the private sector; and deplores their decision to increase indiscriminate subsidies and to proceed with further measures of nationalisation, which are damaging in themselves and inconsistent with the conquest of inflation".—[Mrs. Thatcher.]

Question again proposed, That the amendment be made.

3.39 p.m.

Sir Geoffrey Howe (Surrey, East)

Yesterday my right hon. Friends concentrated on an analysis of the Government's responsibility for the present disastrous situation and the extent to which the proposals contained in the White Paper fall short of what is necessary. I intend today to devote some time to expounding the case set out in the amendment moved by my right hon. Friend the Leader of the Opposition. I begin by explaining our approach and the way in which Parliament should approach matters of this kind.

It is the function of the House of Commons, and most of all in a crisis such as the present, to hammer out policies which are in the interests of the nation, and to push and to persuade the Government in the right direction. When the Government are moving in that direction, the function is to offer them support and certainly not to oppose them. That is the simple reason why we shall not be asking my right hon. and hon. Friends to vote against the White Paper itself tonight.

We have been urging the Government to take action on inflation for months. When the Prime Minister and the Chancellor of the Exchequer and their colleagues were saying that all was well, we were urging him to take action. When the Chancellor was saying that inflation was running at 8.4 per cent., we were urging him to take action. Month after month since then we have been urging them to do just that, so we certainly welcome their belated repentance now, so far as it is well conceived.

Those who thought that we should have acted otherwise must have been expecting us to follow the example of the Opposition when it was led by the right hon. Gentleman the Prime Minister. I can give him this assurance. We shall not follow his example. Some may have been expecting us to seek to undermine the authority of Government, as he did. We shall not follow him in that respect either. It is worth devoting a moment or two to the record of the Prime Minister.

The Prime Minister (Mr. Harold Wilson)

These are interesting revelations. However, although I am sorry to be a minute or two late in getting in, may I ask the right hon. and learned Gentleman, in view of what he has said, whether this means that the Opposition will not be voting against the Second Reading of the Remuneration, Charges and Grants Bill?

Sir G. Howe

The right hon. Gentleman certainly has some effrontery in interrupting my speech within seconds of his arrival without having heard the beginning of it. Let me answer the question. We have tabled an amendment drawing the Government's attention to our clear reasons for anxiety about the Bill which is now before the House. We shall be debating it tomorrow. The Government will have every opportunity of indicating how far they will respond to our anxiety, and how far they will respond to the amendments already on the Notice Paper. If they fail to do that we shall certainly vote in support of our amendment. [Interruption.]

I want to examine the record of the over-talkative Prime Minister—if he can contain himself for a moment—because it is almost 13 years since the right hon. Gentleman replaced the late Hugh Gaitskell as the Leader of the Labour Party. I do not know what verdict his party will pronounce on the record of those 13 years, although I can make some guesses. [HON. MEMBERS: "Wasted years."] The nation can hardly congratulate itself on the impact of his service during those 13 wasted years—as my hon. Friends describe them. [Interruption.] The Patronage Secretary says that the right hon. Gentleman has won four General Elections. That is about the beginning and the end of the standards the Prime Minister has set himself.

They have been years in which the Prime Minister has sought to deceive his party and the nation and has ended up deceiving no one but himself. They have been years of false expectations, beginning with the "white heat of the technological revolution"—what a faded phrase that now seems—and ending with the social contract, described by the Prime Minister last September as The boldest experiment in civilised Government that Britain has ever seen. They have been years in which the Prime Minister has taken up policies only to dispose of them a few months later when others, under the leadership of my right hon. Friend the Member for Sidcup (Mr. Heath), have applied themselves to the same task—in relation to the Prime Minister's position on Europe, on the reform of industrial relations and, above all, on his position on the conquest of inflation. Having himself been driven, despite all his earlier protestations, rightly or wrongly, to adopt a statutory policy, when the time came for our Government to do the same he uttered not a syllable in support. Last January the cry was "A victory for the mineworkers will be a victory for the nation." Tragically, it was not. In 1972 and 1974, as in 1975, it was a victory for inflation. Yet until two weeks ago the Prime Minister has continued to march in the opposite direction.

When the history of our time comes to be written, the verdict on the right hon. Gentleman's 13 Houdini years as Leader of the Labour Party will be harsh indeed.

Mr. John Tomlinson (Meriden)

What a turgid old bore you are.

Sir G. Howe

The Prime Minister will be seen to have done more harm to the social and economic fabric of this country than any other party leader in our history—13 wasted years indeed.

I turn now to consider the condition of the nation's economy, over which the Prime Minister continues to preside. The OECD had produced a report about the condition of our nation. It confirms that production is stagnant at best and that our trade balance is still very far from right.

When the Prime Minister dealt with this in the last debate, he had a tendency towards euphoria, to which he returned during Question Time this afternoon. He paid tribute to the remarkable achievement of his Government in going so far to redress the balance of trade. I join with him and anyone else who pays tribute to our exporters, but the Prime Minister, in this as in so many other matters, really must not deceive himself. The truth is that many factors in the underlying recent improvements in the balance of trade conceal unsatisfactory features for the future. Exports are up by 1 per cent. only. Why have they risen by only that extent? It is because prices are growing at about 20 per cent. per annum. while those of our competitors are growing at about half that rate—10 per cent. per annum? [Interruption.] Of course they have fallen—but wait for it! The volume of our exports fell by 28 per cent. in the first two quarters of the year, faster that the fall in world trade—and because of the excessive rate of price increases. That is why the Prime Minister is being driven to take action now. Those factors are already sapping the position and adding to the serious effects of declining world trade. The other half of the balance has improved because the volume of imports fell by 28 per cent. between the first two quarters of this year, much faster than the 8 per cent. fall in industrial production.

That position cannot be sustained. The present trend is unsustainable. I take no pleasure in saying that. I merely wish that the Prime Minister would from time to time have the courage to face the facts instead of leaping at any statistic that seems to point in his favour. [Interruption.] I need no lectures on patriotism from the Chancellor of the Exchequer.

Unemployment, according to the OECD forecast figures, will be almost twice what it is today. Again according to those forecasts, inflation will be well in double figures. On these policies, which the House is now debating, we shall still be facing a long and rocky road ahead.

Mr. Tam Dalyell (West Lothian)

Is it not also a fact that German unemployment is markedly higher than our own and that German exports have fallen dramatically?

Sir G. Howe

German unemployment is not, I think, now higher than ours. [HON. MEMBERS: "It is."] Not markedly higher. The hon. Gentleman must try to analyse the gravity of the situation. If one could point to the massive accumulated surpluses of Germany, to their booming investment record and to a society in which the Social Democratic Party had had the good sense to discard socialism, we too might well be on the way.

However, the Prime Minister has never really implied that the situation is as serious as it is. Last February the Labour Party, in its manifesto, was said to be "ready with policies essential to rescue the nation." In October the magic phrase appeared in its manifesto: At the heart of … our programme to save the nation lies the Social Contract. If during the last 16 months we have been witnessing the salvation of the nation, heaven save us from the second coming of this particular saviour.

We may be forgiven a feeling of anxiety when we see set out in paragraph 48 of the White Paper a plan that is once again described as "a plan to save our country", and we are still more anxious when the Prime Minister qualifies the position still further by calling on the nation, as he put it, to "give a year to Britain". The nation is certainly ready to make sacrifices provided the policies set before it are firm enough, and, I would say, severe enough, and provided the people have some conviction that they will be maintained, because the situation is now so grave that every one of the options now before us is immensely hard.

Reductions in living standards are inescapable, so let the Prime Minister spell that out with a great deal more clarity than he has done so far. Cuts in social programmes are inescapable. Let him spell that out with greater clarity, as well. A period of rising unemployment is unavoidable. Let him spell that out with equal clarity. The question facing us is whether our society, our system of government, can sustain these things, and, if so, for how long? The choice is horrific, and on present plans all these things will need to be sustained for a number of years.

One asks oneself whether it can be done. Certainly, it cannot unless these prospects are more clearly understood and spelt out. That is why, first of all, we call on the Prime Minister to demonstrate a far greater candour than he has so far displayed. This is why we have to state the case for even more severe measures now. We have constantly said that the longer action is delayed, the more severe that action will have to be. That is why we indict the Government for the prolonged delay which has landed us in this position.

There are two other matters with which I want to deal first, on which no doubt the Prime Minister is more than capable of trying once again to misrepresent the position of our party. First of all, on unemployment. The Conservative Party abhors the idea of enforced and unavoidable idleness for a single individual. We wish to return, and so does everyone else in this House, as soon as it is consistent with the conquest of inflation, to the "high and stable level of employment" set out in the 1944 White Paper. [Interruption.] I will deal with the Prime Minister's petty interruptions in a moment. I need no lectures from right hon. Gentlemen opposite about the evils of the alternative, high unemployment, for I was born and brought up in South Wales.

Several Hon. Members

Oh!

Sir G. Howe

Hon. Gentlemen opposite may moan, but it is a fact that we on this side of the House know at least as much as they do about the social consequences of unemployment. I saw for myself the length and the horror of dole queues. But let there be no misunderstanding—[Interruption.]

The Parliamentary Secretary to the Treasury (Mr. Robert Mellish)

How can the right hon. and learned Gentleman remain a Tory?

Sir G. Howe

Because I have more sense than the right hon. Gentleman. Let there be no misunderstanding about the present position. A Socialist Government are now presiding over an increase in unemployment. Unemployment has risen under a Socialist Government from 588,000 in March of last year to 810,000 this year and is expected to rise to about 1½ million next year. This Socialist Government are doing, and can do, nothing to prevent it. In the words of the White Paper, they are "shackled" by the burden of inflation. We take no pleasure whatsoever in that. It is an inevitable accompaniment of the attack on inflation to which the Government are committed. It is a consequence of their failure, which we deplore, to act sooner than they have done. Let us hear nothing from the Prime Minister to the effect that our policies will create unemployment.

The Chancellor of the Exchequer (Mr. Denis Healey)

If the right hon. and learned Gentleman will allow me, the amendment which he and his Friends have tabled asks for large increases in the cuts in public expenditure for the current year. Could he answer the question which his Leader consistently failed to answer yesterday: how big an increase in unemployment is he prepared to accept as a consequence of these cuts? Let him not dodge the question as his Leader did yesterday, because if he really takes seriously the problem of unemployment, as he has just told us, he must be honest about this and not conceal his views.

Sir G. Howe

We reach a fine pass when anyone in this House has to take lectures—

Mr. Healey

Answer the question.

Sir G. Howe

The right hon. Gentleman will have an answer to his question, which is more than he gave my right hon. Friends yesterday. The right hon. Gentleman is not in a position to give me lectures in honesty.

Mr. Healey rose—

Hon. Members

8.4 per cent.

Sir G. Howe

I will deal with the public expenditure point later, but I will tell the right hon. Gentleman now that if this Government had had the courage to restrain public expenditure sooner than they did we would not now be facing the prospect of high and rising unemployment. We have now reached a situation in which whatever any Government may do the prospect of unemployment is inevitable.

Mr. Healey

Answer the question.

Sir G. Howe

I am going to do so. The right hon. Gentleman must contain his arrogance and his impatience, if that is possible. We have reached a situation where we have to make cuts in public spending now to prevent the prospect of still higher unemployment in the future, after that, and there is no escape from that. Action now on these lines—rather than action this year, next year, sometime, never—is an essential foundation for long-term strategy to restore the economy.

Mr. Healey rose—

Hon. Members

Sit down.

Mr. Speaker

Order. I did indicate that we have 75 hon. and right hon. Gentlemen who want to speak. Can we have a fairly good tempered debate?

Mr. Healey rose—

Hon. Members

Order.

Mr. Healey

On a point of order, Mr. Speaker, the right hon. and learned Gentleman has just—[Interruption.]

Mr. Speaker

Order. If the right hon. Gentleman rises on a point of order I must be allowed to hear him.

Mr. Healey

Thank you, Mr. Speaker. The right hon. and learned Gentleman has just undertaken to answer the question which I put to him. He has failed to do it. Is it in order, Mr. Speaker, for the right hon. and learned Gentleman to break an undertaking which he has made to the House within 10 seconds of making it?

Mr. Speaker

The right hon. Gentleman knows that that is a matter of argument, not a point of order.

Sir G. Howe

I have answered the right hon. Gentleman's question, Mr. Speaker. I do so again. The Chancellor of the Exchequer is adept at using his hectoring and bullying manner to distract attention from the focal point. The position, which he ought to have had the candour to explain, is that we are now in a situation in which the prospect of unemployment for a substantial period ahead is inescapable. The question is how quickly we can improve on that, and the only cuts in public expenditure we are advocating are a more certain way of getting us back on the road to recovery than any alternative.

Mr. Norman Tebbit (Chingford) rose—

Sir G. Howe

Let us hear nothing further from the Prime Minister to the effect that our policies will create unemployment. His policies are doing so, and it is inescapable. It is part of the price that the British people have to pay for his earlier delusions. It would be very easy for us to jibe, as he jibed at my right hon. Friend, "Dole queue millionaire", but we shall not do so. It would be easy for us to agitate upon the basis that there is at least one honour that the right hon. Gentleman will share with Ramsey McDonald, that of being the second Socialist Prime Minister this century to preside over more than 1 million unemployed in this country. We shall not do that. There is now no escape from this vale of tears and the tragedy is that the Prime Minister has never had the courage to be as frank as he ought to have been about this.

The second point that I want to deal with is the one which provoked the Prime Minister's other sedentary interruption on monetary policy. Monetary policy, properly managed, is an essential of economic management. It is not in itself sufficient. [An HON. MEMBER: "Enoch said so."] The right hon. Member for Down, South (Mr. Powell) may have said it, but there are sources nearer home than that. [Interruption.] The Prime Minister, interrupting from a sitting position, says that he did not mention monetary policy. No he did not. He muttered sotto voce, as he is so often inclined to do, "What about Joseph?" referring to my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph).

The Prime Minister

I made a reference to the fact that when the last unemployment figures came out the right hon. and learned Gentleman made light of them, and said that unemployment was only about a third of what the figures showed. Will the right hon. and learned Gentleman comment on that?

Sir G. Howe

The Prime Minister knows perfectly well that analysts on all sides of politics—

Mr. Healey

Answer the question.

Sir G. Howe

I shall. The right hon. Gentleman must have the patience to allow me to finish a sentence.

The Prime Minister knows perfectly well that analysts on all sides of politics have been studying the shape and accuracy of the unemployment statistics. But if he suggests that my right hon. Friend the Member for Leeds, North-East cares less than he does about the impact or unemployment—[HON. MEMBERS: "Answer the question."] I am answering the question. My right hon. Friend and all hon. Members on this side of the House care about unemployment, and wish to see it reduced.

Let me deal with the second point. The White Paper says that the Government: will continue to use the full range of instruments available to them to keep the growth of the money supply under firm control. Fine. In the Labour Party's last manifesto we find the following sentence: We have: Stopped printing money to finance unnecessary expenditure. Fine. Let this be noted, then. The Prime Minister and the Labour Party are self-confessed monetarists and, if they are to stick to this aspect of their manifesto, intend to remain so. If the cap fits, let the Prime Minister have the courage to wear it from now on without any further deception.

The Prime Minister and the Chancellor are fond of blaming part of their present troubles on the monetary policy of the last Government. If so, so be it. But let the Prime Minister understand why it came about. I commend to him the excellent speech, among so many others, made by the Paymaster-General to the Canada Club on 1st July, when he said: It should not be imagined that Governments that have in the past allowed the money supply to get out of control have done so out of a particuular love for printing money. It is done under political pressure. Let the Prime Minister ask himself this: by whom was that political pressure orchestrated? To his shame, it was orchestrated by the Prime Minister himself.

The Conservative Party will not seek to undermine the Prime Minister's position. It is a tragedy for the nation that we cannot expect similar support from him. So let the Prime Minister write out of his speech now the misleading and hypocritical attack that he has no doubt already prepared on my right hon. Friends the Leader of the Opposition and the Member for Leeds, North-East, because both my right hon. Friends have higher standards of integrity than any to which the Prime Minister could ever hope to aspire.

What, then, of the other elements in the policy? We shall be discussing some of the details tomorrow. There is the Government's commitment to the use of cash limits to contain public expenditure —at last. We have long pressed them to do just that. It is essential that those limits should be strictly defined tnd rigorously enforced. They need to be supported by much clearer policies than we have yet seen for local government, and carried through with no weakening of will. We shall certainly support them if they are.

But is that enough for public spending? I am driven to the conclusion that it is not. I endorse the Chancellor's programme to cut back in the years ahead. Sadly, that will impinge on social programmes. God knows, there is more than enough that we all wish to do in social reform. Here, too, the Labour Party has no monopoly of care and concern. I have presided in the constituency of the hon. Member for Bethnal Green and Bow (Mr. Mikardo) over a comprehensive school where it was manifest for all to see that we needed far more resources to improve the conditions in which the children were being taught.

Under the last Labour Government I reported to the late Richard Crossman on conditions in Ely hospital, in South Wales. Heaven knows, that hospital needed help. We all want to help people —the elderly, the frail, the sick, the young, the dependent—in our community. Let there be no doubt about that.

But if we are to do it—and to do better in that respect, as we must, can and shall —we must return to the creation of wealth before we spend it. The conquest of inflation is an essential prerequisite to that, and so is an end to the Government's habit of living beyond their means, and continued dependence on international credit, which leaves them perilously at risk. So, too, is the transfer of resources into investment, above all into profitable private industry, returning as soon as possible into the pockets of our people.

That is why we believe that the Chancellor needs to go still further, sooner, in reducing public expenditure. Last year he told the CBI at its annual dinner: I have planned a drastic cut in the public sector borrowing requirement. Yet he ended up with a public sector borrowing requirement three times larger than that for which he had planned. Therefore, we trembled when we heard him make a similar commitment in this year's Budget speech, and we trembled still more when we saw published last week, and saw brought on to the Floor of the House only half an hour ago, Supplementary Estimates for the first three months of this year falling just short of £2,000 million. Already in the first three months of this year public expenditure is 31 per cent. up at an annual rate, on what the Chancellor said it would be in his Budget speech.

The horrifying thing about that is that last year the right hon. Gentleman missed the target by only 25 per cent., so this year he is doing even worse than last year. That is why we are apprehensive about his approach, and why we criticise —[Interruption.] The Chancellor may laugh, but £2 billion excess spending is not much of a laughing matter.

Mr. Healey rose—

Hon. Members

Sit down.

Sir G. Howe

Therefore, we criticise the further planned growth of subsidies and the failure to reduce those in payment. We understand the temptations—

Mr. Eric S. Heffer (Liverpool, Walton) rose—

Sir G. Howe

I shall not give way at present.

Mr. Healey

I had 24 interruptions.

Sir G. Howe

I dare say the right hon. Gentleman needed them.

We succumbed to the temptation to make subsidy payments. Some may be justifiable in some circumstances.

Mr. Heifer rose—

Sir G. Howe

I shall give way to the hon. Gentleman at the end of this section of my speech, which will not be long.

The Chancellor now takes credit for his reduction of the price subsidies payable to the nationalised industries. So be it. That is an inevitable part of the temporary reduction in our standard of living that we face. That is why the Prime Minister needs to be so much more candid than he has been.

The Secretary of State for the Environment has argued in recent weeks and months the case for higher rents and lower housing subsidies. What a pity he was not more frank about that in the face of our own fair rents legislation! The Secretary of State for Prices and Consumer Protection has been explaining in recent weeks and months why food subsidies will have to go. What a pity the Labour Party did not say the same when we explained that such subsidies would not solve our problems.

That is why we regret the fact that the Government are not now prepared to take further action to reduce public spending along these lines. Action now is an essential part of a long-term strategy. The sooner we are through these unpalatable policies, the sooner we can resume the path towards prosperity. The Government's failure to act in that direction is only one of the reasons set out in our amendment why we shall not be able to support them tonight.

Mr. Heffer

The right hon. and learned Gentleman has said that the bread subsidies should not be increased, and that there should be no food subsidies. As that will mean further price increases, and that is not the end of the story as far as he is concerned, will he explain in which other directions there would be cuts in public expenditure if we had a Conservative Government? Would he like to spell out in detail what this will mean to the people?

Sir G. Howe

I have been explaining the areas which cry out for early reduction—housing subsidies, which are now running at double what they were two years ago, and food subsidies and subsidies to nationalised industries, which are all running at substantial figures. [Interruption.] The Chancellor says that that would bring about an increase in the retail price index, but so does the reduction of the subsidies to nationalised industries.

So, too, when the Chancellor imposed increases in taxation. There can be no escape from changes of that kind if we are to move from this vale of tears. The Chancellor should be more candid about it. It is not that we do not wish to help homeless families. However, it is irrational and absurd for families earning incomes in excess of £100 a week to receive huge subsidies towards their rents when others are in need. That is the essential case which we put forward.

There is an even more compelling reason for criticising the Government. I refer to the Government's obstinate insistence in going ahead with their nationalisation programme—land, oil, ships, aircraft. In heaven's name, why? What reasonable Government could wish to drive our greatest asset, North Sea oil, into following, for example, the dynamic example set by the Post Office? What sensible Government could possibly wish to drive our aviation and shipbuilding industries to emulate the enterprising profitability of British Rail or British Steel?

The Prime Minister

That is very cheap.

Sir G. Howe

The Prime Minister says "very cheap". But that is the reality. When a Socialist Government have demonstrated that nationalisation improves the management of an industry, that will be the time to put forward further cases in that direction.

Whom will the Prime Minister be able to persuade to take on the Herculean tasks of running these new giants? Does he hope to absorb the energies of the growing army of disenchanted ex-Ministers now on his back benches—jobs for the hon. Member for Liverpool, Walton (Mr. Heffer), for the right hon. Member for Lanark (Mrs. Hart) or for the hon. Member for Aberdeen, North (Mr. Hughes)?

Mr. Arthur Lewis (Newham, North-West) rose—

Sir. G. Howe

It is much more serious than that. The extension of the public sector enlarges—

Mr. Arthur Lewis rose—

Mr. Deputy Speaker (Mr. George Thomas)

Hon. Members must control themselves. The Attorney-General is entitled to address the House. [Interruption.] Order. At least everyone Knows when I am wrong.

Sir G. Howe

I do not know whether to be flattered or dismayed by that.

Mr. Arthur Lewis

On a point of order. You have rebuked me, Mr. Deputy Speaker. I should like to apologise to you and to say that my apology is sincerely meant. It is reserved for you, Mr. Deputy Speaker. The right hon. and learned Member for Surrey, East (Sir G. Howe) will never give way, so I must get my point in. Perhaps he is being hypocritical because he knows that his wife has just been appointed a chairman of a board at £7,000 a year, although he claims that he supports wage restraint.

Mr. Deputy Speaker

The trouble is that in getting his point in, the hon. Member got me into trouble.

Sir G. Howe

The situation is more serious than that. The extension of the public sector enlarges the scope of inefficiency within our economy. It is also serious in economic terms. Last week the Prime Minister suggested that nationalisation made no addition to public sector expenditure. Nationalisation goes far beyond its implications for demand within the economy. It increases the cash total of public expenditure. It pushes up the borrowing and interest rates. The profit inflow to the Government from the nationalised industries is less than the interest payable on compensation. The longer-term effects of nationalisation lead inevitably to declining profitability and efficiency, loss making and a waste of the community's resources.

The Government are entitled to call upon the nation to make sacrifices for the sake of economic sanity and for salvation from the great dangers facing us. But the Government are not entitled by any standards to call upon the nation to make further sacrifices simply for the sake of Socialism. We reject that. That is one more reason for our amendment. That is why we cannot support the Government.

We point to the Government's failure to recognise the need to promote the prosperity of the private sector, which is recognised in the White Paper, yet which faces still tighter price control and a vastly egalitarian Price Code. In that respect the Prime Minister produced a policy which could transform the brain drain, of which he once complained, into a tidal wave of emigration. That is another reason why we cannot support the Government.

Pay restraint is necessary for the reasons given by the Leader of the Opposition yesterday. Above all, it is necessary in the public sector. But what a horror it is that we must enter this tunnel, and do so in this fashion. In his approach to this question the Prime Minister surpassed even his own records in equivocation. Is the policy statutory? Yesterday the Chancellor of the Exchequer described it as a voluntary policy with powerful sanctions and support from legislation. That does not exactly reek of voluntarism. Indeed, there is to be a Bill. Or are we to see two Bills?

Let us examine the Title of the Bill. It reads "Remuneration, Charges, and Grants Bill." What skill there is in that! The word "income" is translated into "remuneration". The word "prices" is translated into "charges". I suppose it is some comfort to know that the Prime Minister still has the time and energy to thumb his way through Roget's "Thesaurus". Clause 1(1) says that there is a contractual obligation to pay money above the limits when the limitation is no greater than necessary to keep the remuneration within the limits imposed by the policy set out". The Bill seeks to set aside contractual rights within the limits imposed by the policy set out in the White Paper. What will happen if the limpid draftsmanship of Congress House, annexed to this White Paper, is less than clear? That is easy. Clause 1(5) reads: Any question arising under this section whether any remuneration exceeds the limits mentioned therein shall be referred to and determined by the Secretary of State". That refers to the Secretary of State for Employment. What a farce this is! There he sits, the champion of the rights of man, as he used to be, the defender of the rule of law, as he used to be, the upholder of parliamentary sovereignty. In the good old days he used to speak about those subjects as if he had invented them. He was the hammer of the European Court of Justice and the scourge of Sir John Donaldson in the "political court". Under this legislation the Secretary of State for Employment alone is to be the prosecutor, judge, jury and court of appeal in one. Indeed, we should not be surprised to find him going for the job of Official Solicitor as well. Everything is to rest upon the sagging shoulders of the commissar for Ebbw Vale. What a fall is this! But that is not all.

We have been told that there will be another Bill, upon which all will depend. The Chancellor of the Exchequer said that the Bill would contain no sanctions against work people. But will it contain, as in 1966, sanctions against trade unions? How are we to judge?

Another question must be asked. Where is this phantom Bill, this ectoplasmic document? It must exist. The Chancellor quoted from it. The Prime Minister, heaven help us, has even promised to publish it. But when will it be published? [HON. MEMBERS: "Answer."] I will offer an answer to my hon. Friends—in the next volume of the Prime Minister's memoirs perhaps. That may come a great deal sooner than he thinks. We very much hope it will, but even that will not be soon enough. Even then we might not be satisfied, because the Attorney-General might appear before the House and move a writ to prohibit publication.

This is no way to treat Parliament, and it is no way to treat the nation. It is one last reason, going beyond our amendment, why we cannot vote for the Government tonight. We cannot be expected to vote for a phantom pig within a phantom poke. These are the reasons why we shall not vote for the Government tonight—because of their contempt for Parliament and the nation, because of their continued commitment to disastrous and expensive measures of Socialism, because of their failure to satisfy the House that they have yet come to the end of their rake's progress of public spending, because of the failure of their present strategy for the recovery of the private sector. Those are the reasons why we cannot support the Government in the Lobby tonight.

I will say something to the Prime Minister which he has never said to us. I shall tell him why we shall not be voting against him tonight—because we support his commitment at last to attack the inflation that is destroying our society and we support his commitment at last to set strict cash limits to the size of public spending. I will add something else which he has never said to us. When the time comes for him to stand firm upon those commitments, from wherever the challenge may come, the Conservative Party will give him or any other elected Government of this country our positive and united support. We shall give him that support not because the Prime Minister has done anything to deserve it—he certainly has not—

Mr. Healey rose—

Mr. Deputy Speaker

Order. Only one right hon. Gentleman at a time.

Sir G. Howe

We shall give the Prime Minister our support not because he has done anything to deserve it—he has not. We shall give him our support not even because he is the best Prime Minister we have—he is not that either. We shall give him support at that time because the survival of democratic government in this country depends upon the willingness of the House of Commons to give just that kind of support to its elected Government. That support will certainly be forthcoming from the Conservative Party, and when the time comes for us to resume the government of the country we must devoutly hope that the Labour Party will by then at least have found a Leader with the guts to say the same.

4.23 p.m.

The Prime Minister (Mr. Harold Wilson)

Before I come to the general debate, I wish to congratulate the hon. Member for Woolwich, West (Mr. Bottomley) on his maiden speech yesterday and to thank him for his reference to Bill Hamling. I personally treasure the fact that when the hon. Member took his seat—which is rather an awesome moment for a new Member after a byelection—just before he read the Oath he turned round to me and expressed sympathy to me on the death of my Parliamentary Private Secretary. I am sure that the hon. Member will have a great welcome in the House, particularly as he expressed himself as desirous of following the standards set in Woolwich, West by my former hon. Friend.

The debate so far has shown the contrast between the Government, with a clear and courageous policy, and the will and determination to carry it through, and an Opposition with no clear policy to assert. We read—and the right hon. and learned Member for Surrey, East (Sir G. Howe) confirmed—that the Opposition propose not to vote against the Government or the White Paper tonight but that they will then vote against the legislative vehicle which makes the White Paper policy a reality. I have never heard such humbug in my life. I will come to the point about the Opposition's intended vote later in my speech.

As for the speech made by the right hon. and learned Gentleman, it is a matter of common observation in the House that when an Opposition have no policy or are divided three ways—as are the Conservative Opposition—they usually do only one of two things: either they get preoccupied with picking petty procedural points, as the right hon. and learned Gentleman did, or they get preoccupied and ride off from the lack of policy by attacking personalities. In fact, the right hon. and learned Gentleman spent his whole speech doing both.

We are talking about consensus and the consent of the nation, and the right hon. and learned Gentleman should realise that one of the biggest problems we have had in helping to reach agreement in a disastrously divided nation is his responsibility for the Industrial Relations Act and his sneering contempt of the House throughout its passage.

The crisis we are debating—and here I agree to some extent with speeches which have been made, indeed from the Opposition Benches; the world crisis, crisis for Britain—was endemic in 1973. It was in the making even before the decisions of the Middle East oil producers. Already, before the oil crisis, the feverish industrial boom had petered out. Industrial production had reached its peak in the second quarter of 1973. Manufacturing investment, which had never under our predecessors even regained its 1970 peak, was beginning to fall back. The current balance of pay- ments deficit in the fourth quarter was running at an annual rate of some £2,000 million, and that was before the increase in oil prices had hit this country more than marginally.

As regards inflation and unemployment, in January 1974, when sections of the Conservative Press—and Conservative leadership—were urging an early snap election, the most true blue newspapers at that time were forecasting price increases of 15 per cent. rising to 20 per cent. and heavy unemployment within a few months—so, they pressed, have an election and get back before it all happens. All that was happening before Labour came into power.

When we became the Government, it was clear that we faced rapidly rising prices—partly through world factors and oil and the commodity boom—but also, as the right hon. and learned Gentleman fairly said yesterday, through the inevitable re-entry problems which follow a period of freeze and statutory control, the anomalies and relativities, and the catching up of those groups who had been left behind, some of them for years. It was also clear at that time that we faced the prospect of sharply rising unemployment, stemming from world inflation, and that our balance of payments was deteriorating sharply.

These undeniable facts were clearly stated by all the party leaders in the February election and again in the October election. All of us warned about the impact of world prices and what they would mean for inflation and unemployment. All of us—however much we might disagree about the right domestic policy to follow—made clear the nature of the danger the country would face if to these world factors we added further aggravation by actions taken here in our own country. Where we disagreed was on the right policies to avoid that aggravation.

These warnings were spelled out again and again. At the meeting of Prime Ministers and other party leaders of the Socialist International at Chequers on 30th June last year, I said this: I believe that the nub of the problem—the problem of 1974 and 1975—is this. Over the last year or two, world prices have soared —not only oil but raw materials of manufacturing industries, and of grain, meat and other produce … But the danger for 1975–76 is that, as these outside pressures ease, the inflation problem will become increasingly caused by internal factors—as month by month incomes rise to meet last month's price increases. This is certainly the situation which we in Britain have had to face. Throughout the October election I warned, as did the right hon. Member for Sidcup (Mr. Heath), the then Leader of the Opposition, that we were facing the prospect of the worst world depression since the 1930s. All of us emphasised that while in 1974 the world inflation and its inevitable aftermath was caused by world prices, in 1975 the danger would arise mainly from a further aggravation caused by our internal cost structure, from industrial costs reflecting internal incomes settlements.

While the consequences of world depression have joined with our encouraging export record—our export record is extremely encouraging but I concede that imports have been affected by the world depression—in reducing the balance of payments deficit to a figure well under £500 million in the first half of this year, only a quarter of what it was last year, we have suffered the inevitable consequences both in terms of unemployment and in the rise in costs and prices.

I believe that the House will be ready, as were the EEC Heads of Government last week, to recognise the gravity and magnitude of the world depression. It was world inflation that we talked about two years ago but it is now world depression. That recognition has confirmed the predictions that we all made last year about this being the worst depression world-wide since the 1930s.

The five-fold increase in oil prices has enriched some countries and caused strains for many others of us. It has hit hardest all those countries with no oil, with no high priced raw materials, countries needing oil and other imports and unable to pay for them, countries, some of them, through primeval poverty or through natural disasters, such as flood or drought, which are living on the very margin of subsistence, the very margin of life itself.

What my European Prime Ministerial colleagues expressed so clearly last week —I think that the whole House will agree with this—was that the world has rightly condemned the depression of the 1930s, the cost of which was tens of millions of workers throughout the world losing their jobs, but the consequence of the world prices of today can be the loss of hundreds of thousands of lives in wide areas of Asia and Africa, where starvation was already endemic.

There has been a considerable easement in world commodity prices over recent months, though not, of course, oil prices. I will not speculate today—and I do not think that anyone else would—either about the possibilities of further oil price increases or on the future movements of commodities, particularly with the uncertainty now surrounding world harvests, where the prospects are for a high yield in North America, drought in Western Europe and scorched crops in the Soviet Union.

The reductions in commodity prices which have already occurred have begun to be reflected in some of the more important internal indices here, and notably two published last week, the import cost index and the increase in wholesale prices. Both indices are significant in presaging what can happen in future. The import cost index and the increase in wholesale prices show the lowest increase since April 1973, some two and a quarter years ago. Let it be remembered that in April 1973 we had a full 100 per cent. price freeze. The fact that they show the lowest increase since 1973 is encouraging, but the challenge still remains. It is a challenge to Government, to industry, to trade unions and to the whole nation. If world prices continue to ease, we must not, by increased internal costs, reject the prospect of profiting from easier world prices. If they were to worsen again, all the more would we have the obligation to ensure that we do not add to that worsening in the world by harmful actions or harmful attitudes within our own economy. That is the inspiration of the White Paper that the House is being asked to approve tonight.

I know that right hon. and hon. Members have shown some impatience about the time that was taken before the policy could be announced. I believe that it was right to seek the maximum agreement with the trade union movement in a situation which had so much to deal—not exclusively, but so much—with incomes. The right hon. Member for Sidcup, my predecessor, spent many months in discussion with the TUC in the pursuit of a voluntary policy. He was right to do so. The right hon. Gentleman told the House on many occasions of the number of meetings that he had with the TUC and the number of hours he spent in discussions with it. We, for our part, were not only entitled but duty bound to give whatever time was needed to achieve the aim the right hon. Gentleman set himself.

Whatever the views of hon. Members on either side of the House—and I hope that we shall sec less of the crabbing attitude that has been displayed as regards what the TUC has done—the decision of the TUC General Council is historic. No less significant has been the increasing rallying to that lead over the past 10 days, including the response of certain unions which had voted against the TUC General Council's policy of a fortnight ago, and of those unions whose attitude at ground level was in doubt. The response of the mineworkers' executive has been clearly backed, as my right hon. and hon. Friends who were with me can confirm, by the support we were given last Saturday by the mineworkers of Durham. The three to one vote of the NUR conference will have been noted by the whole House, as will the response of other unions.

A vote against the White Paper tonight is a vote against the TUC decision. Still more, it is a clear signal from this House that we do not want the TUC's help and that the House thinks it can do better on its own. In a democracy, no anti-inflation policy can be successful which does not carry the consent of the great majority of those principally affected by it.

The aim of us all, of Government, the TUC and the CBI—and, I believe, an overwhelming majority in the country—is to get the rate of inflation down to 10 per cent. by the end of the coming pay round, by the late summer or early autumn of next year, and to single figures by the end of next year. The overriding pay limit of £6 which we have set—and the TUC has agreed—is consistent with that target inflation rate. Equally, the achievement of that target is utterly dependent on the limitation of incomes which we have said must be honoured.

No other proposals put forward from either side of the House or from any part of the country, however wide-ranging, and regardless of whether they include import controls or controls on movements of capital, can ignore the central fact—indeed, some other proposals would demand even more than the Government's policy, even more than that which the Government are proposing— that they must be buttressed by a comprehensive and tough policy on incomes, and—

Mr. Heffer

My right hon. Friend has said that if there is a vote against the White Paper it will be a vote against the TUC. Will my right hon. Friend say whether it will be a vote against the 19 who were the majority or the 13 who were in the minority, who themselves were against the Government's position?

The Prime Minister

I am glad that my hon. Friend has picked up that point. Those who vote against the White Paper tonight will be voting against the TUC. It will be a vote against the TUC General Council. Any hon. Member who decides so to vote will be voting against what was, admittedly, a majority decision. My hon. Friend will have noticed—and I hope that he was gratified—the fact that some of those who voted for the minority have reversed their decision either by conference decision, executive decision or by reconsideration. For example, I believe that USDAW found the proposal that the Government were making to be very different from that which it had been led to believe.

Therefore, I say again that a vote tonight against the White Paper—I understand that it would be a perfectly honest thing to do, a perfectly fair and reasonable attitude for anyone to take against the background of particular views—will be a vote against the TUC. Let those who vote in that way not again talk about the TUC. Let them not, after voting in that way, talk about what we said in our manifesto about reaching agreement with the TUC and the agreed view of the trade union and political Labour movement. That is what it is about. Hon. Members may disagree with the TUC, but if they vote against the White Paper tonight do not let them pretend that they are safeguarding TUC interests. They will be flying in the face of a previous decision.

Mr. Ron Thomas (Bristol, North-West)

Does my right hon. Friend ask us to accept that it was an agreement in the accepted sense of the word when for a number of weeks the TUC had been told that unless it came to some such agreement statutory controls would be introduced? I am afraid that we see this as a piece of blackmail as far as the TUC is concerned.

The Prime Minister

My hon. Friend cannot get away with that. He must recognise that the TUC General Council is composed of responsible, adult, mature people with a great deal more experience of trade unions and of life that has my hon. Friend. They are not the sort of people who would be blackmailed. They put forward proposals on their own initiative before the Government made any recommendations on the matter. My hon. Friend may vote against the proposals, but do not let him pretend that he is saving the soul of the TUC, or that he knows better than they.

Mr. Daniel Awdry (Chippenham)

As one is tempted to vote for the Government's White Paper, may I put a question to the right hon. Gentleman? How can the Prime Minister offer any concessions to people, such as myself, who are worried about nationalisation plans and feel that they will spoil the chance of any success for the Government's policy? Is there anything he can offer to people such as myself who are listening to his speech and deciding how to vote tonight?

The Prime Minister

That is a fair question, and no doubt it is in the minds of those Conservative Members who are considering this matter. I shall be dealing with it a little later. I hope that what I say will be of some help to the hon. Gentleman. I cannot guarantee anything, so I must leave the matter to him to decide for himself.

We have made clear—and the House and the country should be in no doubt about this—our total commitment and determination to carry this policy through. This is the year of fight back—fight back against inflation and against the steadily, remorselessly rising unemployment figures. This year, as we have all agreed—and I refer to the remarks of the right hon. Lady the Leader of the Opposition about ten days ago—must be used to work out the policies for the period which follows. This year, starting in the public sector, the Government as employer will ensure that all settlements in respect of its employees in the Civil Service, National Health Service and the Armed Forces comply with the pay limits.

We have discussed with the chairmen of the boards of publicly-owned industries and services the measures for enforcing the limit over that substantial part of the public sector. Both in our meetings with the chairmen and in public announcements and broadcast statements by nationalised industry chairmen, we have had their full, and indeed their enthusiastic, assent for the policy. Nobody realises better than they what are the implications of measures designed to bring down the level of inflation in their predominantly Labour-intensive industries.

Mr. Hugh Dykes (Harrow, East) rose—

The Prime Minister

The right hon. and learned Member for Surrey, East (Sir G. Howe) gave way on very few occasions indeed. I have not yet finished the point. Perhaps the hon. Gentleman can intervene a little later. I shall signal to him when I have reached that point.

The money available to the chairmen of publicly-owned industries will be strictly controlled and there will be not a penny for the payment of increases over the agreed limit. We have made clear to them, as I did in the House, that no money will be made available for excess settlements, whether by subsidies, by permission to borrow, by loading excess costs on the public, or by increased costs or charges.

I believe that the majority of workers in these industries have understood what the alternative would mean if they secured settlements over the limit. It would mean an inevitable and sharp offsetting cutback in the operations of the public boards, other than incomes. In these predominantly labour-intensive industries this could only mean a loss of jobs. In the coal-mining industry, to which reference has been made, it would mean inhibiting the expenditure which the Government have sanctioned for the sake of saving pits or of making pits economic and viable in already hard-hit coalfields. Yorkshire's wage increases would have been Scotland's pit closure, and that of Wales and other areas, too.

Mr. Dykes

Now that the chairmen of the nationalised industries are precluded from salary increases because of the stipulations in the White Paper, will the Prime Minister confirm that it will be Government policy—if the Government last that long—to restrain those chairmen from having any increase at all until the operational performance of those industries improves tangibly and significantly?

The Prime Minister

That is not in the White Paper, nor is it in our policy. Last year we stated on other grounds the Government position in relation to top salaries, including these salaries. I am satisfied—as I am sure are former Conservative Ministers who held responsibility in the nationalised industries in respect of transport, energy and other industries — that those chairmen, appointed by the previous Government or by the present Government, have their hearts in their jobs and are skilled in management. We have to make changes from time to time, and changes might be required, but the hon. Gentleman's suggestion, although the House might like to study it, is not the right way of securing what he has in mind.

Similarly in local government, the White Paper sets out a stringent system to ensure that local authorities adhere strictly to the Government's policy. Parallel with what is proposed in the new extension of price control for private employers, rate support grant will be withheld from local authorities who exceed the pay limit. In the event of a national pay settlement which exceeds the limit, no grant will be paid on the excess. In the case of an individual authority which breaks the limit, the Government will be taking powers to withhold not just any excess over the £6 but the full amount of the settlement. If an individual local authority seeks to finance an evasion of the limit by manipulation of its capital finance, the Government have made clear that they will use all their existing powers to control, case by case, that authority's borrowing, including access to the capital market.

Mr. Nigel Lawson (Blaby)

I am grateful to the Prime Minister for giving way. The right hon. Gentleman has been helpful to the House by spelling out some of the consequences to the local authority sector, to nationalised industries and particularly to mining if there is an increase in excess of the limits set in the White Paper. What he has not said, and what the House wants to know, is whether one the consequences will involve bringing in the reserve powers.

The Prime Minister

Is the hon. Gentleman referring to reserve powers in existing Acts?

Mr. Lawson

No. Will the other legislation be brought in if the nationalised industries agree to excessive pay increases?

The Prime Minister

The hon. Gentleman must appreciate that I cannot simultaneously make speeches about local authorities, about public industries and about the private sector. They are matters which should be dealt with later.

Mr. Lawson rose—

The Prime Minister

Perhaps the hon. Gentleman will contain his soul in patience until a little later. I have given way five times. The right hon. Lady gave way six times, and her right hon. and learned Friend hardly at all.

Dealing with the local authorities, we have also made clear in the White Paper that the Government will reconsider the scale of the rate support grant provision if local authorities fail to exercise tight control over staff numbers.

In the private sector my right hon. Friend last night set out in detail how the price control system will operate in support of the White Paper policy. We have also made clear that companies that break the pay limit must not expect selective assistance under the Industry Act. This may appear harsh, but Parliament has voted assistance under the Industry Act—and this is equally true in the case of British Leyland and will also be the case in schemes for industrial modernisation, including those announced in the Budget by my right hon. Friend.

Parliament clearly intends that such funds should be available specifically to preserve or provide jobs, to encourage modernisation and firms' consequent viability on a competitive basis. The Government believe that it will be inconsistent with these objectives to underwrite income settlements higher than the country can afford. In other words, we do not want to see an alienation of money, designed to help jobs, in fact going to increased salary levels.

In regard to the private sector, my right hon. Friend the Chancellor of the Exchequer yesterday referred to the powers in the reserve Bill. I have noticed a great deal of interest in this matter among the Opposition. It is a fact that when they have no policy, they take up positions on procedure.

My right hon. Friend made clear what would be in the Bill in broad terms. He made it absolutely clear, and was right to do so, that while there are a number of queries, as well as discussions with the various interests concerned, such as the CBI and the retail consortia, we cannot finalise these matters, nor would it be right to publish them in legislative form. However, I would reiterate what my right hon. Friend said. If we have to bring in statutory powers, the CBI accepts that it would have to fall only on individual employers and that it would have to be protected against suits for conspiracy. It was then said that we would consider publication. We shall decide that probably in relation to the debate.

My right hon. Friend has told the House as much as any Government can about legislation which we hope we shall not have to bring in. It is legislation that the Government do not intend to bring in unless it becomes necessary through the breakdown of the policies for which we are asking the support of the House and the support of the Opposition tomorrow.

Against this clearly defined policy, and the Government's equally clear determination to make it effective—[Interruption.]

Mr. David Price (Eastleigh) rose—

Mr. Deputy Speaker

Order. The Prime Minister is addressing the House.

The Prime Minister

—we have to set the reactions expressed in this debate from the official Opposition. Their amendment has been moved and it has, of course, been studied by the House.

The right hon. Lady yesterday, in a brief philosophical passage—as reported at col. 79 of Hansard—seemed distinctly sceptical about the possibility of success of any incomes policy at all. She set out the problems, I thought perfectly fairly, referring to the problems of the successive phases of an incomes policy—the initial phase; the second phase, when rigidities set in, and anomalies and differentials and all the rest; and then the third phase, when, she said, everything breaks down.

This was, of course, an instinctive but not uncharacteristic repudiation of her own Government, because that is exactly what happened. We had to deal with all those anomalies, rigidities and hard cases, such as the groups which had been left out for years on end, for example the nurses, and what are now known as the re-entry problems.

I did not understand from what she said yesterday whether she agreed with her own Government's policy at that time or whether she disagreed with it but kept tactically silent about it.

Nevertheless, in what she said I think there were one or two important truths. One was that, on the day when the White Paper was published, she stressed as she did again yesterday, the need this year to ensure that enough thought is given to preparing for what she rightly described as the re-entry period. She is obviously right about that. I think also that there was some validity in her three-phase criticism, on which not only the Government but the whole House must be ready with ideas. But the simple fact about her speech yesterday is that she did not spell out any alternative policy whatsoever to what the Government propose.

When she was referring to these three-phase difficulties, she entirely failed to draw a distinction between an imposed policy, such as that upon which her own Government in the end had to insist, and a voluntary policy such as her Government sought to get but failed to get—a policy which we have secured by agreement, which I think some members of her Government would have dearly liked to get. It is a policy which carries with it the general agreement of the trade union movement, and now, as our policy is becoming increasingly apparent, it has also the strong support of the country.

As to her own policies, she was repeatedly challenged by my right hon. Friend the Chancellor of the Exchequer —and, indeed, by the Leader of the Liberal Party—but she had none to put forward yesterday. All she could do, in answer to every challenge she had yesterday, was to plead the fifth amendment and to say that she was only the Leader of the Opposition and that her party did not have to have a policy.

But her amendment to this motion, and to some extent her speech, centred on her party's ululations about what it regards as our failure to reduce public expenditure. There were also the usual ritual incantations about subsidies and about measures now going through the House, or in another place, or shortly to be brought before the House, on nationalisation and other things in relation to the regeneration of industry, including the extension of the public sector in cases where public funds are committed.

On public expenditure, I told the right hon. Lady in the debate in May that not only the House but the country would like to have the privilege of being made privy to her secret thoughts about those items of expenditure which ought to be cut. I am disappointed yet again by her response yesterday. I thought we might have had it spelled out more clearly yesterday. I know that the country will also be disappointed.

Perhaps I could correct one thing that she said yesterday about public expenditure—to the effect that in the major OECD countries there has been no real increase since 1973".—[Official Report, 21st July 1975; Vol. 896, c. 88.] That is not true of the USA, and it is above all not true of France and Germany. It is not true in regard to public consumption of any major OECD country—Japan, the USA, France, Germany, Italy and Canada. Apart from that she got it about right. I thought it right, perhaps, to have that statement in its correct setting.

She welcomes our determination substantially to expand the use of cash limits both with direct Government spending and more widely in the public sector. She agrees that that is good doctrine. In that case, why did not her Government apply that doctrine of cash limits between 1970 and 1974?

She is against the totality of Government expenditure in general, but, apart from food and housing subsidies, she shows an uncharacteristic coyness about identifying specific reductions to which she would put her name and pledge the authority of her party.

The House knows that any possible analysis of her proposals here in the House and her speeches outside the House must lead to one simple, incontrovertible conclusion. It is not that she is against public expenditure, whatever she may say. It is that her proposed reductions in expenditure add up to far less than the increased expenditure for which she has so frequently and urgently called, as has her party.

First, in successive defence debates over the past year her party has consistently opposed the reductions we have made in defence expenditure—more than £600 million over this year and next. On the Social Security Bill her party voted to spend £145 million more, over three years, as a result of its vote on the earnings rule. She talked of the public sector borrowing requirement. Her party added £50 million to £60 million more to the public sector borrowing requirement by its vote last Thursday night.

Every time we debate food subsidies or housing subsidies her party complains that these subsidies are indiscriminate. I think that on radio or television she asked why the bread and cheese she eats or I eat should be subsidised. On that argument, why should the colour television that she watches and that I watch benefit from the expensive vote her party carried through the House the other day, if she does not believe in these discriminations?

Yesterday the economies that she specified in non-capital spending were food and housing subsidies. Surely she must realise that food subsidies are important not only in their effect on the Retail Price Index. Still more important, she must know that rising food prices, for whatever reason, are psychologically important in leading to pressure—almost irresistible pressure—for wage claims.

As for housing subsidies, has she no sense of the psychology of ordinary people? Has she no sense of what would be the impact of rent increases of £1 a week at this time? We stopped the previous Government's rent increases in April and October last year. Had we not done so the results for inflation would have been a great deal worse. In this situation does not she agree with us—I do not suggest that she should necessarily rush in straight away with an answer—that it is right to temper the increases now in prospect after the freeze that we have had for the last 16 months?

When she dealt with housing on BBC radio the Sunday after the White Paper, she complained that housing subsidies had doubled. That, she said, really is ridiculous. It is not as if the housing problem is any better now than it was two years ago. Is housing no better than two years ago? In the public sector there have been 34,000 more starts in 1974 than in 1973; 39,000 more houses in new contracts approved; over 12,000 new houses, standing unsold because of mortgage famine, acquired from private developers, since we came into office, and 23,000 existing houses, many of them empty, acquired by local authorities from private owners. In the first five months of this year, starts were up by 7 per cent., completions were up by 26 per cent., and houses in new contracts let by local authorities were up by 19 per cent. compared with the same period for 1974. Yet the right hon. Lady says that there are no improvements. I could give her the figures in the private sector, too.

I am surprised that in this debate the right hon. Lady refers to housing at all. In her General Election bribe last October, she said that she would reduce mortgage interest rates, which her Government had not succeeded in bringing down, from 11 per cent. to 9½ per cent. This would have cost £180 million a year. The estimate of the building societies was £300 million a year, but I settle for the lower figure.

That was not all. She said that she would abolish rates and transfer teachers' salaries to the Exchequer. That would have cost the Exchequer £1,500 million. Oh, yes, it would have fallen on the taxpayer—the taxpayer who, the right hon. Lady so often says, has been pressed against the utter upper limit of taxable capacity.

Then again, in two elections the right hon. Lady's party was committed to her Government's tax credit scheme, with £2,300 million to be handed out, but we never heard how it was to be paid for.

These are the increased expenditures to which the right hon. Lady is committed, to which her Government were committed and to which her party is committed: defence, plus £300 million a year; mortgage interest rates, £180 million; rates, £1,500 million; the tax credit scheme, £2,300 million—getting on for £3,000 million of increased expenditure, excluding the abolition of rates. All this and Maplin, too, and the Channel Tunnel, rail-link and all—and the Opposition talk about cutting Government expenditure. On the right hon. Lady's own commitments, on her own speeches, on her own election bribes, she starts with an increased expenditure of thousands of millions of pounds before she ever begins to tell us what she would cut.

But I must ask the right hon. Lady, since she referred to housing yesterday, how she thinks her election housing proposal would help to create a more united country? She knows that there are well over 5 million families living in local authority and new town houses—all kinds of people, and not just the old and the disabled. During the last election campaign she said that she would like to see the end of council housing apart from local authority housing for old-age pensioners, slum clearance schemes and special cases.

Does the right hon. Lady seriously suggest that we would have had any chance of getting the co-operation of millions of workers in our nationalised industries and services on the basis of condemning the old, the disabled and the disadvantaged to live out their lives in ghettos? [HON. MEMBERS: "Come off it."] That is what the right hon. Lady proposed—as Nye Bevan once described the policy of a previous Tory leader, housing estates exclusively populated by old-age pensioners watching the funerals of their neighbours through lace curtains. That is what the right hon. Lady proposed during the last election campaign, and I do not believe that any of the Opposition Members who are bellowing now dissociated himself from it at the time.

An increasing proportion of public expenditure over successive Governments has been in the area of local authorities. The White Paper sets out the policy. My right hon. Friend yesterday and I today have said plainly what this means. We have not yet heard in detail from the right hon. Lady the views of the Conservative Party. I think that the Opposition agree substantially with what I have said about local authorities, but we have not had this in any detail.

I hope to spend only a minute replying to the right hon. Lady's philosophy on public ownership in relation to public expenditure. As I understand it, she would like to halt the Government's legislation on North Sea oil and the National Enterprise Board and, of course, the Scottish and Welsh Development Agencies. She should go to Scotland and Wales and tell them about it. She would also like to halt the Community Land Bill.

Does not the right hon. Lady realise the simple economic distinction between expenditure which involves a call on resources and expenditure which involves the simple transfer of assets between one ownership and another? As for Government participation in North Sea oil, the economic effect is exactly the same whether multinational oil companies raise the money by borrowing on the market or, where Government participation involves financing part of the capital cost, whether the Government borrow the same money on that same market. The effects on resources are the same. I grant that the effect is not the same in respect of the public sector borrowing requirement. But, in terms of resources—and inflation is a matter of a call on resources—a transfer of assets has no effect at all. That is why these arguments are fallacious.

I grant that the effect on the public sector borrowing requirement is not the same—

Sir G. Howe

The right hon. Gentleman is returning again to his half-presentation of this fact. In his own public expenditure White Paper, it is stated that it is wrong to look at these matters simply in demand terms and to look at them simply because they have a low direct demand content. It goes on: The indirect effects arising from the financing of such expenditure will also need to be carefully considered", and that we … must pay full regard not only to their direct demand on resources, but also to their implications for the money supply, interest rates, and general financial conditions in the economy. That is why we urge him to take back this plan.

The Prime Minister

As the right hon. and learned Gentleman will have noticed, I was able to complete the quotation that he had in mind. I have stressed that it is important to consider the resources expenditure. That is the main feature in inflation and, in his quotation, the right hon. and learned Gentleman picked up that point. But that is not the only one. I have just said that it was not the only one. I have referred twice to the public sector borrowing requirement, to the financial operations involved and the financial market conditions, which is what the right hon. and learned Gentleman was dredging out of that document.

If that is the argument which the Opposition intend to press—that all that matters is the total and not the increase —they could easily make a fictitious, phantom saving in Government expenditure and in public sector borrowing by, for example, handing over the whole hospital building programme to a private organisation. That would save a fictitious amount of money. They could hand it over to Aims of Industry, or whatever alias it goes under these days. They could save this money for bookkeeping purposes, which is what concerns them, if the whole school building programme were undertaken by a consortium of private builders, who would then have to borrow from the market. Local authorities have to borrow. There is no economic distinction in real resource terms.

I am still dealing with the public sector. Does the right hon. Lady object to the public expenditure involved in her own Government's Industry Bill, which we are using as her Government did? Everything that she said about this was equally a condemnation of her own Government's Industry Bill. Or is she simply saying that, when money is paid out to help a firm to maintain employment, we should forgo any suggestion that, where Government money goes, so should go a corresponding degree of participation, control and share in the ultimate profits?

So I come to the question of the vote tonight. I am still not clear, having listened to the right hon. and learned Gentleman, how the Opposition will vote tonight, still less how they will vote tomorrow. I am not sure that they are all that clear themselves. But I hope that the right hon. Lady will allow me to plead with her. I ask her to forget the monetarists for a moment, if she can. I ask her to forget the picking over of detail and the procedural niceties. I suggest that, because we are all interested in the maintenance of democray, she should not pin the future of her party on monetarism. It is only a reaction from her Government's monetary irresponsibility in the early 1970s. The remorse which follows a hang-over is no basis for a life-time of abstention, still less is it a basis for abstaining tonight.

After making it clear that the right hon. Lady is still running away—that is what the right hon. and learned Gentleman made clear—from the decision "Yes" or "No" to the White Paper—and the Opposition will have to decide in about five hours—we read this morning that, following some extraordinary psychological phenomenon in the Shadow Cabinet room last night—it must have been collective —the right hon. Lady now intends, not having opposed the White Paper, to vote against the legislative vehicle necessary to support the White Paper policy—the Bill now before the House.

That is incredible. I cannot believe it. I read it in The Times, in The Telegraph and in a motion on the Order Paper—and that was when I began to believe it. This means that they will abstain on the end but tomorrow night will reject the means. Their reasons, apparently, are that the White Paper cannot now be amended. This is important. I want to deal with the matter seriously, because I am sure that the right hon. Lady would like to find a way out—if not three ways out, for all the sections of her party. Apparently their anxiety is that the White Paper cannot be amended. But nor could the Pay Code under their own legislation be amended.

The legislation now before the House, apart from the specific provisions for local authorities, and the amendment of the Price Code, which was described by my right hon. Friend last night, relieves em- ployers of certain obligations. The Opposition's motion objects to the relief of employers of certain obligations, but this is necessary for the employers if this policy is to work. The CBI wants it but the right hon. Lady in her motion says that they should not have it. I hope that she will think again.

Their other midnight objection—I understand that they put this motion down after midnight—is that it will be a Minister not a judge who will construe the measure before the House.

Under the Pay Code that job was laid on an appointed chairman of the Pay Board together with his members. It was not laid even on a Minister elected and accountable to this House. It was not under the control—we certainly did not support it—of a Minister who had been elected to anything or by anybody at any time. We saw this, as we warned, in the most tragic farce at the end of 1973, when certainly the then Secretary of State for Employment, as we think, would have wished the Code to be interpreted in a way which would have ended the coalmining dispute by the inclusion of waiting time and so on. That should have been done at the end of December, but whatever the Secretary of State for Employment wanted, whatever the House wanted and whatever everybody else wanted, it was the Pay Board which frustrated the clear wishes of at least one Minister and, I believe, of the whole House. That was why we had the three-day week for another two months. I submit that it is right that if a Minister is to be responsible, he should be responsible and accountable to this House.

Therefore, in conclusion I say to the right hon. Lady that now, as I hope, the Shadow Cabinet have awakened to what they did last night—some day there will be a mass psychological explanation of what happened—they must realise the gravity of their proposed course of action. They know that the vast majority of the people in this country, of all parties, trade unionists, and non-trade unionists, desperately want to see the Government's White Paper policy succeed.

By one single, ill-considered and perhaps wilful act in pursuit of some procedural objective with which they are concerned, the right hon. Lady and her colleagues are, by the motion on the Order Paper, telling the country that they know better and that if their manoeuvre as presented on the Order Paper succeeds, they will frustrate our policy, which is supported by almost the entire nation, by denying it the necessary legislative support. That is why I describe as utter humbug some of the things said by the right hon. and learned Member for Surrey, East about how they will support the Government. They cannot say that and still let the motion remain on the Order Paper. I call on the right hon. Lady to think again and I equally call on the House, in the Division Lobby tonight, to accord to the Government White Paper the same measure of support and resolve as the British people all over the country themselves demand.

5.14 p.m.

Mr. Edward Heath (Sidcup)

I have not sought to intervene in an economic debate in the House since the one on 18th December 1974 which, no doubt, many right hon. and hon. Gentlemen will remember. I should have thought it a matter of regret for the whole House that the forecasts then made about the economic situation of this country have come all too true, and perhaps much more quickly than any of us thought at the time.

I have no desire tonight to go over the past. This was dealt with yesterday very effectively by my right hon. Friend the Leader of the Opposition and again today by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). I wish to bring the House back to the central issue of this two-day debate and that is the question, is it necessary for this Government to embark upon the incomes policy which is set out in the White Paper? That is, I believe, for the whole House and for the country the crucial issue with which we are now confronted. My answer to it is a quite unequivocal "Yes".

I believe it is essential that this Government should now pursue the incomes policy set out in the White Paper. I do not wish to haggle about the definition of it—a voluntary policy backed by statutory powers. However, if that is the case, in a voluntary policy in a free society anyone, be he an employer or trade unionist, has the freedom and the opportunity not to follow it. It therefore becomes essential, if the policy is to hold good, that there should be sanctions behind it.

This is where the Prime Minister should not make it more difficult than is necessary for those who wish to support his policy to do so. To say that the Bill is prepared and not to bring it to the House is indefensible. More than that, not to give any reason for not bringing it to the House is offensive to it. If the Bill is not prepared and not ready I for one will quite understand, because we have had to handle the difficulties concerning this matter ourselves: but let the Prime Minister or the Chancellor tell the House so quite frankly. At any rate we could then judge the Government on their incompetence rather than suspect their motives. On the whole, I have always believed the former to be better than the latter.

I ask the Prime Minister, or whomsoever winds up the debate, to clear the air on this matter and not to make it more difficult. If a voluntary policy of the kind set out is to succeed, we must know the sanctions which are to lie behind it. With the House due to rise for the Summer Recess it is intolerable that one should be asked to accept that people should become liable to penalties retrospectively to 1st August when the legislation has not been seen and not been passed. I must ask the Prime Minister and the Cabinet to think further about this matter.

The Prime Minister

The right hon. Gentleman is being helpful. He may not have been present at Question Time. I was asked that particular question, and I said that there was no question of it.

Mr. Heath

If the Prime Minister is saying that there is no question of retrospection of any kind—

The Prime Minister

I was asked exactly the same question and I gave the answer that there was no question of it. I was asked exactly the same question as the right hon. Gentleman has just asked.

Mr. Heath

That clears the air on the question of retrospection, but it does not remove the offence to the House of not presenting the Bill or, alternatively, not saying why it has not been presented today.

One sanction announced by the Secretary of State for Industry is that the chairmen of the nationalised industry boards wil be sacked. The present Secretary of State for Industry has the fewest chairmen of nationalised boards under his influence. As I recall it, he has only the Chairman of the British Steel Corporation, the one nationalised industry chairman who has attempted to put his industry in order by removing overmanning, and has been prevented from doing so. It seems to me that even this threat to a chairman of a nationalised industry—I have seen the problems with which those industries are consistently beset—is almost an incitement to bust the policy. I should have thought that any chairman of a nationalised board still in his senses, given this opportunity, would offer his workers at least £10 a week, get the sack, go off with a golden handshake and live happily ever after. I accept that this is not the intention of the Secretary of State for Industry.

Why have I come to this conclusion about the Government's incomes policy? The reason is that, faced with inflation now at 26 per cent. a month on a year ago and still rising—I am told that it is 48 per cent. a month on three months ago; faced with the rising unemployment, which may now be over a million, according to official statistics; faced with the continuing depreciation of sterling, some of which may be acceptable to the Chancellor because of its effect on export prices but unacceptable because of its effect on foodstuffs and raw materials; faced with a Budget deficit which may be as much as £12 billion, certainly £9 billion or more; faced with the difficulties of raising this money either at home or by continuing loans overseas; faced with the possibility that at any rate the supply of loans will begin to dry up and that some may possibly be withdrawn—it is inevitable and inescapable that the Government must take this action. No other solution I have seen proposed can possibly act in time. Again, I do not wish to go over the past, the reason why the time has been wasted. But no other solution could act in time.

Two possible solutions, broadly speaking, have been put forward. One was put forward from the benches below the Gangway, but even those who are most enthusiastic for it would not say that it would deal with our present inflationary situation. It might over the longer term transform the nature of our economy. Indeed, many of us believe that it would act greatly to the detriment of the freedom of most people in this country. However, I do not believe that it will deal with our immediate inflationary problems.

Alternatively, there are those who say that by budgetary and monetary measures alone we can succeed, but those who have most propounded this doctrine are now saying that the level of inflation is such, and inflationary expectations are so high, that they do not now believe that purely monetary policies can deal with the situation.

What I regret in so many ways is that those who wish to pursue monetary policies and public ownership have sought to elevate those matters to a doctrinal significance which it requires a person of almost Papal infallibility to handle. It is unlike the British House of Commons or people, known for their pragmatic approach, to elevate a particular policy to a doctrinal level of that kind. We shall be able to deal with this economy only if we accept that monetary policy has an important purpose and that there are areas of public ownership which there is now little chance of reversing. Let us accept both those matters without elevating them to that level which makes it impossible to carry on what I believe to be a correct, balanced policy for this country. Neither of these solutions will in any event deal with the national crisis which we face.

I do not wish to go into detail on other parts of the White Paper. I say to the Prime Minister that I am sorry that, with his experience of the 1960s, the White Paper gives so little impression that the lessons of incomes policy and its handling have been learned. It may be that with further discussions these matters can be adjusted, but there are many lessons to be learned.

There is also the question of local government expenditure. In our experience, that was the biggest loophole for inflation in the years 1972 to 1974. In my view, the steps proposed in the White Paper go part of the way, but they still leave a massive loophole for local authorities to indulge in expenditure which is then put on the rates without grants.

One of my reflections is that so many of the classic solutions of our institutions today no longer work as effectively as they once did, if in fact they did. The sanctions on local authorities for over-expenditure are, to say the least, slow, and certainly do not have the speed to catch up with inflation. With the mixed composition of local authorities, very few sanctions will deal drastically with local government expenditure unless pressure is put upon them. I fear that these steps, although steps forward regarding local government and its financial control, but not, local councillors would say, its freedom, will not be sufficient to deal with this loophole in inflation.

I should like to emphasise what, I believe, are three dangers to the policy of the Prime Minister and the Chancellor of the Exchequer.

First, the Prime Minister said that the policy can function only with consent. With that I agree. I have said that I do not wish to go into the past. All I would say is that, regarding the incomes policy of 1972–74, in the freeze and in stages 2 and 3, more than 10 million trade unionists accepted and acquiesced in it. We were challenged by only one union. Consent is necessary, but it is necessary over a far wider area than just that of trade unions, the CBI and the Government. It is necessary over the great majority of people in this country who do not belong to trade unions or take part in CBI activities. They represent very large numbers indeed.

Consent is also required of this House. I ask the Prime Minister to remember this, because there are many things which can be done to allow the House to speak with a more united voice than it has in the past. I say, just as much to hon. Gentlemen below the Gangway, with their views, as to some hon. Members of my own party, who are, perhaps, further to the Right wing than myself with the views which they honestly hold, that it is vital that out of this debate today should go to the nation—a nation faced with crisis—the view that we believe that this policy ought to have consent. After that we can start discussing the details and getting them more suitable, acceptable and adaptable than they seem to be at the moment.

Secondly, what this country faces today in this crisis—everybody has in general said this—is a reduction in its standard of living, but it has never been brought home to the people of this country what that reduction in living standards will be. At the weekend the right hon. Member for Lanark (Mrs. Hart), who formerly held ministerial office, said that she believed that it would be 9 per cent. It depends whether we make the calculation on overseas loans, on the balance of payments, or on Government deficit borrowing. Whichever it is, it must be between 5 per cent. and 10 per cent. That is a substantial reduction in the standard of living and an enormous amount to demand of the people of this country. But they should be told what the position is.

I believe that we can then consider further how the burdens are to be borne, who can best bear them, and who should be helped. That becomes a basis for a sound economic and social policy. Therefore, I ask the Prime Minister and his colleagues to tell the nation facing a crisis precisely what is before it.

What is the reason? Part of the reason is that we are seeing a massive transfer of resources from each country of the Western world to the oil-producing countries. That means that we cannot have those resources for our own standard of living. Of course, there is recycling, but that is no permanent answer. Unless the economy is strong, recycling cannot be maintained. Therefore, it is vital to point out that that is one of the reasons, and that it will go on.

For too long—perhaps over 30 years—we have seen that the payments that we make to ourselves are greater than our production of resources to meet them. At the moment our production is stagnant. The gap between our general production in the second quarter of 1973 and the first quarter of 1975 has widened by 51 per cent. In manufacturing industry it has widened by 9½ per cent. That is the capacity not being used. This is the worsening position which we see in our manufacturing industry. It is another reason why we cannot maintain our present standard of living. I firmly believe that, till the country is told this graphically, and sees what the situation is, we shall not get the response which is absolutely necessary for our survival.

Thirdly, the steps being taken by the Chancellor on the wages front will not deal with inflation. The public have a general impression that £6 a week is equivalent to 10 per cent. across the board and that there will be 10 per cent. inflation. The Chancellor may be right when he gets to the end of the period, but those who make settlements in the autumn will find a continuous and rapid rise in prices. All this is in the pipeline as a result of the wage arrangements of the last year. No price controls can stop them except by bankrupting the firms concerned.

This point has not got though to people. The danger is that, having accepted £6 a week as a settlement, they will find early in the new year that the rise in prices has gone past that settlement and they will then turn on the Government, and, indeed, on this House, and say that they were misled by the arrangement which was made. That is not to say that they will not accept it if it is explained to them now at the beginning as being essential for the survival of our economy.

Mr. Healey

I think that the right lion. Gentleman was present when I spoke yesterday. I am sure that he will agree that I spelt out in great detail that the rate of inflation year on year was bound to increase for some months. Because of the increases in the pipeline and the low base in the third quarter of last year the real benefit from the lower rate of wage increases will not begin till next year. It will take up to six months for that benefit to come through. I think the right hon. Gentleman will agree that I made that point very clearly yesterday. However, I agree with the point he is now making.

Mr. Heath

The Chancellor of the Exchequer certainly said that in his speech. I recollect it clearly, but that is not what the people understand, and they do not recognise what "month on month over the year" means. By January the rate will be coming down, but they will find postal charges and national industry charges going up. Let us remember that a £6 a week wage increase for nationalised industry workers will cost £600 million and for local government workers the cost will be £900 million. This money has to be found somewhere. With the decreasing production in industry come higher unit costs, and these also have to be taken care of somehow. The Chancellor of the Exchequer also mentioned the depreciation of sterling and this will mean that prices continue to rise. It is vital that all this should be made clear now.

My third point is that unemployment will continue to rise very substantially. OECD reports are based on information provided by Government Departments, although the information may often be unknown to Ministers, and today's report states that, even on the best projections, unemployment will reach 1½ million next year.

Mr. Healey

I think I should correct the right hon. Gentleman. The report projects a figure of 1¼ million by the middle of next year.

Mr. Heath

I accept that. The figure is much higher than anybody has been told before, certainly by the Government.

The Government adhere to the position that these forecasts are not made, but in our situation of crisis the country should be told what is going to happen to unemployment. I believe it will go higher than the projected figures. Some people say that, if the present figures are analysed, they show that not all the people are unemployed, but I do not share that view. What is, however, true is that very large numbers of people are kept on the payroll when they are not economically productive. As the Price Code bears harder on employers they will have no alternative but to stand off these people.

If the country is told that unemployment will, as I believe, rise higher than the current projections, and that the £6 a week pay limit will not stop that from happening, we shall have a better chance of the country's understanding the situation and at least tolerating it for a period till it can be put right. Perhaps in the 1920s unemployment was effective in dealing with wage levels, but it is far less effective now, and unemployment is less acceptable to people than it was in the 1920s and 1930s.

Mr. Jeremy Thorpe (Devon, North)

OECD says the figure is 1½ million. The Chancellor is wrong.

Mr. Heath

If the Chancellor admits it, it would not be the first time he has been wrong. I always check the accuracy of my figures carefully.

My anxiety is that workers on the shop floor today are not prepared to see unemployment rising to what they would describe as unacceptable levels. They expect our institutions and economic system to deal with the matter.

I must warn my hon. and right hon. Friends that there is a great danger to free enterprise here. We may see those on the shop floor turning on free enterprise and saying that the system is not capable of providing employment for those who want it. Hon. Members below the Gangway will be the first to play on this, and it would not surprise me to see the new Secretary of State for Energy playing a prominent part, because it is his honest belief that employment cannot be provided by private enterprise. He would be at their head. This would be a grave danger to this country and to democracy. It is not the fault of private enterprise. If, as the Prime Minister says, he believes in a mixed economy it is time he created the conditions to ensure the survival of a mixed economy.

I urge the Prime Minister to give attention to these three aspects of his policy with great speed. In part, it is a matter of communication—but who am I to talk about communication? But till the nation is asked to recognise these facts in all their stark horror we shall not get a response.

The Chancellor of the Exchequer said he was now thinking in terms of several years for working out what should happen. Nobody who has had any experience in Government could possibly want an incomes policy laid down by the Government with statutory backing. All the difficulties have been mentioned by my right hon. Friend the Leader of the Opposition.

Of course, there are unfairnesses, but I must say that they are not as bad as the unfairnesses of roaring inflation. To those who talk of free wage negotiations I say that many of the unfairnesses to which the Prime Minister alluded stem from free wage negotiations. These have also been elevated to a doctrine which cannot be maintained. Those below the Gangway will be the first to insist on wage councils, but they were established by legislation by the 1945 Labour Government following on the policies of Mr. Ernest Bevin. Those below the Gangway are also the first to ask for a minimum wage policy, backing up the TUC, but how can we have that except by Government intervention and legislation? Let us not elevate this to a great doctrine either.

Anyone who has been in Government thinks of the hours spent by officials, Cabinet committees and the Cabinet itself on settling the whole approach to a statutory pay and prices policy and all that arises from it. Some may want such a policy, but I would never want it for a moment, if it could possibly be avoided. I hope the right hon. Gentlemen on the Government Front Bench will agree with me.

The Chancellor of the Exchequer and the Prime Minister ought to ask themselves why we have never been able to run our economy at a reasonable rate in the last 30 years without crises of this kind. The fundamental answer is that this is an unbalanced economy in many ways—regionally, for one, and in the developing power of trade unions, for another. The whole problem of what part the Government should play in a modern, complex society like our own is probably the most searching we now face. Our policy now should he concentrated on turning our economy into one with reasonable balance through its distribution regionally, or through wealth, trade union power, management expertise and so on, in the same way, broadly, as the economy of the Federal Republic of Germany is balanced today. That is how we can get away from statutory or voluntary policies or price controls of this kind. That is the way a free and democratic society ought to move.

Looking back on the referendum campaign, one thing stands out clearly. There were many people, probably from both sides, who had previously played no part in our institutions. Suddenly they felt they had a purpose to fulfil and they did it with enormous skill and enthusiasm. I believe they ought to be mobilised in the general battle against inflation, and that is what I mean by obtaining a wider consent than that of trade unions or the CBI.

The other thing which emerged from the campaign was that, although in the beginning there were all the detailed arguments, what finally settled the issue was not the niceties of the renegotiations and little differences here and there, because in the last ten days or a fortnight all that dropped out of the public discussion. What happened was that the public recognised this as a big issue which, perhaps, might not affect them so much as it would affect their children and, even more, their grandchildren. It was one of the highest issues, because it involved the peace of the European Continent and the means of getting prosperity for its people; and when that issue was put to the people they responded. Who on earth thought that there would be a 66 per cent. poll? How on earth could it have been achieved had the people not responded to the big issue of the day?

The issue which we have been debating this week is just such a big issue, the major issue of peace time since 1931. It requires to be lifted to a level at which people can see that the future of their whole standard of living is at stake. For that purpose there will be a sacrifice which will have to be fairly borne. It will have to be a heavy sacrifice for a period till we can start moving forward again. The responsibility lies on this House to show the nation that this is the issue, and that it is to this issue that it can respond.

Hon. Members

Hear, hear.

Mr. William Hamilton (Fife, Central)

Come back, Ted. All is forgiven.

5.41 p.m.

Mr. John Mendelson (Penistone)

It is appropriate that the first back bencher who is called to speak after the right hon Member for Sidcup (Mr. Heath) should with care and some modesty say that he has been present on an historic occasion. This is the first speech that the right hon. Gentleman has made on domestic economic policy since he gave up the office of Prime Minister, and it was his first opportunity to put forward his ideas, not as the official spokesman for Her Majesty's Government but as a Member of the House of Commons. He has shown a good example of the democracy of the House of Commons in the way in which he was heard and the impact which he has made.

Just as he did not deal with the past and dwell on the details of old disagreements, so the occasion requires those who speak after him to concentrate on the task in hand and to deal immediately with the ideas and proposals that the Government have put before the House, reflecting on what the right hon. Gentleman said. That does not mean that one necessarily accepts all the analyses that he has made of the past, where he dealt with the past. There will be other opportunities to continue the critical examination of the part the right hon. Gentleman played in the history of the last seven years when an incomes policy was part of our public debate.

The Government's proposals contain one element on which I wish to commend the Government. I am conscious that on this occasion I do not carry the full support of my hon. and right hon. Friends who over the last seven years have agreed with me on these matters. I believe that the Government have kept close to the TUC and have taken the counsel of the trade union movement over the last year. I believe that these consultations have been good for the Government and good for the country. The result of the discussions is to be seen in the proposals which have the support of some leaders of the trade union movement who put forward such propositions before they constituted Government policy. These are simple facts which have not yet been put on the record by any back bencher so far in the debate.

It is to the credit of the trade union movement that at some point over the last six months the leader of the Transport and General Workers' Union, the General Secretary of the National Union of Mineworkers and other trade union leaders, on their own initiative, looking at the economic situation and analysing the rate at which inflation was advancing, themselves started to put forward a number of propositions of how the country should deal with the situation.

It is the duty of anybody, particularly my hon. Friends, to start from that proposition if history is to be properly recorded. That is not something to sneer at. No policy in industry is worth the paper it is written on unless it has the broad consent of those who work in industry. It does not matter what sort of policy is advanced. If it is to be carried through—and I want to link this point later with some more critical remarks I shall say about the Government's proposals—it must have the support of the work people or it will not succeed.

It is often said that the view of the trade union movement is not important in consideration of a Government's foreign policy, whether that policy applies to Vietnam or some other far-off place. What of it if a lot of people working in industry do not agree with a particular aspect of foreign policy? It is suggested that perhaps the Government and the House of Commons know better, anyway. But no industrial policy can continue for 12 months without the support and active co-operation of the people who work in industry. The policy simply comes apart in the Government's hands.

It is possible that in the later stages of the capitalist economic system a rate of inflation of perhaps up to 9 per cent. is acceptable and containable. Economists in Britain and the United States have even maintained over the last 25 years that with a falling rate of profit a provocative level of inflation of 5, 6 or 7 per cent. is necessary to make the capitalist system work. It is profoundly true, however, that no Government can sit idly by and let a situation continue in which inflation is running at perhaps 30 per cent. That situation hits hardest those who can least afford to bear it.

When those who earn wages and salaries or who draw pensions, whether retirement, widow or disability pensions, find the money in their hand is suddenly worth 30 per cent. less than they expect, a corrosive, destructive element creeps in to destroy the social cohesion of the community and present a profound danger to any kind of social advance and reform.

People frightened by such a level of inflation do not listen to the proposals of Socialist theoreticians to my hon. Friends or to me. They begin to wish for strong men who bring quick, immediate solutions, who lead them to panaceas, who do away with the slow parliamentary process of reform and bring sudden solutions that are hostile to Socialism and parliamentary democracy. Although dangers will be involved, those are the implied dangers of a rate of inflation of 25 per cent to 30 per cent. Any analysis that does not begin from that starting point is blind to the political dangers that such a rate of inflation brings with it and brings about.

Having justified to my satisfaction the need for action, I turn to the kind of action that the Government have taken. The Opposition are profoundly misguided in making such a fuss about what they call compulsory powers and whether Bills are produced at one time or another. If they agree—as by their silence some Conservative Members seem to agree—that the situation is as serious as I have described, by blowing up this disagreement over the production of certain statutory proposals into a major argument of crisis proportions they are behaving in a rather small and petty way.

The Opposition should understand that there has been an argument within the Government over this. They should also understand that the Government cannot say to the trade union movement, "We are proposing, in response in part to some of the ideas proposed by some of your leaders, a voluntary policy", and then, if the trade unions agree that there should be a voluntary policy, at the same time be so appallingly idiotic as to produce a set of proposals, bang them on the table and say, "Hey, voluntary policy here, voluntary there, but this is what you will get if we cannot agree on a policy". A Government would be out of their senses if, in such a situation, they decided to rush in and produce proposals which at present they do not want to implement.

What is wrong with not producing a Bill that we shall not be asked to pass? It is right not to introduce a Bill that the House of Commons will not be asked to pass. If we were facing a situation in which the Government were to say "We shall ask you anyhow to pass it", we should have reason for complaint. As it is, we have no reason for complaint on that score.

Mr. Victor Goodhew (St. Albans)

Will the hon. Gentleman give way?

Mr. Mendelson

I do not want to give way. Other hon. Members have had to answer many questions and, therefore, many hon. Members will not have a chance to speak. My speech will not be as prolonged as some other speeches.

I turn to my third and penultimate contribution to the discussion. It links with what I call my more critical views about the Government's proposals. I profoundly believe that the White Paper and the Government's position on price control is wholly unsatisfactory. I urge them to reconsider the whole position. From recent discussions with members of the trade union movement—which members of the Government must have also had—I am profoundly convinced that with the support of the Trades Union Congress and the support of many individual active trade unionists, this policy will be implemented. If it is found that because of the controlled price rises, brought about by the many reasons that have been rehearsed in this debate, there is a further increase of 25 per cent. by December or January in the level of prices, particularly in those expenditure types which are essential to every working-class household, lower-middle-class home and many middle-class homes where people are living on small margins—it is not a matter that affects only the industrial working class—the whole policy will come apart in the Government's hands.

Whereas there is now a good and reasonable case to be made for people in the mining areas and in the various industrial districts of the United Kingdom—which I fully support and am prepared to argue up and down my part of the country—it will not be possible nor would it be right, to say to working-class people, many of whom will be on average and not high working-class incomes, "In spite of the fact that there has been this large, further rise in prices, you must go on accepting a very small increase in your wages". What would have been a justifiable policy would have turned into the opposite. Those who support the policy because they are in favour of a reduction by 15 per cent. to 20 per cent. in working-class living standards had better come clean if that is what they want. I shall not support such a policy.

If, by the end of the year and the beginning of next year, such a reduction in the standard of living for working people comes about, my support for this policy will cease publicly and in this House for the reasons I have given. Many people in the trade union and Labour movement will take the same view. Therefore, I say frankly to the Government that the explanations given so far by both my right hon. Friend the Chancellor and my right hon. Friend the Secretary of State for Prices and Consumer Protection are unsatisfactory and unconvincing.

As some of my colleagues who were with me on a parliamentary visit to France recently will testify, the French Government have found it possible to select ten essential items that are important to the average family and have imposed a price freeze on them. It is not true to say, as the CBI have argued, that all firms that would be involved are in such a poor position that they could not afford it. Nor could it be argued—this brings me to my last point—that these firms in the past have used the profits they have made for further investment. That is a propaganda argument which they have invented. I wish they had, but they have not. However, where the investment argument holds true, it has more profound implications for the Government.

As the former Prime Minister, the right hon. Member for Sidcup, knows very well, the Government have an uphill task with regard to investment. In spite of the fact that some of the firms would have enough to invest and are reluctant to do so, there will be others that do not have the necessary capital. In the early summer of 1973 the right hon. Gentleman in an article in the Director, which reprinted an address he had given to the Institute of Directors, chided British industry and told them "You told us that the rate of taxation was too high. I have reduced it. You told us that there was not enough money left to you for investment. I have seen that there was enough money left to you for investment, and yet you were not prepared to invest". The right hon. Gentleman is on record out of his own mouth as the chief critic of British industry, saying that it did not do the job for the nation.

The Government have no right to adopt a one-sided policy of suspending the right to free collective bargaining over the next year if at the same time they shirk the task of also doing something about investment. The Government have a perfectly moral right and duty to argue for control over institutions that accumulate a great deal of capital but refuse to invest, and instead spend their money on speculative buying of property abroad with money earned in this country—instead of fulfilling their moral and economic obligations to the country in which they earn the money. In a year in which we take some control over the collective bargaining freedom of our trade unions, we have a right to take control of some of the investment capital of British financial institutions. One has only to go to Hamburg, Paris, or Brussels to appreciate that the British property speculator is a well-known personality over there.

If the Government have the courage of their convictions, they ought forthwith to introduce measures backed by legislation, without waiting for next year or the year thereafter—legislation which is already to some extent well advanced in the minds and the research laboratory of the Labour Party. The Government ought to work that up into proper legislative proposals and to produce in double quick time a body of legislation which would allow them to direct investment where it is needed for the nation.

Mr. Julian Amery (Brighton, Pavilion)

Does not the hon. Gentleman realise that in the present short-term crisis confronting the Government they will be basing all their efforts on persuading the public and the institutions to buy gilts to help them finance the borrowing requirement?

Mr. Mendelson

I have already said that the first task—this was obvious from the way in which I used the first 10 minutes of my speech—is to give support to the proposals that the trade union movement and the Government have worked out together and that I would do so. I said that I would also do that in the months that lie ahead, but that unless something drastic is done about price control and, secondly, unless we deal with the problem of investment—which the right hon. Member for Sidcup also identified as one of the decisive weaknesses of our economy—this policy will not produce the desired result in itself. Therefore, what I am talking about is not something that must happen next Friday afternoon. However, it must happen over the next 12 months, and it must be prepared now. The Government must have the courage to do it.

At present the greatest danger to this policy is that—although it is not meant to be so—it will be attacked as a completely one-sided further attempt to solve another British economic crisis only at the expense of the industrial working class. If there is to be a defence against that charge, the measures on prices and investment that I have proposed must be taken forthwith to turn the policy into a complete whole, acceptable to the progressive and Socialist movement in Britain. But while we are doing that and I am demanding that, I am saying, first, that the present policy is an honest attempt, which has become necessary in this dangerous situation for the nation, to deal with inflation, and it is a policy which must be started and carried out straight away. But if it is to be a policy that is to succeed, the other measures are as essential and must be taken without delay.

In those proposals there is a beginning. This policy is a difficult one for my right hon. Friends in the Government and for the trade union movement, who have worked it out together in good faith, starting from the same principles from which the rest of us here start. In these proposals there is the germ of laying the ground work not only for the immediate but for the long-term support for what they are trying to do, for linking the immediate necessity to the long-term policy to the working out of which my right hon. Friend the Secretary of State for Employment has made such a large contribution. I wish that the Government could be persuaded to embrace such a programme. If they do not do so, this policy will work for a short time but it will not last.

6.6 p.m.

Mr. F. A. Burden (Gillingham)

It is generally accepted on all sides of the House that the present economic crisis of this nation demanded stern measures. It is also a feature of this debate so far that the support for the measures that the Government have introduced has come mainly from the Opposition side of the House, and that the criticisms and fears have come from the Government side of the House, especially below the Gangway. Indeed, I think that many Labour Members would consider that the Government have failed.

I believe that that is true. The White Paper that we are debating is an illustration of the failure of the Labour Government. In the foreword to the Labour Party manifesto for the last General Election, the Prime Minister stated: In February we but before the Britsh people our manifesto, Labour's Way Out of the Crisis." The Prime Minister went on to say: It was a programme for getting Britain back to work, for overcoming what was universally acknowledged to be the gravest economic crisis Britain had faced since the war … Labour formed the Government, got Britain hack to work and showed our determination to fulfil the programme which we had put before the people. No post-war British government has achieved more in six months. There was then an acceptance on the part of the Government that the country was in a crisis. But then the next election came along, and the crisis was minimised. As has been mentioned on many occasions, the Chancellor of the Exchequer then told the country that inflation was down to 8½ per cent. To substantiate the claim made in October and the Chancellor's statement that inflation was down to just over 8 per cent., it was necessary for the Labour Government to prove that they had done more in their first six months of Government than any previous Government and that they had taken great steps towards solving the economic crisis which they had stated the country was in when they came to power. Otherwise, their claims were not only misleading but meaningless political jargon, with the one idea of getting returned to power at the last General Election.

If they were so successful, why do we have this White Paper? However it is viewed, it must be an admission of total failure. It is proof that if they believed their claims, the Prime Minister and his Cabinet were either completely out of touch with reality or—and this is the only alternative—they deliberately misled Parliament and conned the nation.

Just what have this Government achieved in the last 15 months towards solving the economic crisis? One can disregard the Chancellor's flights into the realms of fantasy last September and concentrate on what he said during one of his more responsible moments, in the statement he made almost a year ago to the very day. Speaking on the economy on 23rd July last he stated: When the present Government took power live months ago the rate of inflation was already over 13 per cent. It is now 164 per cent. and yet two months later he told the country that he had halved the rate and that it was down to 8 per cent. The Chancellor must have known that that was untrue. He had stated in this debate only three months earlier that it was running at l6½ per cent.; an increase of 3 per cent. in five months, or a rate of about 7½ per cent. a year. On the same day he stated: Our central problem is a rate of inflation which"— and it is well for us to mark the right hon. Gentleman's words— some say could have been 20 per cent. by the end of this year …". By October 1974 the rate had reached 17.1 per cent., not a great increase. Now, a year later—a year after it was 16½ per cent.—it is not 17 per cent. or even 20 per cent.; it is nearer 30 per cent. During the same debate a year ago the right hon. Gentleman the Prime Minister stated: The prices of materials and fuels purchased by industry last month showed the first fall for over two years. These will work through."—[Official Report, 24th July 1974; Vol. 974, c. 1312–1628] In other words, the right hon. Gentleman was saying that these falls would work through in lower prices. That statement—an admission that the prices of raw materials and fuels for industry were falling—and the subsequent galloping rise in inflation are surely a measure of the abysmal failure of the Government to deal with the crisis. As pointed out by hon. Members opposite, the effect of continuing inflation on the lower paid, people living on fixed incomes and pensioners, and their savings was offensive to every decent person in the land.

What about jobs? The Labour Government have always stated that it is the right of every man to be found a job and to be able to work if he so wills. They have stated what we all know—that inflation is the enemy of full employment, but they failed abysmally to control it. What of the Government's record on jobs? Let us look at that. In February 1974 there were 628,800 out of work, representing 2.7 per cent. In October, 1974 there were 643,400—a rate of 2.8 per cent. By February, 1975 the total had reached 791,800, or 3.4 per cent. I remember Hugh Gaitskell saying in this House on several occasions that 3 per cent. unemployment was the highest acceptable figure to any Labour Government.

By last June—the month with the latest available figures—there were 869,822, unemployed—a rate of 3.7 per cent. Half a million school leavers will soon come looking for jobs. We know, too, as the right hon. Member for Sidcup (Mr. Heath) has pointed out, that there is overmanning in a great many of our industries, while there is not that overmanning in many industries abroad. This is falsely keeping down the unemployment figure in this country, but one wonders for how long that can continue if firms suffer further setbacks in profits.

Fully to appreciate the scale of the Government's failure we must turn again to the debate on the economic situation on 23rd and 24th July last year. The Chancellor of the Exchequer apologised to the hon. Member for Cornwall North (Mr. Pardoe), saying: I unwittingly misled the House on the employment effect on the total package of measures I announced yesterday. The figure of 20,000 reduction in unemployment by the end of next year which I quoted is a bare minimum … The total effect is likely to be more than twice that … The total effect on employment of all the measures I announced yesterday could be to increase employment by the end of next year by between 100,000 and 150,000."—[Official Report, 23rd July 1974; Vol. 974, c. 1324.] Compare that with the situation today and those promises with what has happened. Can anyone have any confidence in the future forecasting or actions of a Chancellor or a Government who have failed so abysmally in all their projections about the economic results of inflation and the effect on jobs?

There are other factors showing where they have failed lamentably in both these areas, but I must speak shortly so that other hon. Members may catch your eye Mr. Deputy Speaker. The figures throw a light of stark reality on the Government's record. What has given concern to many people in this country has been the growing similarity of the parallel between what happened under the Weimar Republic in Germany in the 1920s and what is happening here. It is all very well for hon. Gentlemen opposite to laugh. Inflation ran away, and there was a great increase in unemployment, with results that the hon. Member for Penistone (Mr. Mendelson) feared might happen in similar circumstances here.

In a speech at Tolpuddle last weekend the Chancellor said unless the measures now proposed were successful, unemployment in this country could reach a figure not of 1½ million, not of 2 million, but of 3 million—[Interruption.] Is it possible, Mr. Deputy Speaker, to protect myself from the constant remarks made by the hon. Member for Newham, North-West (Mr. A. Lewis) from a sedentary position?

Mr. Arthur Lewis

On a point of order, Mr. Deputy Speaker, I confess to having made my first interjection, which is not unsual. The hon. Member for Gillingham (Mr. Burden) is the last one to complain, because he does so constantly.

Mr. Deputy Speaker

I know that we shall be as polite to each other as we always are.

Mr. Burden

We have had an enormous debt hanging around our neck as a result of borrowings by the Government. No one knows their full extent, or the terms of such borrowings, but we all know that the cost will go on during this and future generations. In the White Paper there is no hint that the vast nationalisation plans will be abandoned or shelved. I believe that there will be no money from overseas to purchase those industries. Money to do so will either have to be printed or raised in loans in this country—and I find it difficult to believe that they will be available; or will they be acquired by confiscatory measures, without reasonable compensation?

The Government must realise that if they continue to try to placate the Left, by watering down the measures necessary for the economic survival of this country, it is the duty of this Government to put the survival of the country and the interests of Britain above papering over the enormous cracks that are beginning to appear between the Left and the moderate part of the Labour Party. The Government should immediately, or before the end of this debate, make it clear that there will be no more nationalisation, certainly for the next two or three years while we are going through this crisis.

Many hon. Members on the Government benches suffer from the belief that bigness is a virtue in itself, that the creation of big, monolithic industries means the creation of good and successful industries. That is what they think about nationalisation. The idea is entirely false. Every Government should encourage small businesses. They should give people the opportunity to start businesses and make it possible for them to be profitable. They can make a great contribution to the future standards of living of our people.

We should stop further overseas borrowing, and live within our means. That will have to be done sooner or later. No Government, any more than a private person or a company, can borrow their way out of bankruptcy. The Government's ability to borrow has almost come to an end. Unless we start to live within our means, the consequences will indeed be desperate. We should stop printing money, because printing money merely reduces the value of everything we have and increases inflation and unemployment.

Above all, this country must live by its exports. I believe that much of our industry is now suffering from age. It has not had enough innovation in recent years. The most urgent task for any Government, if we are to restore the economy and ensure a rising standard of life for our people, is to see that the country becomes technologically as advanced as any of our industrial competitors, or more so. It is not enough to be just an industrial country. We must be a great technological country.

I hope that the steps taken today will be the first steps towards this country's recovery, although taken belatedly by the Government. But I shall stand aside, and see what happens, because it is the Government who are being judged, not me. I do not think that the steps go far enough. That is why I cannot support them in the Lobby. We shall have to see whether the Government fail to take the next steps, in order to ensure that the right hon. Members for Ebbw Vale (Mr. Foot), Bristol, South-East (Mr. Benn), and some others who are critical even of these steps, remain in the Government.

Mr. Deputy Speaker

Before I call the next hon. Member to speak, I remind the House that there is a long queue of hon. Members wishing to speak. I hope that those who are fortunate enough to be called will bear in mind those who are waiting.

6.23 p.m.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

I regard the White Paper as essentially a political document designed to gain the co-operation of the TUC and the CBI. Judged from that standpoint, it is undoubtedly a skilful compromise, and has a reasonable chance of achieving its purpose. Even its most surprising single feature—the fact that reserve powers to make it illegal for employers to exceed the pay limit are to be contained in separate legislation—makes some sort of sense.

The support of the TUC for the Government a fortnight ago, by 19 votes to 13, is significant. The majority of trade union leaders realise that the recession will go deeper, and unemployment will mount even more steeply, if some such counter-inflationary measures are not adopted. We were told this afternoon that those trade union leaders, reinforced by my right hon. Friend the Prime Minister, would disagree, therefore, with the first point made by some of my hon. Friends in their letter in today's issue of The Times. They would certainly think that if the present measures had not been taken—

Mr. Arthur Lewis

On a point of order, Mr. Deputy Speaker. When you have a few minutes to spare, will you look at the Hansard reports of all our economic debates? You will find that the same hon. Members are continually called. Will you suggest to Mr. Speaker that he puts it around a bit?

Mr. Deputy Speaker

The hon. Gentleman knows that Mr. Speaker's choice of right hon. and hon. Members who are called to speak is not open to question.

Mr. Duffy

My hon. Friends responsible for the letter to which I have referred may find, when they consult today's OECD report on the economies of the member nations, that that report is also at variance not only with their first point but with the remaining points.

In spite of this defiance by my hon. Friends, and any lengths to which it might be taken later tonight, there are growing signs that the British Labour movement is coming to terms with economic realities, that a slow but sure understanding is calculated to prove far more effective than compulsion by State decree. I believe that the social contract has assisted the growth of that understanding.

None of us can any longer be in doubt, in view of what happened to it, that the trade unions are not equipped to enforce a wages policy on their own. They simply cannot deliver. Nevertheless, they know that someone must deliver. There must be a policy, and if they cannot enforce it someone must—and who better than a Labour Government?

Moreover, opinion polls demonstrate a remarkable unanimity among all types of voters that an incomes policy must be introduced if inflation is to be defeated. A joint conference at the grass roots of the Park and Attercliffe Constituency Labour Parties in Sheffield on Sunday produced only one implacable opponent of the White Paper. The same person also accused the Labour Government of reneging on the social contract. The record suggests that, whoever might have undermined it, the Labour Government certainly did not, as my right hon. Friend the Prime Minister reminded the Yorkshire miners at their annual conference in Barnsley a month ago.

Several of those present at the Sheffield conference had reservations about the White Paper. In the main, the reservations came down to the fact that, for it to remain acceptable, the Government, and especially my right hon. Friend the Chancellor of the Exchequer, must be fair and must have continuing regard for the acute needs of the deprived areas of Sheffield and South Yorkshire.

Mr. John H. Osborn (Sheffield, Hallam)

Can the hon. Gentleman say what the attitude of those two associations was when the Conservatives imposed their policy four years ago?

Mr. Duffy

That was not discussed.

My hon. Friends may be interested to know that the greatest indignation was reserved for those Labour Members who failed to support a Labour Government in the Division Lobby.

Mr. Ian Mikardo (Bethnal Green and Bow)

That does not frighten me.

Mr. Duffy

Once the immediate problem of acceptability is overcome, however, the effectiveness of the policy as a means of controlling inflation must be considered. Will it work? Any comment must be prefaced by a reminder that an incomes policy is designed to alter the climate of expectation and keep unemployment lower than it might otherwise have had to be, but that it is bound to produce distortions, whose practical effect becomes more serious as time goes by.

Of course, an incomes policy is difficult. But one must acknowledge that if other incomes policies have failed, or been abjured by parties in advance of their coming to power, all Governments since 1959 have found it necessary to bring one in.

The White Paper makes it clear that the Government mean to maintain anti-inflationary policies of some sort over a number of years, and that agreement will have to be reached on how to arrange our affairs so as to avoid a resurgence of rapid inflation". If that points to difficulties for the future—and, clearly, there must be more sensitive and sophisticated guidelines a year hence—the White Paper is at least more realistic than its predecessors.

The White Paper is concerned primarily concerned with wage settlements and has relatively little to say about the control of public spending and the public sector borrowing requirement. or about the use of monetary policy. Yet for the control of inflation, as opposed to limiting the unpleasant effects of bringing it under control, these are matters of primary importance. Not that public expenditure, even in the present grave circumstances, would have come in for such pressing scrutiny if economic growth had not seriously faltered.

The success of the policy depends ultimately on public opinion. As the TUC has already pointed out, individual unions and their members must associate themselves with the policy if it is to succeed. Public opinion therefore remains the ultimate sanction on pay.

The real bite of the policy, though, will ultimately come not from the sanctions which ostensibly back it up, let alone those which the Government are brandishing in the background; its most telling thrust will come from the worsening economic climate.

Past incomes policies have often faltered because they were brought in to deal with the inflation generated by economic expansion. Employers and workers had the incentive and the opportunity to break those policies, but not so this time. Against the background of contracting markets at home and abroad, it is already true, as the Prime Minister reminded us, that one man's pay increase is another man's price increase, and may also mean the loss of his own or his neighbour's job. Until that is realised there can be little hope of remedying our nation's economic ills.

In the last resort, any incomes policy, voluntary or otherwise, depends on public opinion. The right hon. Member for Sidcup (Mr. Heath), the former Prime Minister, who spoke earlier, did not have the support of public opinion, perhaps because people were more afraid of disruption than of inflation. The difference now is that every family in the land has experienced inflation and is aware of its reality. Contrary to what some of my hon. Friends have said since the 2nd July statement, we are not now reliving the years between 1970 and 1971, much less the years between 1966 and 1970. These are changed circumstances.

Perhaps the real hope for salvation lies in the general truism, and its wider acceptance, that unemployment can be restrained only if inflation is brought under control. It is a vicious circle. But one vital aspect is that while, theoretically—if wages match the inflation rate—standards of living can be maintained, in practice that can happen only if an industry or firm forgoes something else. It is impossible, theoretically, for a firm or industry to maintain an all-round balance if it tries to match total revenue with total expenditure on wages. A firm cannot ensure that its revenue matches increased spending on wages, but those which cannot maintain a balance are setting their workers' jobs at risk.

Every income earner needs to recognise that his contribution to the battle against inflation is decisive. Any section of the economy has the power to destroy the rest and in the end to destroy itself. By contrast, a general acceptance of the need for moderation provides the indispensable key to stability. Nowhere is this recognition more necessary and yet more possible than in the ranks of the trade unions. Concern for others is at the roots of trade unionism. To abandon those aims and ideals for a continued free-for-all scramble against a policy which seeks to safeguard the interests of all is surely to adopt a position which is untenable in the eyes of the people. Last Sunday I consulted my constituency party and that in a neighbouring constituency. I am left in no doubt that such an attitude of the workers, whether organised or not, would be unacceptable.

The months ahead will not be easy for the Government. Labour Governments always prefer to proceed on the basis of voluntarism and consent. No one can say that this Government have not persevered with such policies, or that they have abandoned them. However, earlier this month the Government were left in no doubt that they must strike out in a new direction. They were left with no choice but to adopt an unshakeable and immutable commitment to reduce sharply the rate of rise of inflation by the end of next year. If the Government are resolute and keep their nerve during the coming year they will receive the overwhelming support of the people, especially in their movement for policies which they consider are necessary for the achievement of their target.

6.30 p.m.

Mr. Joseph Godber (Grantham)

I listened to the hon. Member for Sheffield, Attercliffe (Mr. Duffy) with interest. I do not disagree with a good deal of what he said. However, it seemed to me that many of his remarks were addressed to his hon. Friends sitting below the Gangway. I do not seek to interfere in a dispute within his party. However, he made one remark about the policies of the right hon. Member for Sidcup (Mr. Heath) which I should like to take up, especially in the light of the remarkable speech made by my right hon. Friend this afternoon.

The hon. Gentleman said that my right hon. Friend did not have public support for his incomes policy. My right hon. Friend reminded us that phase 3 of his policy received the support and acquiescence of over 10 million workers. Only one trade union stood out against it. Had the Labour Party, which was at that time in Opposition, supported the then Conservative Government, I do not believe that that trade union would have stood out. The failure of this House to speak with one voice caused the problems which led to the Labour Government taking over and to the disastrous economic situation that has developed since then.

The Labour Party bitterly complained that my right hon. Friends said that we will not vote for the White Paper. The Government should go down on their knees in thanks for the undertaking given this afternoon by my right hon. and learned Friend for Surrey, East (Sir G. Howe), who pledged a substantial degree of support for the Government. Had the Conservative Government received anything like the same degree of support from the then Labour Opposition we would now be in a different situation. That is the answer to those who claim that the Opposition should vote with the Government tonight.

I should like to refer to ways in which the Government could encourage us. In considering whether the Government deserve support for their measures, it is necessary to consider not only the measure themselves but also the Government record in the area of wages, salaries and prices since coming to office in March last year. It is also relevant to bear in mind the other major factors in the Government economic strategy, and especially the degree of Government spending and borrowing.

Part of the Government case is an appeal for national unity and for a combined attempt to overcome inflation. It is pertinent to ask what real attempt the Government are making to create unity in the country. After all, what controversial measures, what Socialist doctrines or what divisive legislation are they jettisoning, or are they prepared to jettison, to create the good will and the united approach required to overcome our economic difficulties?

After the speeches made this afternoon by my right hon. and learned Friend the Member for Surrey, East and my right hon. Friend the Member for Sidcup compared with the Prime Minister's speech, my conclusion is that it is the Prime Minister who failed the nation. He spent at least one-third of his speech indulging in petty abuse and chiding the Conservative Party. He should remember that we represent nearly as many voters as does the Labour Party. If he wants to invoke the passages on national unity contained in the last two paragraphs of the White Paper to which he referred the other day, he should speak as a national leader and not as a party leader. That was his failure today.

I turn to the Government record on incomes and prices since they took over in March last year. The official figures show that at the time they took over prices were rising at an annual rate of 13.5 per cent. and average earnings were rising at 14.1 per cent.—in other words, salaries and wages were keeping ahead of prices. But that was against the background of the enormous upsurge of world prices which had started 18 months before and with which the then Conservative Government had had to contend. The Economist sterling index of world commodity prices records that in March of last year the rise in commodity prices over the preceding 12 months was 52.3 per cent. So the picture when the Labour Government took over was one of earnings rising at 14.1 per cent., prices at 13.5 per cent. and world prices at over 52 per cent.

Putting it at its lowest, therefore, it is undeniable that the British people at that time were being protected from the worst effects of world inflation. I was the Minister responsible for food prices in that Conservative Government and I clearly recall the shouts of rage and indignation when I reported to the House the monthly figures showing the percentage change in the retail price index. It was in vain that I pointed out to the House that world prices were rising much faster. The Labour Opposition were loud in their condemnation of the Government for failing to keep down the cost of living. The concern that many Labour Members showed at that time for the poor housewives seems to be strangely muted now.

I have here the whole range of the three sets of figures to which I referred, from March last year to the latest available. Together, they constitute the biggest indictment of any Government that it is possible to imagine. Under the baleful influence of the totally bogus social contract, earnings rose with extreme rapidity. In June last year they had reached 16.1 per cent., in August 20.5 per cent., in November 25.3 per cent. and in April 30.5 per cent. The figures announced yesterday show a slight fall to 28.3 per cent., but that figure is of earnings, and the wage rate continues to rise. The total abdication of the Government from this vital sector of the economy has meant a rise in wage and salary payments of more than double in just over a year.

While this was going on, all the country got from the General Secretary of the TUC were pious platitudes and incantations about the social contract. All we got from the right hon. Gentleman now on the Government Front Bench—the Secretary of State for Employment—was apparent paralysis; no action at all.

Turning to the prices side, the inevitable result is there for all to see. The sudden rise in earnings was reflected in the inexorable rise in prices. The Prime Minister's phrase that one man's pay rise is another man's price rise has been used in the House today. In Durham at the weekend the Prime Minister enlarged that phrase to include another man's dole queue. However it is expressed, that is what has happened.

In June last year the retail price index had risen to 16.5 per cent. By November it was 18.3 per cent., and by March this year 21.2 per cent.—and the latest figure is 26.1 per cent., which is almost double the figure when the Government took over. The movement in those two sets of figures is painfully evident to us all, but it is the contrast between what has happened to earnings and prices on the one hand and to world commodity prices on the other which I want to emphasise.

The movement in world commodity prices has been in precisely the opposite direction. At the time the Government came to office that index showed a rise of just over 52 per cent. By June last year it had dropped to 23.6 per cent., by December it was 1.9 per cent., by March this year it was minus 17.5 per cent. and then, in June, when the fall in the value of the pound affected it, it was minus 13.9 per cent. For the current month the figure is minus 5.8 per cent. Since January this year, world commodity prices have been falling, and in spite of the lowered value of sterling they are still lower, in terms of sterling, than they were this time last year.

Therefore, the main element in pushing up the cost of living when the Labour Government came to power is no longer a problem. A rise of 50 per cent. has not only been eliminated, it has been replaced by a fall in commodity prices which, if other things were equal, would mean that we should be entitled to look for reductions in prices. The external pressure on prices has eliminated itself, and what the country suffers from at this time is a totally self-inflicted wound. It is the enormous rise in wages and salaries which is largely responsible for the Latin American level of inflation we have reached. To the impartial observer there is nothing particularly surprising in that. What should surprise him is that any Government should ever establish a régime in which prices are controlled while wages are not. It is the surest recipe for inflation which could ever be devised, and so it has proved. For the last 16 months the country has been suffering from the economics of a "Mad Hatter's Tea Party".

That, then, is the picture of incomes and prices, and it justifies up to the hilt the introduction of measures designed to bring this runaway wage and salary inflation under control. What we have to consider, however, is whether the Government's proposed measures are adequate and whether they are likely to be effective. Before examining those measures I should like to consider another aspect of the Government's economic policy which has added fuel to the fire of inflation. I refer to Government borrowing.

The previous Conservative Government engaged in deficit financing. As a member of that Government I accept my share of responsibility for that, and I am ready to admit, with the benefit of hindsight, that in doing this we erred. If we were at fault, however, the Labour Government have made our sins seem very small by comparison with their activities.

The public sector borrowing for 1973–74 for which we were responsible showed a final outturn of £4,465 million. For 1974–75, the estimate given by the Chancellor of the Exchequer last November was £6,331 million. In his last Budget speech he gave the provisional outturn as £7,602 million, but the final quarterly figures for the first three quarters are now out, and they show, for those three quarters alone, a total of £6,436 million. Based on those figures the final outturn for a full financial year will amount to £8,581 million. As the figure was rising sharply in the third quarter there is every likelihood that the final figure will be even higher. Even on that basis, public sector borrowing has doubled in a year.

For the current financial year the Chancellor's Budget estimate was £9,055 million. No later official figures have been made available to us. I heard suggestions in the House today that it might be £12,000 million, and there are suggestions in the Press that it might be £13,000 million. I have no means of knowing whether any of these guesses are correct, but such a growth of borrowing would not be out of line with the Rake's Progress of the previous year.

A growth of public sector borrowing of this order must have already created enormous inflationary pressures. So far we have heard virtually nothing of plans to curb the present level of Government borrowing. Indeed, on 11 th July the Prime Minister talked about another £150 million. When Labour Members shout at my right hon. Friends on the Opposition Front Bench "What would you do?", my answer would be "We would not have increased Government borrowing, as you have done. You have increased it by this amount. It is your duty to choose where the cuts should come." It is a cheap device to claim that the Opposition should declare what the cuts should be. I am saying that the Government should not have allowed this runaway inflation in their spending to occur.

That is the background to the anti-inflationary measures. What of the measures themselves? The first thing to note is that there was a definite softening of the proposals between the Chancellor's statement on 1st July and the Prime Minister's statement on 11th July. The Chancellor said that he was determined to bring down wage inflation to 10 per cent. per annum, but it is questionable now whether the limit of £6 a week will achieve that. Secondly, the loading of all responsibility on the employer is unreasonable and unfair. However, as the Government are, in various forms, the country's largest employer, it would not be unreasonable to proceed on that basis, provided the Government refused every threat and every blandishment to get them, in their capacity as employers, to weaken their resolve. We have had certain assurances about that, but we shall want to see the results.

Thirdly, there is the total absence of any attempt to cut back the public borrowing requirement to a more tolerable level. I have demonstrated the devastating way in which the borrowing requirement is growing. Fourthly, there is the lack of any detailed knowledge of the powers which it is said are being held in reserve. It is not sufficient that we should be called upon to take such matters on trust. In any case, it is my belief that such powers as are envisaged should be placed on the statute book now, so that they are available immediately if the need should arise.

I do not understand or accept the argument put forward by the Government that there is no need to bring the powers forward at this stage. If anything happened during the recess I suppose we would be called back immediately to enact the new legislation. That should be a requirement, otherwise the whole programme could break down. It is folly for us to rise for the recess without being told what is involved.

Fifthly, there is the appeal in the last two paragraphs of the White Paper which the Prime Minister commended so strongly to the House on 11th July. I believe myself to be as patriotically minded as most hon. Members, but I am bound to ask what right this Government have to seek the support of the nation unless they acknowledge the attitudes, desires and feelings of the whole nation. This is a Government which, on any analysis, have never had more than the flimsiest claim to a mandate. Because of the number of small opposition groups, in addition to the main opposition party, the Government are able to carry out their policies, but at this very moment their majority rests on the absent vote of the right hon. Member for Walsall, North (Mr. Stonehouse).

Mr. Tomlinson

You have absent friends who never turn up.

Mr. J. Enoch Powell (Down, South)

Some of them have turned up.

Mr. Godber

Yet the Government have not hesitated to bring forward a range of measures that are controversial and divisive in the extreme. Furthermore, many of the Government's measures are costly in terms of Government expenditure. To name only one, there is the Community Land Bill. Then there are all the nationalisation measures which we have been promised. If the Government want national unity, let them start by trying to unite the country instead of dividing it.

The Government talk of sacrifices. Let them set an example by dropping some of their measures, which are urgent only in the eyes of dedicated Socialists. They may be urgent in their eyes, but they should recognise that there are many people who do not share their views. Many of the measures that the Government promise are anathema to many people.

I say that the Government have failed the nation in many ways. Nevertheless, I have to admit that the proposals that we are considering, although inadequate and dangerously late, at least show that the Government have at last started to realise the need for action on their part. They will find that they have a great deal further to go if they are to restore our economy. In my view, the Government's proposals represent the first, faltering steps in the right direction. They are nothing more than that, but because they are in the right direction I shall not oppose them. However, I shall vote for the amendment standing in the names of my right hon. Friends. Although we support the need to limit wage inflation, the amendment emphasises the areas of economic policy in which the Government are still failing the nation.

Mr. Leslie Huckfield (Nuneaton)

Now we have it.

Mr. Godber

Labour Members who jeer should understand that our approach goes a great deal further than anyone had the guts to do in the Labour Opposition when we were in Government and were confronted with the same problem. I suggest that they remember that and show a little more humility in future.

6.57 p.m.

Dr. John A. Cunningham (White-haven)

I do not intend to take up the arguments of the right hon. Member for Grantham (Mr. Godber), except to say that although his tortuous explanation of his decision on how he will vote may be clear to him it left the rest of the House in some puzzlement. The right hon. Gentleman's speech contrasted markedly with that of his right hon. Friend the Member for Sidcup (Mr. Heath). who at least had the honesty, in an interesting speech, to admit that over his four years of office—a period when the right hon. Member for Grantham was also in office—he had learned some lessons.

Apparently the right hon. Member for Grantham learned very few lessons from his four years in government. One of the lessons that he has not learned is that statutory incomes policies have been an abysmal failure throughout history. The acceptance of the right hon. Gentleman's suggestion that a Bill giving effect to statutory measures should be published would serve no useful purpose other than to create further problems in a situation which is already very complex and difficult.

This country has been in this economic crisis since 1973 at least, and the right hon. Gentleman was a member of a Conservative Government whose policies on money supply laid the foundations for the present difficulties. Two General Elections were fought in which the Labour Party argued against the then Conservative Government that we were actually facing an economic crisis. Apparently the nation is beginning to accept the realities of the situation which many of us have been trying to face them with for a long time.

As well as the economic crisis, we have been going through a political crisis. The previous Conservative administration must accept its share of the responsibility. It was that Government which produced the kind of confrontation and lack of consensus about which Conservative Members have been arguing. However, I hope that behind the present package which the Government are introducing some measure of consensus will be reconstructed.

In my view, the most significant feature of the Government's activities in the last few weeks has been the lengths to which the Cabinet has gone to carry with it the General Council of the TUC, and also the CBI. It was fundamentally important that any decision on a wages policy should be based on consent and, without any coercion from the Government, that it should be acceptable to the TUC. A good deal has been said in this debate about coercion, and it is interesting to note that nobody on the General Council of the TUC has seriously argued that point. In fact, the situation is quite the reverse.

Mr. Brian Sedgemore (Luton, West)

That is not true.

Dr. Cunningham

Does my hon. Friend wish to intervene?

Mr. Sedgemore

Will my hon. Friend take it from me that at least one leading member of the TUC has seen a number of us, and certainly what my hon. Friend said about the General Council is not correct.

Dr. Cunningham

That is an interesting intervention. I was making the point that, publicly at least, members of the General Council have not made the assertion which my hon. Friend attributes to them. However I still believe that this is the most significant feature of the Government's approach to this aspect of the package. Statutory policies have failed, will fail, and should be avoided at all costs.

It is crucial that the Government should now start working to ensure that agreement follows at the end of the 12 months' period of agreement. The problem with incomes policies in the past has been not that many of them have not had a limited measure of success but simply that, the moment they have ended, the whole framework of control, in terms of agree- ment on the policy, has vanished and a free-for-all has resulted. This has been disastrous and has immediately eroded any good flowing from sacrifices made in the previous period of control. It is crucial that the Government should now be working with the TUC—as, indeed, I understand is happening—and with the CBI to ensure that this does not happen on this occasion. I do not accept that wages are the only problem, or, indeed, the main problem that we face, but I would argue strongly that they play a very important part in the economic crisis.

Much has been said about the failure of industrial investment. As with many other generalisations, that statement is not true. It is certainly not a valid criticism of the chemical and petro-chemical industry which has an excellent record of investment, and other industries can also point to good investment records. If we want to create the circumstances in which industry, either in the private or public sector, has a good record of investment, we must bring about a situation in which industries can make profits. There is a dangerously schizophrenic attitude in the Labour Party about profitability. We cannot have good working conditions, high wages and many of the things we want in the Employment Protection Bill, and other measures which are part of our package, if industry is not in a profitable situation. The argument should not be about profits in industry; it should be about the way in which profits are deployed after they have been made.

The United Kingdom faces not only the problem of lack of investment in industry, but also—and this point was made by the right hon. Member for Sidcup—the problem of a distorted industrial economy. Currently, the Northern Region has the highest percentage of unemployment in the United Kingdom. This is not a new situation for people in that region, but it is all too often the case. As well as seeking to increase our record of investment in industry, the Labour Government—and indeed all Governments—-should be taking a fundamental look at the distribution of industrial investment throughout the United Kingdom as a whole. I welcome the work carried out by the Northern Region strategy team, and I give the Opposition the credit for at least establishing that team during the time of the Conservative Government. I welcome the team's report, and also its attempts to produce a map on a regional basis showing the distribution of public investment in the United Kingdom. From the Government's point of view, that area is far too obscure. Although I appreciate that there must inevitably be some falling off in the level of public expenditure among local authorities and the like, I believe that such a course will be more crucial than ever in a period of austerity, in face of deprived regions, regions with major urban problems, and areas with higher-than-average unemployment.

I support the package, but I also wish to comment on the alternative proposals made by several of my hon. Friends below the Gangway. The problem is not that I disagree with their arguments—indeed, I am very much in support of many of their arguments—but that I believe those arguments would have no immediate effect on the crisis that we face—and, in my view, the effect they would have would exacerbate rather than help the situation. The road to Socialism will not be built on a litter of bankrupt industries, unemployment and a collapse in the economy of the United Kingdom. Any suggestion that that is a quick way to obtain the objectives of this movement is misleading to our supporters.

Mr. Mikardo

What my hon. Friend says is correct, but he is directing his homily to the wrong quarter. It should be addressed not to his right, but straight in front of him.

Dr. Cunningham

My hon. Friend will forgive me if I gave the impression that I was addressing my remarks solely to him and to his colleagues. Of course, I am addressing myself to the Opposition, too. From what we have heard so far. I wonder which of the "Oppositions" will muster the most votes in the Lobbies tonight. My point is that my hon. Friends are not so much fiddling while Rome burns; they are still composing the music. We have not time to dally in that way.

I believe that people will accept firm action from the Government in respect of public expenditure, incomes, and all other aspects of the package, but there are many dangers. I believe that people in general would have accepted the social contract. The trouble with the social contract, from the point of view of the Labour Government and the Labour movement, was not that it was unworkable or unacceptable, but that it was damned with faint praise. That was the attitude of a number of people who are now loudest in their complaints about the present package. We on the Government side cannot have it all ways. We are running out of options, in terms of policies. If we are to resolve the political crisis that surrounds the whole debate about incomes in the United Kingdom, we must be prepared to stand up and be counted—in a way that too few people were willing to do when we were saying that the social contract was central to the whole economic strategy of the Labour Government. If those steps were central to our strategy and all our other policies that flowed from it, it must be said that a number of people were careless with the social contract and also with the rest of the Labour Government programme, which I wholeheartedly support.

I mentioned unemployment briefly a little while ago. I want to finish by talking about unemployment in the Northern Region and in areas like West Cumbria, in which my constituency is situated. For too many years—for many decades, in fact—areas like this have had a raw deal from successive Governments. Many of us want to see, once and for all, an end to this kind of "poor relation" area in the country.

It is time for the Government to act, and it is opportune in terms of the review of public expenditure and of industrial policies. I favour the National Enterprise Board and planning agreements. We do not, however, have a short-term industrial strategy, any more than a short-term strategy for wages, but the time is right for a fundamental review of regional policies, not only in terms of the provision of new jobs but of the whole effect of Government expenditure in the peripheral areas of the United Kingdom. I hope that the Government will accept that that case has been made and will look very closely at what they intend to do in the future.

I end with a question to my right hon. Friend the Secretary of State for Employment on this whole subject of unemployment. Many of us on this side of the House remember participating in a demonstration here in 1972–73 under a Conservative Government, when the figure of 1 million unemployed was reached. What advice has he to give us if that figure is reached under a Labour Government?

7.11 p.m.

Mr. J. Enoch Powell (Down, South)

A certain element of drama, which was introduced into this debate at an earlier stage—not actually by the Prime Minister—might have given the impression that there was an equally striking novelty about the subject that we are debating. In fact, what is remarkable about the subject we are debating is its staggering lack of novelty.

Apart from the title—which does show a certain variation from the titles of the White Papers on the same subject which have drearily preceded it at intervals of about three or four years each—the contents are easily recognisable. There is the proposal of a freeze, in this case at the flat rate of £6; the indication that, if that does not work, then, of course, compulsion must be introduced; the realisation that out beyond all flat rates lies the insoluble problem of variety and differentials; and, finally, the concluding exhortation to "give us time to find the answer." That is expressed with a certain novelty that ought to be recognised: the words in paragraph 47 of the White Paper are reach agreement on how to arrange our affairs so as to avoid a resurgence. Otherwise we know exactly the pattern, and it is a pattern which right hon. Gentlemen who are putting forward this White Paper know perfectly well.

They know it from beginning to end. They have agonised on it under their own administration. They have destroyed it when it was put forward by their political opponents. The right hon. Member for Ebbw Vale (Mr. Foot) was one of the chief destroyers of the Prices and Incomes Policy of 1972–74, and I joined in the work gaily with him. They knew then—and, of course, the right hon. Gentleman explored with glee and in detail—the inherent impracticabilities of the course on which they are now setting out. They do not come to this as strangers.

There might have been a time, 10 or 15 years ago, when this was a new adventure and some of them actually thought that it might work. But these men, Mr. Speaker, are not fools. They have been through it all before, many times, and they are not so stupid as to think that it will turn out as advertised. They know perfectly well by now that such a policy is irrelevant to the causes and therefore to the cure of inflation.

There is a certain amount of badinage which goes on, and it is well understood—the motives of the right hon. Gentleman the Prime Minister are well understood—about monetarism; but, as the right hon. and learned Member for Surrey, East (Sir G. Howe) remarked in an earlier debate, we are all monetarists now, and even the hon. Member for Whitehaven (Dr. Cunningham) has just stated that the basis of our present troubles was the increase of the money supply by the previous administration.

Dr. Cunningham

One of the bases.

Mr. Powell

One of them—all right. As for the right hon. Gentleman the Chancellor of the Exchequer, whence his anxiety about the size of the net borrowing requirement, his recurrent preoccupation with it and the possibility of financing it? It is not that the Labour Party are averse either to public expenditure or to borrowing the money for public expenditure. It is, of course, that the right hon. Gentleman realises perfectly well that inflation is built upon the monetary consequences of an uncovered deficit on public expenditure.

As The Times put it, with delightful brevity, in one exceptionally lucid and unambiguous—both at the same time—leading article on 15th April 1975: Inflation is a monetary problem susceptible alone to monetary cures. The right hon. Gentleman the Chancellor of the Exchequer knows all that perfectly well. He is not so "economically illiterate", if I may borrow a phrase, as to imagine that the effect of trade union action is other than to alter relative prices. He knows perfectly well that wage pressures, and so on, only alter relative wages: they put up some wages in relation to others, strong bargaining increases one group of wages in relation to the rest. Again, he is not so ignorant as to imagine that the rise of the price of an imported commodity, be it food or be it oil, causes the rise in all prices; for he is not guilty of the vulgar confusion between real prices and inflation—between relative prices, the change of one price in relation to another, which all those causes can produce, and inflation, which can alone be produced by a relative glut of money itself.

So the House is confronted with the question: why is it, then, that once again Members on both sides of the House, Government and Opposition—who know all this perfectly well, at any rate, by now—are setting off on the old, old adventure? I believe the answer is connected with unemployment. I believe that it is in the fear—I almost said the magic—of unemployment that the key to the problem posed to us is to be found.

The right hon. Gentleman the Chancellor of the Exchequer intends to reduce—or foresees that there will be a reduction of—the rate of inflation from the present 25–26 per cent. to 10 per cent. over the next 12 months. He knows what the consequences of such an unprecedented fall in the rate of inflation—something of which we have no knowledge or experience in this country—will be upon employment. He knows that in itself a fall in the rate of inflation from 25 to 10 per cent. in one year does mean massive unemployment. Indeed, he suspects that the present rise in unemployment is due to that trend towards a lower rate of inflation, which gives him the confidence to talk about rates of 10 per cent. or less in 10 to 15 months' time. So as inflation diminishes—if it does diminish—he sees himself facing the emergence of rates of unemployment with which, except for brief periods, we have also been unacquainted.

This connection of the fall in the rate of inflation with unemployment should not be misunderstood, though many have a vested interest in causing it to be misunderstood. It is not the unemployment which causes the rate of inflation to fall. The unemployment emerges as one of the consequences of the fall in the rate of inflation, which demands that a different pattern of economic activity shall be established to correspond with the expectation of 10 per cent. and not 25 per cent. inflation and more in the few months ahead.

Neither is the unemployment caused by any reduction of public expenditure to eliminate the part of public borrowing which is financed by inflation. Inflation is a form of taxation: inflation is a method whereby resources are withdrawn from the private sector and entrusted to the public sector. Therefore, except for transitional and frictional effects, the elimination of public expenditure financed by inflation no more causes unemployment than does the elimination of public expenditure financed by borrowing from the public or of public expenditure financed by taxation. There is an automatic balance between the two: the resources which are not claimed in the public sector are left available—are still there, the demand is still there—in the private sector. In short, the unemployment is the automatic, unavoidable consequence of doing what sooner or later we have to do—namely, ensure that the, rate of inflation does come down from 25 per cent. to 10 per cent. and stays there.

At this point, all Governments—like this one at this present time—take avoiding action. They do so by pivoting upon the myth or fallacy that, if the fall of inflation from 25 per cent. to 10 per cent. is brought about by the voluntary or compulsory behaviour of all elements in the community, it will not hurt anyone, and there will not be any unemployment—in other words, that we can come down from 25 per cent. to 10 per cent. and not notice it because it will not hurt.

Now this is not so, for the reasons already given. But I will illustrate the point further by an assumption even more improbable than that this policy will work on a voluntary basis, or indeed work at all. My assumption is that we send up a national prayer—perhaps we have a national day of prayer—to be liberated from the scourge of inflation or at any rate to be liberated from the difference between 10 per cent. and 25 per cent inflation, and that our prayer, like that of so many unfortunate persons before us is heard and that as from tomorrow morning "all with one accord", as it says in the Acts of the Apostles, behave in such a way that inflation falls to 10 per cent. Still, the mere fact that it happened in the manner in which I have described—which might be regarded as the marginal case for a prices and incomes policy—would not alter the dislocation which is inherent in the fall in the rate of inflation.

So the purpose of this policy is to act as a guilt transfer mechanism. It is the action of men who are not prepared to tell the people what is the cause of our difficulties and what will be the price of ending our difficulties. It is the action of men who are looking for scapegoats, who want to take the credit if perchance there should be such a decline in inflation, but who want to be able to say, if there is no decline or when the unemployment emerges, "If you had only done what we told you, obeyed the guidelines and complied with whatever was the phase of our prices and incomes policy at the time, it would not have hurt you." They want to say to the people, "It is your fault and not ours." That is what the right hon. Member for Sidcup (Mr. Heath) said throughout his version of this adventure. It was always the people who were wrong because they were not behaving as he told them they should be behaving and, consequently, the appropriate consequences were not following.

This is the mystification which is being practised on a grand scale upon the nation, in place of telling the nation what it is that has to be done, how it is to be done and what the price will be.

There has already been more than one reference in the debate to the Tolpuddle speech—how evocative—of the Chancellor of the Exchequer at the weekend. He dared to say to the public: For the past 18 months we have been living above what we were earning. We have been able to do this because foreigners have been prepared to back us with their money I do not know who that "we" was intended to mean to those whom he was addressing. But I am sure that he did not spell it out to the audience at Tolpuddle, because he has not spelt it out to any audience, that the people living above their means were the Government.

It is the Government's deficit that is being borrowed from overseas, or which has been borrowed hitherto; and our deficit on current account is simply the unavoidable contra of that borrowing which, fortunately for us and for the Government, they have been able to accomplish in order to meet their determination—not to live above the nation's means, because it is our means that have been used—but to live above what even this Government were willing to obtain by taxation or were able to borrow.

It is a strange irony that in this same Sitting during which we are to vote on the White Paper, we shall proceed afterwards—though I hope not, because I shall vote against it—to award ourselves some more money. If anyone wants to see the people who are guilty of inflation and whose fault it is, they are not the people to whom White Papers and Tolpuddle speeches are addressed. They are right hon. and hon. Members in this Chamber, who sustain Governments, who form Governments and who fail adequately to criticise Governments. It is their actions not just in the present but in the past, too, which were bound to produce this effect, which it was predicted would produce this effect, and which did produce this effect.

I shall not trench upon the debates which are to follow later tonight save to say that at other times many considerations might have been passed in review when we awarded ourselves what we consider to be our appropriate "remuneration", to use the terms of the Bill. But tonight one is outstanding. It is that the people who, by their actions over the years, are solely responsible for the scourge of inflation in this country will be taking steps, on a scale which they purport not to permit to anyone else, to protect themselves against the consequences of inflation. I do not know how with any sense of shame or decency they can do that.

However, that is to come after 10 o'clock. At 10 o'clock, by omission or commission, once again, instead of telling the people of this country what they need to be told about the cause and the cure and the price of the cure of their ailment, we shall embark on the course of make-believe of which everyone knows the main elements and items, and a majority will vote for the piece of buffoonery between the covers of the White Paper entitled "The Attack"—the attack, forsooth, from the predators themselves—"on Inflation."

But the dereliction of duty lies not by any means wholly upon the Treasury Bench. At a time like this, when the nation needs to be told, that function falls pre-eminently upon Her Majesty's Opposition, untrammelled as they are by the immediate consequences of what they do and say and not subject to the pressures day to day which rest upon all administrations. That is why at historic moments it has been Her Majesty's Opposition that have had the duty and privilege to speak for England.

However, on your left, Mr. Deputy Speaker, you survey what is largely a vacuum. The right hon. Ladies and Gentlemen on the Front Bench bear a certain resemblance to barnyard fowl—say, a hen and chickens—huddled together in one corner, for fear that someone will ask them the inevitable question to which they are not prepared to give the answer. The function of an Opposition is to be in the position to replace the Government. No Opposition, when it is challenged to say what in this grave hour needs to be done, dare reply, "You got us into this mess. It is your business to get us out of it." That is non-opposition. That is the renunciation of the constitutional function of Her Majesty's Opposition in the House and in the country.

The practice has already been inaugurated in this Session, by none other than the right hon. Member for Sidcup, of quoting, of all people, the Marquess of Salisbury—the great Marquess of Salisbury. I shall conclude with a quotation from 1872. The right hon. Member for Sidcup quoted from 1867. The Marquess of Salisbury said: The plea of necessity, the claim of party fealty, the fear of making bad worse, or the hope of mitigating the inevitable, are motives of real cogency … and though after the event they are seen to afford no defence for a shifty policy, they often appear at the time sufficient". He continued Such pleas may serve to excuse exceptional deviations from the consistency which the law of honour requires between the promises of opposition and the performances of office—but only so long as they are exceptional. If ever they become so habitual to any party that leaders can plan them without scruple, and followers can be brought to accept them— how contemporary it all is— without shame or resistance, that party must renounce, unless the English character shall greatly change, all substantial share in the councils of the nation. The tragedy of the nation at present is that that description, as some Labour Members to their credit have recognised, applies not to one great party in the State but to two.

The Marquess of Salisbury attached to that statement, as will have been observed, the qualification: unless the English character shall greatly change". There are those, throughout the world and in this country, who say that it has changed and that this is now a nation which expects to be deceived, which looks to its party politicians to deceive it, which wants not to be told the truth, and which will muddle or be bamboozled along to the edge of the abyss and over it.

The moral issue behind these debates is whether or not we have become the reflection of a nation whose character has indeed changed or whether temporarily we in this House are misrepresenting the nation. For my own part I shall not, as long as I live, believe that the character of this nation has changed. I shall never believe it—never, never, never.

7.35 p.m.

Mr. Doug Hoyle (Nelson and Colne)

I certainly agree with the right hon. Member for Down, South (Mr. Powell) that whilst time may change the solutions offered to the House by successive Governments have not changed one bit. Perhaps we may also agree that this is the fifth or sixth time that these measures have been tried. I am sure that just as they were found to be wanting in the past they will be found to be lacking in exactly the same respects in the future.

I am sorry that I cannot agree with the solutions offered by the right hon. Member for Down, South but I certainly agree that it is time that both Front Benches rejected the advice of the Treasury mandarins, who have been wrong on every occasion since the war. They have been wrong from the time when they said that the American loan should be convertible and it disappeared overnight. Yet theirs comes forward as the respected view. It is accepted. We hear the same part-worn arguments and platitudes from both sides. We hear about the strong Government and their determination to force through measures whatever the cost. When the analysis is placed before the House it is always said—this time it has not been lacking—that the people are behind the Government that the measures are necessary, and that they will receive full backing.

It is natural that with raging inflation people should be desirous of seeking a solution. What inevitably happens, as night follows day, is that six months later, as the full effects of a policy become known, it becomes unpopular. Those who supported it begin to re-examine the policy. I suggest that we shall follow that pattern.

We have been told today—and I am sure we shall be told later in the debate—that this is not a statutory policy. It is like a horse that is drawing a cart. A person can tell the horse that the whip is in the locker but not in his hand, and that if the horse does not follow the route the man wishes he will bring the whip out. What else can that be but a warning that even worse is to follow. That is what is now happening. A statutory policy will follow.

Looking back on the actions of successive Governments we have seen the policy fail and unemployment begin to rise. I tell my hon. Friend the Member for Whitehaven (Dr. Cunningham) that this policy will do nothing for his constituents. Indeed, the position of Whitehaven and the Northern Region, in which unemployment is already high, will be made worse.

Dr. John A. Cunningham

Certainly the present rate of inflation is doing something for the people of Whitehaven. It is rapidly destroying their standard of living. They will welcome any action in the short term which will militate against that. If my hon. Friend wants to advance the argument that what I am supporting will not do anything for the people of Whitehaven, perhaps he will explain how his proposals will do something for them in the immediate future.

Mr. Hoyle

I am saying not only that it will do nothing for them, but that unemployment will rise. I predict that by the beginning of next year unemployment will rise to 1½ million. If there is no redress before the end of the year, it will reach 2 million. I suggest that, then, if not before, a different tune will be played by the Front Bench and those who support it.

My hon. Friend has been critical of the alternative measures which we put forward. He rightly said that they do not help in the short term, but they do help in the long term. If the Government would follow the policies advocated in the manifestos on which they fought two elections, it would be more relevant to the crisis now facing us. At that time they said that a statutory incomes policy would fail and that the way to tackle inflation was first to tackle prices. We are saying that if we began to combat price rises of essential goods and services—for example, foodstuffs, rents and rates—that, by its very nature, would take out the anticipatory nature of wage bargaining. I suggest that at the wage bargaining table it must be in the region of at least 12 per cent. If we took that element out by our attack on prices, as we advocated at the election, it would be an immediate measure that the Government had taken and on which they were elected to office.

I think that my hon. Friend the Member for Whitehaven and I are in agreement. The measures that we are suggesting—import controls, the re-establishment and re-equipment of British industry through the National Enterprise Board and the setting up of public industry in the regions—are the longer-term measures. But a start must be made now if we are to prevent the erosion of the base of manufacturing industry. That is what I and some of my hon. Friends put forward as the alternative strategy.

I know that many hon. Members still wish to take part in the debate, so I will conclude on this note: the late Aneurin Bevan said that it was no use looking into the crystal when one could read the book. The measure that is being proposed tonight is the same well-worn book that, so often in the past, has been taken down from the library shelf, read, put into practice, and has failed. I suggest that it is time that the Labour Party and, indeed, the Labour Government, threw that book away if we are not to follow the same path as we followed from 1966 to 1970 and the path which destroyed the Conservative administration.

7.43 p.m.

Mr. David Knox (Leek)

In a few minutes I should like to try to take a balanced view of a statutory incomes policy, but at this stage I should like to dispute the point made by the hon. Member for Nelson and Colne (Mr. Hoyle) that statutory incomes policies quickly become unpopular with the public. During the February election campaign, polls showed the same 70 per cent.-plus support for such polices as the recent poll on the policy put forward by this Government. The hon. Gentleman may recall that in the February election about 17 million people voted for the Conservative and Liberal Parties, who were then in favour of statutory incomes polices, compared with only 11 million who voted for the Labour Party, which was against such policies. Something of a myth has arisen about this matter and it is only right to put it in its proper perspective.

I should like to join those who have paid tribute to the speech made by my right hon. Friend the Member for Sid-cup (Mr. Heath). It was one of the most outstanding speeches that I have heard during the five years that I have been a Member of this House. I found myself in considerable agreement with the points made by my right hon. Friend. In particular, I should like to endorse his remarks about the effect of a high level of unemployment on people's attitudes to free enterprise. Those who advocate unemployment are no friends of the free enterprise system. I wish that from time to time some of the more extreme monetarists would recognise that if free enterprise is to survive in this country it must be seen to be successful, and success is not measured by people in Britain by a high level of unemployment.

Having believed in an incomes policy for some time and particularly that the last incomes policy should not have been stopped, it would be churlish not to welcome the proposals in the White Paper. They are a considerable step forward after the dither, delay and incompetence of the last 17 months since this Government came to power. The White Paper deserves a welcome because it is the first real attempt by the Labour Government to deal with the major economic problem facing us—inflation—a problem which has got worse since the present Government came to power. The White Paper is to be welcomed because it is better later than never.

The amendment rightly mentions the Government's belated commitment to reduce the disastrous rate of inflation. It might also have mentioned the considerable escalation in the rate of inflation over which the Government have presided. While prices rose by 13 per cent. in the year to February 1974—the last year of the Conservation Goverment—they have risen by 26 per cent. in the year to June 1975 under this Government. While most of the increases in the year to February 1974 was the result of the steep rise in import prices, particularly oil, over which we had very limited control, most of the increase in prices during the past year has been due to excessive increases in incomes. I use the word "incomes" advisedly, because I include salaries quite as much as wages.

What is particularly worrying about these figures is that whereas British prices went up by about the average of the OECD countries in the last year of the Conservative Government, they have gone up by double the average increase in the OECD countries during the past year.

Why has this escalation in inflation happened? It has not happened as the inevitable consequence of the Conservative Government's statutory incomes policy. It has happened simply because the present Government abandoned that prices and incomes policy and put nothing in its place They gave the green light to everyone to ask for and get as big a wage and salary increase as possible. The Government have encouraged every trade union and professional body to exploit their monopolistic powers to the full. They have pretended during the last 17 months, that everything in the garden was lovely. Today's inflation is the inevitable consequence not of the Conservative Government's prices and incomes policy but of the Labour Government's absence of any meaningful incomes policy so far.

Now, after 17 wasted months in which great harm has been done to the British economy in terms of inflation, unemployment and the balance of payments, at Ion last the Government have introduced a statutory incomes policy which they said they would never do. They have done what the 1964–70 Labour Government found they had to do even though they disliked doing it and what the 1970–74 Conservative Government found they had to do even though they disliked doing it. It is a pity that Government's in Britain will not learn from the bitter experience of their predecessors.

Even though I condemn the Government's attitude, until very recently, towards incomes policies, I welcome the White Paper and the Government's conversion to an incomes policy. This does not mean that I agree with every detail of the White Paper—far from it. Every incomes policy has defects which should be criticised and discussed even if one accepts the principle of the policy.

Phases 1, 2 and 3 of the Conservative Government's policy had defects but I supported all three in principle. It would be surprising if phase 4 did not also have defects. For this is phase 4 of that policy. That is how I see the White Paper proposals and I suspect that most people in the country will see them in the same way.

The Prime Minister has explained that his previous objections to statutory incomes policies were not really objections to a statutory policy but only against criminal sanctions on workers. I hope that he believes this explanation, because very few other people do. If it enables him to convince himself that he has not changed his mind and that he is the personification of consistency, so be it. The rest of us prefer to take a different view.

In welcoming phase 4 of the incomes policy, I hope that it will have at least as much success as phases 1, 2 and 3. Despite the myths that have arisen, these phases were undoubtedly much more successful than unsuccessful.

As my right hon. Friend the Member for Farnham (Mr. Macmillan) said in the Second Reading debate on the Finance (No. 2) Bill, That policy was not such a failure as it is sometimes made out to be … when we were forced to move to a statutory policy, despite the fact that world prices and commodity costs were escalating to an unprecedented degree, we contained inflation and prevented the hyperinflation that would otherwise have happened. We obtained the consent of the great mass of work people, including the trade unions, right up to the end."—[Official Report, 8th May 1975; Vol. 999, c. 1672.] In the same debate, the hon. Member for Berwick and East Lothian (Mr. Mackintosh) concurred in this view. Certainly the Conservative Government's statutory incomes policy succeeded in keeping inflation at a lower level than it has been since, despite the escalation of import prices during phases 1, 2 and 3. Certainly the Conservative Government's policy did not cause anything like the industrial strife that is claimed. There were far fewer days lost through strikes than there were before or have been since.

Of course phase 3 finally came unstuck as a result of the General Election defeat of the Conservative Government in February last year, but it would be wrong to judge statutory incomes policies on that one reverse, serious though it undoubtedly was. If a true judgment is to be made, one must look at the whole, and phases 1, 2 and 3 had many more successes than failures. I hope that phase 4 will be equally successful.

My main worry about the Government's proposals is the absence of real teeth in the policy. After the complete failure of the social contract, one inevitably has doubts about toothless monsters. I am particularly concerned about the lack of direct powers to ensure that the pay limits are observed in both the public and the private sectors. It is not enough to threaten to sack the chairman of a nationalised industry if the limit is exceeded or for the Government to say, as the White Paper does, that it will not foot the bill for excessive settlements in the nationalised industries through subsidies, by permitting extra borrowing, or by allowing excess costs to be loaded on the public through increased prices or charges. The White Paper continues: All this means that excessive pay settlements will affect employment in the industry concerned. The Government know perfectly well that they could not and would not sack miners if there were an excessive settlement in that industry. Nor is it enough for the Government to threaten action through the Price Code to deal with the private sector. We need much stronger powers of a more direct nature over pay—both wages and salaries—and I hope that the Government will think again about this. Perhaps they might even let us see their back-up proposals. It would be even better if they introduced statutory back-up powers with real teeth that would have some effect.

Despite some reservations, I believe that the White Paper deserves support in principle. Its authors have not earned any support. Their behaviour in Opposition to every move by the last Conservative Government to deal with inflation was nothing short of disgraceful. They supported every wage and salary claim, no matter how exorbitant. They did everything in their power to undermine the Conservative's Government policy against inflation.

However tempting it may be for the Conservative Party to launch an all out attack on the White Paper, this is rightly being resisted. If this Government's proposals fail, Britain will fail. The British people will suffer. The Government should get our support now, but if they are to keep it, they must earn it. There must be no backsliding on the policy and the White Paper. If there is, the Government will forfeit any right to support or respect. Belatedly, they have acted. For as long as they act with decision and resolution, they should be supported.

Mr. Deputy Speaker (Sir Myer Galpern)

I would remind hon. Members that the wind-up speeches are due to begin at 9 p.m. It is now almost 8 p.m.

7.58 p.m.

Mr. John Cronin (Loughborough)

The hon. Member for Leek (Mr. Knox) made an interesting speech. It was reassuring to hear him welcome the White Paper. He said he hoped that there would be no backsliding from the White Paper. I hope there will be no blacksliding from his speech and that he will join us in the Lobby this evening.

I congratulate the Chancellor of the Exchequer and the Secretary of State for Employment on their joint effort. It has obviously involved considerable political disturbance to them. The White Paper has one unique quality which escaped the right hon. Member for Down, South (Mr. Powell). He said that it was the same as before, and claimed that there was a staggering similarity to other wage policies we have had in the past. The one important difference is that this policy has the support of the TUC General Council, the principal unions and the general public. That is the important difference between this policy and the other five we have had in the last 10 years, and that is why it is more likely to be successful.

It would be gracious to express some appreciation of the trade union leaders who have taken considerable personal risks to make a substantial contribution to this policy. Jack Jones, Joe Gormley and others have put themselves in considerable personal jeopardy with some members of their unions in order to support a policy whch they believe to be in the best interests of the nation.

I have some sympathy with my hon. Friends who feel that they cannot support the White Paper. There is no doubt that it involves a substantial departure from the manifesto, and we accept that it will cause some heartsearching among many active workers in the Labour Party throughout the country. I shall probably have some difficulty in explaining the White Paper to the Loughborough Constituency Labour Party. However, the manifesto cannot be regarded as tablets of stone coming down from the mountain, to be adhered to rigidly, when we face a national crisis of the greatest magnitude.

I am therefore sorry that some of my hon. Friends have put down an amendment and that some, I understand, are to vote against the White Paper. It is unfortunate that at a time of national crisis we cannot have more solidarity on the Government benches. I am surprised at some aspects of the amendment. One of its principle demands is for import controls. It is generally agreed that import controls always produce reciprocal import controls in other countries—

Mr. Mikardo

That is not at all true.

Mr. Cronin

I could imagine nothing more deleterious to our trade situation.

My hon. Friends seem to have in mind some direct control of private investment into public investment. When done on the scale envisaged by my hon. Friends I can imagine nothing more calculated to reduce international commercial confidence in this country. The crisis we face is very much a crisis of confidence.

It is suggested in the amendment that we should mobilise our overseas assets. Surely that simply means spending our reserves. What does "mobilise" mean, if it does not mean spending the reserves?

Mr. Mikardo

I am sorry that my hon. Friend has not read the amendment more closely, or studied the documents which explain it. We are proposing to mobilise a sector of private portfolio holdings. The effect of that would not be to dissipate them it would mean that certain liabilities which we now have to discharge across the exchanges could be discharged in sterling. It is as simple as that.

Mr. Cronin

What my hon. Friend suggests is simple but my point is that it would have disastrous effects. I understand perfectly what he wants to do. What my hon. Friends have in mind would immediately cause a great reduction in the living standards of this country.

Mr. Mikardo

What does my hon. Friend expect of the White Paper?

Mr. Cronin

It is extraordinary that the amendment suggests nothing for coping with the unquestionable problem of wage inflation. Yesterday my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) said that wage increases were not an important element in the present inflation; that they had merely a marginal effect. I should have thought that both sides of the House, practically all economists, and anyone who has any dealings with political economies, accepted that the principal crisis is created by wage inflation.

When I heard my hon. Friend assuring us that increased wages were not an important part of inflation I felt that I was listening to him in some sort of nightmare, hearing him say that the earth was flat. Everyone except for a very small section agrees that wage inflation is the biggest cause of our troubles.

Mr. Mikardo

My hon. Friend certainly will have difficulties in Loughborough.

Mr. Cronin

I trust that I will not have the same difficulties as those which my right hon. Friend the Member for Newham, North-East (Mr. Prentice) is having, because although there are those who disagree with my views, there are not the manoeuvres which are taking place in my right hon. Friend's constituency.

Hon. Members on both sides of the House have suggested that the Bill which provides sanctions against breaking what is at present a voluntary policy should be published. There is a respectable argument for that case. It is tiresome to debate a White Paper, the ultimate sanction of which is a Bill which has not yet been published. It is clear that our overseas creditors would like to see sanctions with teeth. The financial institutions would like a Bill with sanctions. It would greatly increase confidence. We must realise, however, that this is the most sensitive part of the White Paper policy, and since, in September, the TUC General Council and leading trade unionists will be trying to steer the Trades Union Congress into agreement with the White Paper policies, it would be absolute folly to publish the Bill at this stage. The Bill is not necessary, and its absence does not cause any injustice.

Mr. Tom Swain (Derbyshire, North-East)

Will the consultants and the British Medical Association follow the guidelines laid down by the TUC?

Mr. Cronin

I cannot speak for my professional colleagues, but I assume that they will have to do so. The most they can get is an increase of £6 per week—[Interruption.] Speaking as one who believes in the White Paper, I think the answer to my hon. Friend's question must be "Yes".

The policy base of this White Paper will not produce successful results immediately. There will be continuing price increases as a result of what is already in the pipeline, and all the economic indicators show that there will be a deepening recession in this country. Obviously, through the next few months there will be great pressure on the Government to abandon or modify the policy. I hope that my right hon. Friend the Secretary of State for Employment will make it clear that the Government will adhere rigidly to the policy. Unless they do, the present deplorable economic situation will rapidly deteriorate further.

This is a psychological exercise, and the whole effect of the White Paper will depend on creating the realisation that the Government mean what they say and will pursue their policy. Yesterday, my right hon. Friend the Chancellor said that there would be a review of public expenditure, and in the Budget he sought to put in hand measures to reduce public spending by about £900 million in 1976–77. There has been an enormous runaway increase in public expenditure. Even a few hours after the White Paper was published there was a request for Supplementary Estimates of £2 billion. There has been a 44 per cent. increase in public expenditure, which is now approaching 50 per cent. of the GNP.

As a Socialist I welcome public expenditure, because it is a redistribution of resources. Obviously we need more public expenditure on such things as homes, better medical services, better education and better social security benefits. But public expenditure has now increased to an extraordinary degree, and that applies to the increases in local authority rates. I hear ceaseless complaints from my constituents about the rate increases, as, no doubt, do all other hon. Members. I hope, therefore, that after the review the Chancellor will take more effective action to keep public expenditure under control, while maintaining all the necessary Socialist priorities. Public expenditure must be decreased in the immediate future.

I entirely accept that it would be most unwise to attempt any short-term cuts in public expenditure. However, public expenditure always has to compete with capital investment and with consumer expenditure. Capital investment is inadequate at present and it is politically impossible without enormous increases in taxation, to reduce consumer expenditure to the substantial degree necessary to keep public expenditure at its present rate. I hope that the Chancellor will be firm when dealing with that cause of inflation.

The right hon. and learned Member for Surrey, East (Sir G. Howe) and the right hon. Lady the Leader of the Opposition have said that the present economic crisis is the fourth which this Government have experienced. I suggest that this is totally untrue, because there would never have been this enormous escalation of wages had it not been provoked by the attitude of the previous Conservative Government. If we had not had the Industrial Relations Act and the confrontation with the miners, there would be a more helpful attitude on the part of the trade unions.

The Conservative Government expanded the monetary supply in a most reckless way—they induced Lord Barber to trans- fer his activities to an entirely different place. Everyone knows that increases in the money supply take approximately two years to work through. In 1972 Lord Barber increased the money supply by 22 per cent. and in 1973 by 24 per cent. We are now beginning to feel the real effects of this. For right hon. Gentlemen opposite to indicate that the present crisis is the Government's doing is as hypocritical as their intention to abstain tonight. It is extraordinary that at a time of great national crisis all we can expect from the Opposition is that they will reserve their judgment and abstain. History will not forgive them, but will remember the toughness, courage and determination of my right hon. Friends on the Government Front Bench, who will enforce this policy.

8.13 p.m.

Mr William Clark (Croydon, South)

The House has listened with great interest to the remarks made by the hon. Member for Loughborough (Mr. Cronin) and is pleased with the sort of chat he had with his hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo). The House is indebted to the hon. Member for Loughborough for demolishing the manifesto myth that seems to keep cropping up. He should have gone on to say that only 39 per cent. of those who voted went along with that manifesto.

It has come out in the debate that the action that the Government have taken has been too late. It has been delayed for 17 months. Our competitors, especially in Europe, have taken action against inflation. I shall not bore the House with the figures of their rates of inflation, because those figures have been bandied about sufficiently. It is obvious that in the United Kingdom we cannot measure up to the records of our overseas competitors.

One thing that upsets the public is the effrontery of the Prime Minister. A few days ago when the Prime Minister was being pressed on what he would do about inflation, he said that no panic measures were necessary, as if our inflation had just crept up on him the day before. Inflation has been going on for some time. The Government bear heavy responsibility for allowing it to continue for as long as it has. Now we have a package deal, and many people are asking the question: will it work? We all agree that the enemy is inflation. We differ only on how to tackle it. The Conservative Party believes that inflation should be tackled one way and the Labour Party believes that it should be tackled another. No doubt the Liberal Party has its own solution to the problem. It has emerged from this two-days' debate that all hon. Members agree—even the hon. Member for Loughborough conceded this—that public expenditure has got out of hand and that we are spending too much money that we do not have.

It is all very well for the hon. Member for Loughborough to say that to increase public expenditure or to have a high public expenditure means a redistribution of wealth or resources. However, this does not apply if the country does not have the money. This is the trouble we are in, and this is what I cannot understand about the White Paper.

Having regard to the position of sterling and our international financial standing in the world, foreigners will say that as a country we are living above our means, and consequently we must cut Government expenditure. It is complete madness for the White Paper to contain proposals for increasing Government expenditure. I know that £200 million is a drop in the ocean, but it is a step in the wrong direction. The Government should be going the other way and reducing their expenditure. This is why sterling is so weak.

Mr. Ivor Clemitson (Luton, East)

Put up the rates.

Mr. Clark

It does not matter what we do. Labour Members do not seem to understand that we can only go on for so long spending money that we do not have. Eventually the situation catches up with us and the price becomes greater and greater the longer we continue.

Mr. Mikardo

Cut defence.

Mr. Clark

At last the Government have accepted, in the White Paper, that there will be cash limits on the nationalised industries. That is a step in the right direction. The other day a Minister said that if a chairman of a nationalised industry exceeded the £6 guideline he would be sacked. That is an interesting remark. I should have thought, with our parliamentary tradition, that the Minister in charge of the Department which dealt with that nationalised industry should also be sacked. There are many anomalies. Labour Members may laugh but a Minister cannot shed responsibility to the chairman of a nationalised industry. He must take some responsibility himself. Many more anomalies will arise from this £6 guideline.

The point has been made, and it is worth repeating, that although the flat-rate £6 guideline sounds attractive, it does, at the end of the day, upset the differentials between the craftsman and the labourer. Therefore, more trouble is being stored up for the country. The rate of inflation is 26 per cent. and the Chancellor is trying to reduce it to 10 per cent. within one year. As the right hon. Member for Down, South (Mr. Powell) said, this will be a painful operation.

I should like to remind the Minister that when the Conservative Government were in power they took action against inflation when it was running at only 9 per cent., 10 per cent., and 11 per cent. This Government have waited until inflation has reached 26 per cent. before thinking that some action should be taken.

One thing that we do understand is that people want increased wages or salaries. However, insufficient attention is given to what rate of production will result. It is no good comparing the United Kingdom with Germany and saying that the Germans receive high wages. The Germans have a high rate of production, whereas our rate of production is low and stagnant. It is no good our sitting in cloud-cuckoo land and expecting a German day's pay for a British day's work. We have to increase our production—

Mr. Clemitson

Or investment.

Mr. Clark

I am grateful to the hon. Gentleman for reminding me about investment. What we must realise, from the indications internationally, is that, probably towards the end of next year but certainly in 1977, world trade will take a reasonable upturn. As an industrial nation, we should now be planning to take advantage of that upturn.

That brings me to investment. I am engaged in industry. Investment in industry depends on two things—confidence and profitability. The question is whether one can get one's money back after a period. So much is said by Labour Members—as it is in one of the amendments on the Order Paper—to the effect that investment must be directed. What is not said is how it will be paid for. As far as I can see, there will be confiscation. We cannot direct investment without confiscation, and it is no good Labour Members below the Gangway thinking that we can.

Investment in Britain is slack for many reasons. It might be a good idea if the Minister got rid of the myth that investment depends on a political party. It has nothing to do with that at all. It might be a good idea for the Government to undertake an investigation into why business men do or do not invest. The results of such an investigation would be very salutary for many Labour Members. If one is to invest, obviously one must get one's money back. We cannot get people to lend money for new machinery, or whatever it is, on any other basis.

There are many reasons why British business men are not investing. One reason is the lack of confidence, about which there can be no doubt. We have high taxation, advance corporation tax, capital transfer tax, dividend limitation and price control, and as if that is not good enough, we shall probably have a wealth tax in addition. What incentive is there for any business man, or anyone for that matter, to invest, with all these shackles on him? The investor may be a foreigner, and he will look at this country and its strike record. We must get back to realism if we are to have an upturn in investment. One cannot legislate for investment.

Mr. Mikardo

That sounds beautiful, but can the hon. Gentleman say why it was that in the three years 1971, 1972 and 1973, when the profits of manufacturing industry rose by a half and its taxation was reduced by one-third, its investment still fell by one-third?

Mr. Clark

The investment continued. The rate of growth of the investment did not rise as fast as it had been rising. That is very different from saying that it fell by one-third. It was the rate of growth in investment that fell.

If we are to have investment we must have an adequate return on capital.

Mr. Mikardo

They had it then.

Mr. Clark

I do not want to delay the House for too long.

Mr. Tom Litterick (Birmingham, Selly Oak)

Answer the question.

Mr. Clark

There is also the question of the Government's nationalisation policy. When we have a national crisis on our hands, to devote our energies to trying to take over this or that industry, whether or not it takes resources, when all our energies should be directed at trying to solve the crisis, is complete madness. Of our exports, 97 per cent. come from private enterprise. If we keep nationalising the manufacturers of goods for export, our exports are bound to drop. Hon. Members on both sides of the House know that the efficiency of the nationalised industries cannot compare with that of private enterprise. [Interruption.] Labour Members below the Gangway must do their homework. They ought to look into private enterprise, which last year paid £3,000 million in tax. If we had taxed the nationalised industries, how much tax would they have paid? They would not have paid anything. Consequently, the nationalisation proposals are irrelevant and absolute nonsense. They are merely a sop to the Left wing of the Labour Party and to the detriment of Britain. The more people talk about this matter, the better.

We must let industry get on with its job. We want less Government intervention in industry. One cannot direct investment or legislate for prosperity. We must also stop trying to hide the unpalatable facts. We should tell the public the absolute truth, which is that the standard of living in Britain must come down before we can get out of this trouble.

I am not a critic of the trade union movement. I agree with it wholeheartedly.

Mr. Mikardo

That is kind.

Mr. Clark

It is not a question of being kind. It would not be a bad idea if some Labour Members below the Gangway were sometimes to say something good about capitalism. However, we must avoid putting the TUC on such a pinnacle, as though if the TUC says something, it is gospel. There are only 10 million trade unionists out of 55 million people in Britain. Let us keep them in perspective. Of course, they are an important part of our economic life, but let us not exaggerate their importance.

In order to get out of our difficulty we must be united. One thing that the Conservative Party will always do, including this occasion, is support anything that is in the national interest—unlike what happened when the miners confronted the democratically elected Government of the day and when Labour Members not only did not support the Conservative Government but actively worked against that Government, working up a feeling that the Conservative Government were against the trade unionists. Labour Members knew that that was untrue and unfair. What they did was done for party political purposes. We all know that. However, in this case the Conservative Party will not play the same game.

8.27 p.m.

Mr. Ian Mikardo (Bethnal Green and Bow)

I never like to sound discourteous even to hon. Members with whom I profoundly disagree, but I am bound to say, in all honesty, that the only description that can be applied to the speech to which we have just listened is one which I shall have to borrow from the right hon. Member for Down, South (Mr. Powell). It was a niece of economic illiteracy. The hon. Member for Croydon, South (Mr. Clark) said in a blinding flash of original thought that we are all against inflation and disagree only on how to deal with it. The reason we disagree about how to deal with it is that we disagree about what causes it. We write different prescriptions because we make different diagnoses.

But one diagnosis which has been made over and over again today deserves some examination. The hon. Member for Leek (Mr. Knox) and my hon. Friend the Member for Loughborough (Mr. Cronin) made speeches which were virtually identical and would qualify both for office as junior ministers—I should think very junior ministers—in a coalition government. They made exactly the same speech and both said that the only cause of our inflation is the rise in wages and salaries. I do not blame them altogether, for many others have said it, including one Minister of Her Majesty's Government who ought to know better.

I want to look at that assertion. It is true, of course, that wages are a contributory cause, and a significant one, of price rises; but we have only to examine some figures to see, first, that they are not the only cause; secondly, that they are not the principal cause; and thirdly, that they are not even the largest cause. I invite the hon. Members for Leek and Loughborough, and any other hon. Gentlemen who wishes, to do a very simple piece of arithmetic. Perhaps it is not all that simple for it involves a little research. They should get two sheets of paper. On one they should calculate what has been the contribution, over the last 12 months, to the increase in the retail price index of all wage and salary rises. That is not an easy calculation but it can be made. I am sure that it has been made by the Department of Employment which will have the figure.

Hon. Gentlemen should then take another sheet of paper and write down all the things the Government have themselves done which have increased prices—and we shall find that there are quite a lot of them. They should then do the arithmetic to quantify that. There are, for example, increases in indirect taxation which are inflationary, VAT and the second rate of VAT. I am not saying whether these actions were right. I am only saying that they are major contributors to inflation. Then there are the results of the insistence on charging economic prices for the products of nationalised industries. Again, I do not say whether this is right or wrong, but there have been increases in postal and telephone charges, and gas and electricity, and all the rest. These can be quantified as a contributor.

There is the increased cost of imports derived from the progressive devaluation of the pound which is, of course, Government policy; and one can quantify what contribution that has made to the increase in prices. There is our membership of the Common Market. There is the cancellation, now happily slightly reversed, of rent controls, with a considerable consequent rise in rents. If one adds all up all those one gets the figure of the contribution which direct action, direct decisions, by the Government—whether they were right or wrong decisions—has made. And it will be found that the contribution made to inflation by all the increases that there have been in wages and salaries is a very small fraction of the increases which have been made as a direct result of governmental decisions and governmental policy. There are, of course, other contributors to inflation, so to start with the idea that we have only to hold down wages and salaries and we have got rid of the problem of inflation is absolutely nonsensical.

I will speak of my attitude towards wages and salaries. I begin by saying that I do not believe in unregulated, free wage bargaining. I never have done. I differ from many of my hon. Friends and many members of my trade union in that. I am not a new convert to this idea. I wrote a pamphlet explaining the need for, and setting out a method for, the planning of the wages sector more than 20 years ago—I would guess long before any member of the Cabinet or the Shadow Cabinet ever began to think about the problem.

The reason I took that view, and still do, is simple. I am a Socialist and therefore I believe in a planned economy, and of course it is a nonsense to say that we can have a planned economy with an unplanned wages sector. But that coin has an obverse and a reverse. There is another side to the coin. If we cannot have a planned economy with an unplanned wages sector, we cannot have a planned wages sector in an otherwise unplanned economy—and that is what the Government are trying to create. This is why their analysis has gone absolutely wrong. I am not saying that we have to wait for a complete, beautifully, tidily planned economy and a Socialist State before we can plan a wages sector. But I am saying that the planning of the one and of the other have to go along part passu.

The Government's and our party's commitment to full employment has been abandoned. For the first time for many years we heard the Chancellor of the Exchequer say, in a speech horrifyingly similar to that of one of his predecessors, Philip Snowden, in May 1931, that he will introduce measures deliberately to create unemployment. That is not planning.

We have a price control which is at best marginal and at worst ineffective. We have no control over capital outlays, no control over imports, no control over investment, no measures generally to stimulate investment. We had an Industry Bill, which was to correct the defects that the right hon. Member for Sidcup (Mr. Heath) listed in that speech which my hon. Friend the Member for Penistone (Mr. Mendelson) quoted this afternoon, in which he condemned the private sector of industry for its failure to invest, and invest intelligently. The vitals have been cut out of that Bill, to make sure that the Government have no power to put right those defects.

My hon. Friend the Member for White-haven (Dr. Cunningham) spoke of the necessity not merely to increase investment but to spread it out better. He spoke with feeling of the had economic situation in his area of West Cumbria. Under our original Industry Bill plans, under the Bill as we envisaged it and described it in considerable detail in the Labour Party's election programme, the Government would have been able to help my hon. Friend to stimulate the economy of West Cumbria. He said that it could be done through planning agreements. We have now ensured that there will be no planning agreements, except when a company asks for them. I do not know any company in West Cumbria which will tell the Government "Please make us out a planning agreement." That is no sort of planning as the other side of the medal of a planned wages sector.

We are to have sharp cuts in the social services. We are not told what they are, but I can inform the House when we shall be told. It will be in the second week in September, the week after the Annual Congress of the TUC. The wraps will come off then. The cuts are being kept carefully under wraps in the hope that they will not cause the annual congress of the TUC to lose confidence in the Government's policy.

What contribution will those cuts make to what was the core of the thesis on which we won two elections last year, that we were seeking to create a fundamental and irreversible shift in the balance of wealth and power towards working people and their families? If we cut the social wage, if we reduce spending on education, the health services, the welfare services and other services of local authorities, what contribution are we making there?

It was an interesting coincidence that a few minutes before we began our debate my hon. Friend the Member for Gravesend (Mr. Ovenden) sought leave to introduce a Bill under the Ten Minutes Rule. He referred in his speech to the activities of a gentleman who has made enough profit recently out of finding a loophole in the rent legislation, and rent racketeering on working people, to build himself a £300,000 golf course. How can we allow that to go on and then say "Nevertheless, we must have controls over wages"?

A contract is a bi-partisan matter. Both sides have obligations. I do not believe that the Government have done nearly enough. Those who say that they have done nothing are at best grossly exaggerating and at worst wrong. But I do not think that the Government have done nearly enough to honour their side of the contract to give themselves the authority to demand a real control over wages. I say to my right hon. Friend the Prime Minister, although he is the last man who needs to be told, that the social contract was not a contract only with the General Council of the TUC. It was a contract with the nation. The people who elected the Labour Government feel let down, as the Government are not carrying out the policy on which they were elected.

I must explain why I shall vote against this White Paper. I never pretend to speak for anybody but myself. I shall vote against the White Paper for two reasons. The first is that I shall not have the opportunity of expressing my views by voting for the amendment in the name of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer). I understand that there are procedural reasons why that could not be taken, although I judge from what Mr. Speaker said yesterday that if the debate had finished a little earlier that vote could have been taken. However, I do not want to become involved in procedural questions.

That amendment contains a policy alternative to that proposed by the Government. Whether right hon. and hon. Members agree or not, they cannot dismiss it. Nobody argued that its contents were wrong, although the right hon. Member for Sidcup and my hon. Friend the Member for Whitehaven said that the policy might be all right but that it would not take effect quickly. I do not agree. Some of its measures would take effect quickly.

The basic policy in the amendment was first put forward by us in 1966. That policy has since been continually refined, improved, extended and updated. We were told that the policy would not have an immediate effect. However, if someone had acted on it in 1966 we should be reaping the benefits of it in 1975. It was said that the policy would have no effect. I stake what little reputation I have as a forecaster of future events on the prediction that within 12 months the Government will have adopted at least two of the measures contained in the amendment but with which they do not now agree.

My second reason for voting against the White Paper is the unpublished, secret Bill. My hon. Friend the Member for Penistone said that the Opposition were indulging in a parliamentary gimmick act about the secrecy of the Bill and were making a great point about what the Prime Minister did or did not say, and whether he made a slip of the tongue. However, this is a real and serious point.

I am curious to see the Bill. I have not seen it. I know that it does not establish a statutory incomes policy. How do I know that? All my right hon. Friends have been telling me for years that only over their dead bodies would there be a statutory incomes policy. I know that none of them is in the mood for suicide. Therefore, I know that the Bill does not contain a statutory incomes policy.

Next Tuesday will mark the 30th anniversary of my election to Parliament. In all that time I have not seen—I am very curious to see it—a statute containing non-statutory provisions. That will be remarkable.

However, that is not the reason which compels me to go into the Lobby. I should like to spell out the reason. The Bill is mentioned in the White Paper, it has figured prominently in the debate and yesterday the Chancellor of the Exchequer gave an indication of what was in it, although we do not know everything that is in it. When that Bill is introduced in four or five months' time, if there is no Division on the White Paper my right hon. Friends would have the right to say to me "What are you beefing about? You had your opportunity to vote against the White Paper. What are you beefing about now that the Bill has been introduced?"

We hear phrases such as "a voluntary policy with sanctions", and so on. I am concerned about Joe Bloggs, the ordinary bloke on the shop floor. Whatever esoteric phraseology the Government use and whatever etiolated formulae the Government give birth to, they will not persuade me that if Joe Bloggs cannot get an increase which he is claiming because he is prevented from claiming it, that is a statutory policy, whereas if Joe Bloggs cannot get the increase he is claiming because his employer is statutorily forbidden to give it to him, that is not a statutory policy. That is nonsense.

I wish to say something to the Prime Minister in his absence and I hope that he will read it, busy as he is. He turned to us on the benches below the Gangway and, waving a metaphorical, admonitory finger, he said, "You naughty boys. If you vote tonight you will be voting against a decision of the TUC". I do not need any curtain lectures from the Prime Minister about the proper relations between the House and the trade union movement and between the Labour Party and the trade union movement.

As is well known, the Prime Minister has a phenomenal memory. He has much the best memory of any man I ever met, but he also has a very good "forgettery". At times he has a convenient "forgettery". When he waves that metaphorical, admonitory finger at me telling me that I must not do something because it is against what the trade unions want, my less good memory goes back to the years between 1968 and 1970. I wonder whether the Prime Minister has forgotten that during that time he consistently spat in the eye of the General Council of the TUC. He derided what it said and he trod on all the TUC's desires and feelings.

Some of us opposed him in that. I do not know whether my right hon. Friend the Prime Minister still remembers, but I bet that my right hon. Friend the Secretary of State for Employment remembers. He was the leading and most effective figure amongst those who constantly told the Prime Minister that he would not succeed and that he would engineer a defeat for the Labour Government—which unhappily proved all too true. I do not want any curtain lectures from the Prime Minister about that.

I am delighted that there has been a closer relationship between the Government and the TUC in the last few years. It started when the Conservative Government were in office. There has been over the past three years a tripartite committee of, first, the Shadow Cabinet and now the Cabinet as one party, the Labour Party as the second party and the General Council of the TUC as the third party. It has met regularly over the past three years. I have been a member of that committee ever since it was established. I am delighted with it. It has done a marvellous job of work and it continues to do so. My only regret is that we did not have it in 1966. If we had had the committee we should have avoided the mistakes of that awful period from 1966 to 1970, and we would not have lost the 1970 election. However, better late than never. We now have the committee and I hope that it will go from strength to strength.

Having said that, I believe that I am sent here by my electors to exercise my judgment and not to take a Messianic view of anybody. I do not believe in tablets of stone. I do not accept the doctrine that I have to accept what somebody says because he comes down out of a cloud from the top of a mountain. I would not take tablets of stone from any Conservative Member, and in my early days I refused to take them from Herbert Morrison. I will not take them from the Prime Minister. I will not even take them from my good and dear friend Jack Jones, for whom I have the greatest admiration. I want to think things out for myself. I shall vote tonight in the way that I believe is right and not because X says so, Y says so or even Jones says so, God bless him.

I think that the Prime Minister's little intervention was a little below his normal standard. Of course, it is true that the General Council has given support to what the Government are doing, and I can understand the importance that the Government attach to that. But let us wait six months. Let us see what the trade union movement's attitude is on 22nd January 1976 when it discovers that not all workers will get the £6, when it discovers that some employers, with Government encouragement, will resist even the £6 increase. That is the first shock that the boys on the General Council will get.

When unemployment rises above 1,500,000—and to my deep regret I fear that will almost certainly happen—when the trade union movement, and above all its members, finds that price increases are still much higher than the Chancellor has forecast, and that the cut in the real standard of living is much greater than forecast, and when it finds that the secret Bill is enacted, many trade union leaders will take a different view.

My hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) has said that his constituents took a certain view at a meeting last Sunday. I invite my hon. Friend to have another constituency meeting on 22nd January 1976 after all the events that I have mentioned have taken place, and especially after the Bill has come to light.

I noticed today that my right hon. Friend the Prime Minister replied vigorously to every question that was put to him except one. That was the question about what happens if an employer seeks an injunction against workers who go for more than £6 and how one legislates against such employers. In other words, how does one legislate along the lines described by my right hon. Friend the Chancellor of the Exchequer yesterday without creating—I put it no higher—the possibility that workers may be sued for contempt of court? My right hon. Friend the Prime Minister did not answer that question. Perhaps he did not know the answer. Perhaps the Government are still thinking about it. If that is the case, they are asking for a blank cheque. I shall not go into the Lobby tonight to give them a blank cheque.

Finally, I apologise for trespassing on the time of the House and for boring the House with what the French call an Explication do vote. Since I shall not be called tomorrow, perhaps I can give an Explication de mon vote demain. Although I shall vote against the White Paper, I shall not vote against the Second Reading of the Bill which is to come later because it contains a couple of provisions that I applaud. My hon. Friends and I have tabled some rough, tough amendments to that Bill. In Committee, I assure the Government, we shall pursue those amendments with all the power at our command.

Since in this speech I have fallen into the habit of quoting the French, I wish to remind the House that the French also have a saying to the effect that what is worse than a crime is a mistake. My hon. Friend the Member for Penistone said, "Let us not get all doctrinal about statutory policy". Let me say to my dear hon. Friend that it is not the doctrine that matters, or whether that doctrine is good or bad. What worries me about propositions in the White Paper is not whether they are doctrinally beautiful or whether they shine in a blazing light surrounded by cherubim and seraphim. What worries me is that they "ain't gonna work". It is not that the propositions are wrong but that they will be unsuccessful. My objection to them is not a moral one but a practical one. We have been through all this before—at least that applies to some of us. It is like waking from a nightmare and being relieved that one has awakened, then taking a sip of water and returning to sleep and having the nightmare over again. It is for that reason that I shall not be in the Government Lobby tonight.

9.58 p.m.

Mr. James Prior (Lowestoft)

I am sorry that the hon. Member for Bethnal Green and Bow (Mr. Mikardo) went on for so long that the hon. Member for Cornwall, North (Mr. Pardoe) was unable to take part in the debate.

I can understand the hon. Member for Bethnal Green and Bow saying that he feels that he has awakened after a nightmare. I am only a little worried that the right hon. Gentleman the Secretary of State for Employment may tonight find himself in a position of still being in a nightmare and of never waking again.

It is no surprise to us that the Secretary of State for Employment has been asked to reply to the debate. After two difficult days of debate, he is expected to provide one of his firework displays—[HON. MEMBERS: "He has gone."] I do not know where the right hon. Gentleman has gone. Obviously he is expected to stir the hearts of the Tribune Group before they lose the battle, having taken their Socialist consciences through the Lobby. Unfortunately, some of the right hon. Gentleman's Socialist fire and powder has got a little damp after the last year or so.

The right hon. Gentleman must look back with nostalgia to the days when he was a back bencher below the Gangway or when, as a new Minister heady with power, he would tell the House that the miners could have all that they wanted and no harm would come of it or, on the other hand, that the Pay Board was to be wound up and that the social contract would deal with everything. He has said: I regard the whole apparatus of the statutory control of incomes as a cancerous institutional growth. In the feast of broken promises and pledges that the Government are now having to chew their way through, the right hon. Gentleman's plate is heaped especially high, and it ill becomes the Chancellor of the Exchequer or the Prime Minister to ask us what is our policy. For a Government who have changed their policy completely in the space of a few weeks it really is quite extraordinary that they should have the nerve even to mention policy to us.

Tonight we are taking part in a burial—a burial of the social contract. It really is quite remarkable that that old fraud, of which we have heard so little during this debate, has become the great unmentionable. It is a bit odd when we recall some of the things said about it in the recent past—the Prime Minister, of course, taking the first prize for hyperbole. He said, at Bury, on 26th September 1974: The Social Contract is our answer in the short term, the medium term and the long term to the problems of a modern industrialised society". At Cardigan, on 28th September 1974, he described it as the boldest experiment in civilised government that Britain has ever seen The right hon. Gentleman won the last election on those slogans, and, even as the social contract began to founder, he and his colleagues went on telling us that it was really working—or perhaps I should say that it would have worked if only Sir Kenneth Keith, the BBC, Henry Ford and others had made it work. Even if it was not working, the impression was given that there was no alternative. While it was conspicuously a total flop, there was the feeling that it was unpatriotic to say so—rather like making criticisms of the England cricket team. Even Labour Ministers began making a few critical noises. When the Minister for Overseas Development, for example, noted the blindingly obvious fact that some unions had welshed on the social contract, he was condemned as "economically illiterate" by the Secretary of State for Employment, and had his wrist slapped by the Prime Minister.

But now we know that the social contract is dead and buried. The Daily Mirror has said so. A couple of weeks ago it told us: Let's face it, the Social Contract is shameful flop; a national sick joke". What an extraordinary about-turn. It is rather like Pravda attacking the Red Army. There could be no surprise, therefore, at the speech of the Prime Minister. I must say that I should have thought that for the winding up of a debate of this nature the Prime Minister and Chancellor of the Exchequer would have had the courtesy to attend. They talk a great deal about the importance of Parliament but they treat it with scant respect.

The Secretary of State for Employment—who has always regarded himself as a great parliamentarian—will, I hope, convey to the Prime Minister and the Chancellor of the Exchequer that when the concluding speeches begin at 9 o'clock they ought at least to have the decency to be here to take part in them. But, of course, we have had no apology, no appreciation from the Prime Minister of where his policies have taken us, no understanding of the enormity of the about-face and the about-turn that he has performed. As the hon. Gentleman the Member for Bethnal Green and Bow has so well put it, the Prime Minister has a very good memory but he has an equally good "forgettery".

Characteristically, we have had the defence from the Prime Minister today that the course which he is following is the course that he meant to follow all along. Condemning statutory pay policies totally and without condition really meant not using criminal sanctions against workers. Although he thus explains away the situation, the question posed yesterday by the hon. Member for Liverpool, Walton (Mr. Heffer) has received no answer.

We ought to ask the Secretary of State. The hon. Member for Walton asked yesterday about a situation in which the Government used their statutory powers, under the Bill which we have not seen, to roll back a settlement that an employer had reached with the unions so that it conformed to the statutory pay limit. If an injunction were taken out by the employer against his workers, who then went on strike, and if the workers were then taken to court and refused to go to court, would this not give rise to a committal for contempt of court? We have had no answer from the Government to that question.

The pathetic answer that we had from the Chancellor of the Exchequer when he was asked a similar question by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) was that that was precisely one of the drafting points still under consideration. A drafting point? How long has the Chancellor of the Exchequer to be a member of the Government to think that this is a drafting point?

The Prime Minister has tried hard to convince us that what we have here is not a statutory wages policy but a voluntary remuneration, charges and grants policy. How a policy which removes from employers a contractual obligation to make pay settlements above the norm can be described as "voluntary", I do not know.

I should like to take up one more point which was made strongly by my right hon. Friend the Member for Sidcup (Mr. Heath) and which the Prime Minister apparently dealt with at Question Time and interrupted my right hon. Friend to say again that any retrospection of powers under the statutory policy would not apply. However, discussing the Bill which he have not seen, the Chancellor of the Exchequer said yesterday: The Bill would, thirdly, provide for compulsory notification of all wage settlements and, fourthly, once passed, it would enable the Government to reduce to the White Paper level any settlements made after 1st August 1975.'—[Official Report, 21st July 1975; Vol. 896 c. 58.] Who is right? Who is responsible for this policy? Will the Secretary of State tell us tonight whether any reserve powers Bill will enable the Government to reduce to the pay limit any award made, or is it not to operate retrospectively, as the Prime Minister now says is the case?

All this merely points out the need for this Bill to be published forthwith. The hon. Member for Bethnal Green and Bow said that the Government were asking for a blank cheque. They are. But they are asking for a good deal more than that from the House of Commons. They are asking us to judge the determination and effectiveness of what they seek to do, but to do so without any of the information on which to base our decision.

The Government whisper to us. They tell their creditors abroad rather less coyly that there is a great statutory weapon in their bottom drawer. Therefore, this policy is voluntary, except that it needs statutory powers to make it work, and, if it does not work, new statutory powers will be introduced.

Is this a voluntary policy, a voluntary statutory policy or a statutory voluntary policy? We just do not know. The Government play with words and think that they are taking everyone in. They are intent only on finding some reasonable words which will provide a fig leaf for the right hon. Gentleman so that he does not have to go naked in to the conference chamber with the Tribune Group. With or without his fig leaf, we are optimistic about his chances. His right hon. Friend the Prime Minister also takes that view, because, like many before him, he believes that the Left can speak to the Left. We take a simpler view. We know that a paper tiger can speak to a paper tiger.

The White Paper leaves many questions unanswered. How do the Government intend to obtain information about pay settlements if the supply of voluntary information is not coming forward in the required amount, particularly if, afterwards, the reserve powers are brought in to penalise an employer for exceeding the limit? Who will monitor the policy? Will it be the right hon. Gentleman, or some high and mighty authority on which the right hon. Gentleman has always poured scorn? What about the position of small firms? Certainly some will pay over the odds. This policy can lead only to a sense of unfairness, which will break it. If there is to be a statutory policy or a pay policy, should there not be a mandatory system of reporting claims as well as settlements?

What about increments? How are they to be monitored? What is the difference between an incremental scale and a structured merit review? If some people get increments, others will also want them. There will be unfairness all round, especially to the blue collar workers.

What are the policy guidelines? What will be the position of an agreement made, for example, in May for a further increase later in the year, or for a threshold agreement later in the year? Will that fall outside the pay limit or within it? What about an agreement made before 1st August, or before the publication of the White Paper—an agreement which is due to come into operation during the course of the year, having already been negotiated, as, for example, in the electrical contracting industry?

What will happen to pensions, which have been mentioned by my right hon. and hon. Friends? What will happen to those people whose pay is being scaled down in their last year and whose pensions depend upon their salary in the last three years of their service? Will they receive the same sort of treatment as, apparently, Members of Parliament, or will they he held down? What is the position of someone who has some sort of index-linked Pension and who expects an increase perhaps in excess of £6? Will he be allowed to have it?

Those are all perfectly fair questions, which the Government should answer. Without those answers we are in no position to judge the effectiveness of the policy.

What happens when the year is over? We all know—the right hon. Gentleman has told us time and again—that the difficulties created by the statutory policy resulted in the flexible use of the social contract. The difficulties, anomalies and differentials had to be cleared up. Yet the Government have gone for the one type of policy, the fixed lump sum, which creates the most difficulties when we start to come out at the other end.

I turn to the attitude of the TUC. The TUC has done the Government and the country proud. It has gone very much further than before, and we should all recognise that fact. But we should also recognise, as the hon. Member for Sheffield, Attercliffe (Mr. Duffy) said, that the situation is much more serious. Unemployment is rising rapidly and inflation is at the astronomical level of 26 per cent.

There has been a feeling, certainly in the rank and file of trade unionists, of disillusionment with national leadership, to which the leadership has had to respond on this occasion. But, as my right hon. Friend the Member for Sidcup said in his great speech today, why must we go so far downhill before recognition of the problem breaks through?

The unions and the work force are enormously powerful in many industries, particularly the nationalised industries, the computer industry and the car industry. They can hold the rest of the country to ransom. Until we come to terms with that power and seek to understand it, and until we learn to live with it and harness it for the good of all, no economic policy, no statutory policy, no voluntary policy or monetarist policy can work in Britain.

It is not that our wages are too high; it is that our productivity is too low. We push up our paper wages, we devalue our currency, and we fall further behind our competitors. Compare what has happened in Germany since about 1965 with what has happened in Britain. We have had far bigger paper increases in cash, but a far smaller real increase in proper terms.

My hon. Friend the Member for Croydon, South (Mr. Clark) said that we must all learn that investment comes from profits and that profits come from using new investment to the full. It is only after that that increases in real pay become possible.

It is significant to see how the Germans have dealt with this matter, compared with ourselves. Some 12 million German workers this year settled for a wage increase averaging 6.8 per cent. The employers argued that today's profits were tomorrow's investments and the day after tomorrow's jobs and mass incomes. That is the lesson that we in Britain have not learned since the war. Therefore, we are and will go on struggling until we learn that lesson.

The Government must play their part. Looking back to the time when we were in government, I recall that at last, after great difficulty, we were getting profit margins up. But who were the people who condemned us for allowing profits to rise in the way that they were rising at that time? Who can blame industrialists for being slow to invest? We wanted them to invest much quicker than they did, but they were not prepared to invest until, first, they could see the market and, secondly, the labour situation improving. That is the lesson that we must learn.

I believe that there is a much greater understanding of this problem on the shop floor than is generally recognised. Leaders need the support of their rank and file. They need the confidence that comes from that massive support. The actions of unions, just like the actions of certain political parties, are not always representative of their total membership.

We believe that further efforts to improve participation in union affairs is absolutely essential to the success of the nation. Why cannot we bring in a Bill now which will provide an opportunity for a free postal ballot for unions? Why cannot we bring before this House a measure, which we know is overdue, which will provide that employer's time is made available on the employer's premises for election to union office at local level? These are matters which would enormously aid the democratisation of trade unions. They would give power and authority to trade union leaders which they lack at the moment. So many trade union leaders tell me that they have to go to the left in order to hold their memberships—[HON. MEMBERS: "Name them."] I could name them, but I am not going to embarrass them in public. Hon. Members know who they are and the Government Front Bench knows only too well.

Mr. Neil Kinnock (Bedwellty)

The central part of the right hon. Gentleman's policies is what he calls the democratisation of unions. He claims, on the basis of personal acquaintance of trade union leaders, that they have told him they are forced to the left because of the absence of these policies. The right hon. Gentleman has an obligation to this House to name the people to whom he is referring.

Mr. Prior

It conies very ill from the party opposite to demand that I name anyone or anything. They cannot even produce a Bill to the House. They cannot expect me to name these trade union leaders. I have no intention of doing so. I am already getting behind with what I wish to say.

I agree very much with my right hon. and learned Friend, the Member for Surrey, East and what he has said today about unemployment. High unemployment is a scourge, and I do not want young people of today to look back at 1975 and 1976 as their grandfathers look back on the 1920s and 1930s.

A statutory pay policy in an emergency such as this can help us to reduce what would otherwise be high unemployment. I do not like it, but it is infinitely preferable to high unemployment. The rest of the policy militates against success in what the Government hope to achieve. Nowhere is this more marked than in the lack of a policy to deal with unemployment. We had a debate two months ago about school leavers and drew attention to the fact that they would have great difficulty in getting jobs this summer. The Government have been complacent in the extreme. An additional 3,000 apprenticeships have been granted by the Engineering Industry Training Board and a similar number have been provided by other boards, but generally not enough is being done to help school leavers.

Not enough is being done to create the skills which we may not need at the moment but we hope we shall need in two or three years' time. Nothing is being done to keep school leavers off the streets and out of trouble. If they cannot find work, we shall have to pay them unemployment benefit or social security. We urge the Government to do much more than they are doing at the moment. Let us have from the Government tonight a greater commitment to the training scheme, and if it costs money, adding to public expenditure, let us do that instead of subsidising food and rents. If the Government asked my constituents whether they preferred a job or a penny less on a loaf of bread, they would soon get their answer, as it has been given to me. The British regard jobs as more important than anything. The Government are going about this in precisely the wrong way.

Right hon. and hon. Members on the Labour side have made a number of charges against the Opposition which I should like to deal with. First they argued that our policy could only lead again to a three-day working week throughout British industry, and to increasing unemployment. That is what they said at the two General Elections in 1974. That argument is a little difficult for them now to maintain. Currently, industrial production is actually lower than it was during the three-day working week, and unemployment has increased by 120,000 in a month, to the worst June figures ever recorded. We know there is much worse to come.

The Prime Minister and his right hon. Friends spent much of their time at the last General Election saying that our policies, particularly what was proposed by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), would lead to a massive increase in unemployment. The Prime Minister told us: We won't have our people unemployed. Who is unemployed now, and what is the Prime Minister's message for them? He said: The Opposition want panic measures; we won't take panic measures. I am sure that most people who have read the White Paper will agree that never have measures been cobbled together with so much haste, with so little thought, and in so much evident panic.

It is all very well for the Secretary of State to shake his head. If he had been here as he should have been at the start of my speech he might have been able to answer certain questions which were not answered by the Prime Minister when he spoke. It comes to something when the Prime Minister has to borrow from his friend, the Editor of The Times, the suggestion that we are being indecisive and even unpatriotic. The Prime Minister put up his former propaganda Minister to say that last weekend. Let me explode that charge, too.

The Government's policies have doubled the rate of inflation, while in other countries it has been halved or cut even further. The social contract was a grossly irresponsible electoral fraud. For months we have urged the Government to tackle inflation, and now they have been impelled by events, by our creditors, by the plummeting pound, to act. With the rest of the nation the Opposition heave a sigh of relief. But even now the Government are doing too little, much too late. So we are now telling them patiently, once again, what they must do, and we are giving them another shove in the right direction.

This afternoon my hon. Friend the Member for Chippenham (Mr. Awdry) told the Prime Minister that he wanted to support the Government's measures because they were moving in the right direction, but would the Government not make any concession in respect of nationalisation? Of course, we have had not the slightest indication from the Government that they are prepared to vary their policies in any way in order to help win our support in the Lobby. We shall push the Prime Minister in the right direction, but he cannot expect us to slap him on the back.

I can promise him that when he and his colleagues are fighting to hold the line against an inflationary pay demand or an increase in a charge for a service, or to cut public expenditure, as they will have to do if their policy is to succeed, we shall support them. We shall remember what they did in a similar situation when they were in opposition. We shall remember the industrial action which regularly received the Labour Party's seal of approval. We shall remember how the Deputy Leader of the Labour Party even found it impossible, under a Conservative Government, to tell the people to obey the law. We shall remember all that, but we shall still support the Government when the fight against inflation and even the future of parliamentary democracy hangs in the balance. The terrible irony, which was made all the more poignant by the moving and masterly speech by my right hon. Friend the Member for Sidcup this afternoon—[Interruption.] How Labour Members can cheer his speech now, when they did what they did to him in December 1973 and January 1974, I do not know.

The Prime Minister is having to take these measures today, at a time when we are poised on the very brink of hyperinflation, precisely because he and his colleagues refused to give us a scintilla of support when we were fighting the battle against rising prices. The events of the past year and the suffering and hardship that we shall have to experience over the next two, three or four years, as right hon. Gentlemen have told us, is, in great part, the price we have to pay for the attitude of the right hon. Gentleman when he was Leader of the Opposition. However, when the right hon. Gentleman has to hold the line—as he will if this policy is to succeed—when his resolution and that of many of his colleagues melts like the snow in spring, we shall support him. I hope that for the sake of our country he has the courage to deserve it.

9.32 p.m.

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

The right hon. Member for Lowestoft (Mr. Prior) has asked me a number of general and detailed questions, as have many right hon. and hon. Gentlemen who have spoken in this debate. I shall do my best to deal with most of those questions. If I fail to answer all the detailed questions, perhaps I shall be forgiven and an opportunity will arise in the debate tomorrow to deal with some of them further. As the right hon. Member for Sidcup (Mr. Heath) said, in any such policy as this, there are a number of details that have to be worked out and I believe that some of those can best be dealt with tomorrow.

However, I shall try to deal tonight with the main questions which the right hon. Member for Lowestoft has put to me. I hope that he will allow me to start my remarks by referring, first, to the speech made by my hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo), who certainly made some critical remarks on which I shall comment. My hon. Friend underlined what he calls the central core of the policy which the Labour Party has fought to pursue in recent years. That central core is concerned with the association between the Labour Party and the trade union movement which we sought to build in the years before the 1974 General Election and which we have sought to sustain since. Certainly the basis on which I and the Government have sought to act during the period since March 1974 has been of strengthening that association. That has been part of the meaning, as I have understood it, of the much-derided but still extant social contract.

At one stage the right hon. Member for Lowestoft paid tribute to the statesmanship of the TUC and he paid an even more glowing tribute to the contribution it has made in recent days than that paid by any other right hon. or hon. Conservative Member. But the title of the document to which he was paying tribute, the document which the General Council of the TUC has recently drawn up, is "The Development of the Social Contract", so whatever the right hon. Gentleman may say about it, the TUC certainly has not altered its view about the central part which the social contract must play in all our affairs.

It has been on that basis that we have sought to sustain a close relationship between the Government and the TUC during all of this period. Sometimes we have been attacked for that; but I believe that, especially in a time of national crisis—and I certainly believe that it is a time of national crisis, as described by many who have contributed to the debate from one side of the House or the other—it has been of immense importance for this country that we have had such a close relationship on which we are able to build.

Long before my right hon. Friend the Chancellor of the Exchequer made his statement to the House on 1st July, which is the origin of the discussions we are having now—indeed, for some months before—we had been having conversations with the representatives of the General Council on the way in which we would devise a new social contract or new guidelines under the social contract to govern the period ahead. We had the most detailed discussions, and out of those discussions a framework of policy was devised. It was a framework in which we still had to fix the figures. But a framework had been devised, and a framework which is of great importance in the policy we are devising now.

Perhaps I may remind the House of what were some of the central propositions to which the spokesmen of the General Council committed themselves, as we did, during those conversations. I believe that they are propositions most apposite to the crisis we face, propositions that cannot be denied by right hon. or hon. Members in any part of the House.

The first proposition was that they agreed with us that the current rate of inflation imposed an intolerable burden on our society and our economic prospects. It constituted a serious threat of a most grave kind to employment, and particularly to employment in the export trades over the coming weeks and months. How many people might be thrown out of their jobs if the rate of inflation continued in Britain at a level twice, or perhaps even more than twice, the level of that in many of the other countries in the Western World? That was the first general proposition on which we were agreed.

The second proposition in which they also concurred—this was not so easy for them, particularly in view of the wild and grotesque statements that were made about greedy trade unionists grabbing for money and all the rest of it—was that one factor, not by any means the sole factor, contributing to the inflationary situation was wages.

My hon. Friend the Member for Bethnal Green and Bow and my right hon. Friend the Member for Lanark (Mrs. Hart) have referred to some of these questions. But we went into these figures in great detail in our discussions, and if they had agreed with the figures produced by my right hon. Friend the Member for Lanark, certainly the TUC would not have agreed with the statement which was included in the proposition which we put to the General Council a week ago. But the fact remains that they said that wages, too, are playing a major part in this development at the present time.

A third proposition to which we agreed was that there should and must be dramatic and deliberate efforts made to break the vicious inflationary spiral and that it should be done by direct intervention, by having a flat-rate concept to deal with the next wage round. These were the propositions on which they agreed, and all of that was the framework established long before my right hon. Friend came to the House and made his statement on 1st July. This was to be achieved, also, by voluntary means, by persuasion and consent, and not by any system of statutory enforcement.

The right hon. Lady the Leader of the Opposition yesterday quoted a statement of mine on the statutory policy in which I said—and I still hold to the view—that I believed that it would be quite wrong for people to imagine that these problems can be solved by the establishment of some vast central apparatus, a point to which I shall return. I wish to underline that we have had these intimate discussions with representatives of the General Council over the whole of this period. We had devised a general framework of policy to try to deal with the problems facing the country and had come near to agreement upon those policies.

It was one of my fears and anxieties when my right hon. Friend the Chancellor of the Exchequer made his statement and told us of the situation that he felt impelled him to ask for those measures, that the work that had been done between the Government and the TUC to build up the arrangements by which we were to deal with the problem were to be undermined and destroyed because of the attempt to establish a legislative method of dealing with the problems. It has not turned out in that sense. We renewed our discussions during the subsequent 10 days and out of those discussions secured the voluntary approval of the TUC of the proposals to be incorporated in the plan to be put to this House. I believe that the House would be most unwise to disregard the significance of what the TUC has done in making these proposals to us.

My hon. Friend said it was an historic gesture by the TUC. I believe that it was an act by the TUC which can be of incalculable significance in enabling us all to try to devise the policy for dealing with our problems—and what I think was so important was that the TUC felt that it was the immediate test that had to be faced, that it was not possible for anybody to dodge it or to say, "We will postpone it to see what other policies can be devised. They did so, I think, because they understood how impossible it was for this country to continue with the rate of inflation prevailing at the time, and accepted that action had to be taken to deal with it in the immediate future.

The TUC saw that danger and therefore were prepared for the action to be taken, but they also saw the possibilities, too. They saw that a great prize was available. They were not only concerned about the danger if the current rate of inflation were allowed to persist; they were not only determined to take action and not to be deflected from that course; they also saw the great advantage that could be secured if this policy could be carried out and if, over the next 12 months, we achieved the objectives on which the Government and the TUC had agreed together. If we did achieve them, there would be a transformation in this country. We should be all the better able to proceed with all the other policies that we wish to pursue.

That was the situation. I believe that it was the right course for the TUC and the Government to take and that it would have been impossible for us to turn aside from it. We had to face the challenge of that time. Nobody could dodge it.

Some of my hon. Friends and other hon. Members have raised important objections. They ask "Is this a statutory policy or not?" I am not interested in any semantic quibbles.

Mr. Tim Renton (Mid-Sussex)

Will the right hon. Gentleman confirm that the price of his staying in the Cabinet was the non-publication of the statutory reserve powers Bill? If so, how is that compatible with his oft-proclaimed belief in a sovereign Parliament and open Government?

Mr. Foot

I shall come to that point.

Under the so-called secret reserve powers Bill, to which reference has been made, there would be powers making it an offence for an employer to pay above a particular figure. It would be a quibble, and one that would hardly be successful, to deny that that is a statutory policy, so I am not denying it.

If such a reserve powers Bill were to be introduced, I should certainly have great difficulties. Indeed, I think that I should hardly be the proper person to do it—but I do not want to add enticement to the dish. If that were the case, I think that that would be a statutory policy. It would certainly be very much opposed to what I have argued for through many years.

But I am very gratified that much earlier in the White Paper is a phrase to which much less attention is paid, the statement in paragraph 9, long before there is any reference to reserve powers, that The Government have made and will continue to make every possible effort to achieve the necessary restraint on incomes by consent.

Mr. Leon Brittan (Cleveland and Whitby)

Is there a real difference between a policy that has been agreed to under the threat of the implementation of a reserve power that is already stated to exist in draft and the implementation of the draft?

Mr. Foot

The sentence that I have just read was perfectly well understood by the TUC in all our conversations. One of my hon. Friends talked of blackmail in the methods by which agreement was induced. There was nothing of the sort. There was a perfectly sensible agreement between the Government and the TUC that it was much better to try to deal with these matters by consent and voluntary actions. I believe that that proposition will command general assent, though not, of course, among Opposition Members who have always favoured a statutory policy. However, I should have thought that it would command general support on this side of the House. Certainly, that is the right way in which we should proceed. I believe that we should proceed by those means.

The Opposition asked me about retrospection. That matter was properly dealt with by the Prime Minister this afternoon. He said that there was no question of employers entering into commitments after 1st August which they might find retrospectively to be against the law. I trust and believe that such a Bill will never be introduced. The dangers referred to by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) are never likely to arise. If such legislation were ever produced, it would contain safeguards guaranteeing against that situation.

I listened carefully to those who spoke about retrospection and constitutional rights. Nothing would be more offensive to proper constitutional practice than that the Government should introduce such a Bill and brandish it in the face of the House of Commons and the country. That would not be the right way to proceed. I trust that such a Bill will never see the light of day and will never be passed by the House of Commons.

Much the best course is to proceed upon the basis of the voluntary agreement we have reached with the TUC. That is the only way in which any policy can be satisfactorily secured.

Mr. Alexander Fletcher (Edinburgh, North)

Have any of the details of the reserve powers Bill been made known to members of the TUC?

Mr. Foot

What was said to the TUC on the subject was the same as was said by the Chancellor of the Exchequer in the House of Commons yesterday.

If we said that such a policy could be carried through only by force—by statutory enactment in that sense—we would be near a situation in which that policy had failed. I hope that the House will support the voluntary policy, which is not defined by the measure to be presented tomorrow. It is not a measure of statutory enforcement in the sense in which statutory policies on wages have operated before. It is a policy to enable the voluntary agreement with the TUC to be carried through. It is no good the Opposition laughing. It seems that the Opposition are in no fit mood to be educated tonight. We must do that tomorrow.

If it were not for the measure which we shall propose tomorrow, it would be impossible to carry out the voluntary policy. Indeed if the voluntary policy is to be carried out we must lift from employers the contractual obligations to pay more than £6. There is no possibility of altering that fact.

Mr. Amery

The drift of the right hon. Gentleman's speech is that nothing matters except the understanding between the Government and the TUC. If I understood him rightly, he went further than that and took on the hypothetical position that if the TUC did not accept the Government's proposals and a statutory policy had to be introduced he would not be the man to commend it to the House. Am I right in understanding that?

Mr. Foot

I was not dealing with a hypothetical situation. I was explaining the position, I hope clearly enough for the right hon. Gentleman to comprehend. It has been my view throughout all these discussions—I am sorry to repeat it and underline it but I believe it to be of paramount importance—that if we are to deal with inflation—and it cannot be dodged—if we are to deal with the economic crisis —and we cannot run away from it—we can do so only in association with the TUC and the trade union movement as a whole.

We should have learned by now that Governments which try to go to war with the trade union movement will not solve the problem of inflation or any other problem. We face not only inflation but the kindred, interwoven problem which is as serious as inflation, and that is the menace of unemployment, which is at a hideous level already, still rising and likely to rise for some period ahead. I understand perfectly the anxieties and fears not only of my hon. Friends but of millions of people throughout the country. Those fears dominate the whole country. That is one of the paramount reasons why the Government believe it is essential to proceed with these measures. We face an economic typhoon of unparalleled ferocity, a combination of inflation and unemployment, and we cannot run away from it. We cannot imagine that the problem will disappear on its own account.

There are many measures which the Government seek to carry through, measures which have been described by many of my hon. Friends, for dealing with the fundamental problems of our society in industry, investment and the rest. There remains the necessity of facing the immediate challenge of overcoming inflation, curbing the danger and ensuring that we survive to be able to deal with these problems. I believe that the response from the country to our policy will be better than the response which has been given by many hon. Members.

It is our duty in the House to speak plainly and boldly. I believe that the response from the country may be better than collectively we deserve. It will be a response which the country will give to a Government who say that they will not make war upon the trade union movement but will solve the problems in company with those who have helped to bring it to power and whose policies we are determined to carry through.

Mr. Patrick Cormack (Staffordshire, South-West)

We have heard the most outrageous display of hypocrisy that a Minister has ever subjected the House to. The right hon. Gentleman has ignored every question that has been asked, he has treated the House with gross contempt, and he should resign. By doing

so he would lend credibility to his Government's policy which it manifestly lacks at the moment.

Mr. Walter Harrison (Treasurer of Her Majesty's Household)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the amendment be made:—

The House divided: Ayes 269, Noes 327.

Division No. 291.]	AYES	[9.59 p.m.
Adley, Robert	Eden, Rt Hon Sir John	Johnson Smith, G. (E Grinstead)
Aitken, Jonathan	Edwards, Nicholas (Pembroke)	Jones, Arthur (Daventry)
Alison, Michael	Elliott, Sir William	Jopling, Michael
Amery, Rt Hon Julian	Emery, Peter	Joseph, Rt Hon Sir Keith
Arnold, Tom	Eyre, Reginald	Kaberry, Sir Donald
Atkins, Rt Hon H. (Spelthorne)	Fairbairn, Nicholas	Kellett-Bowman, Mrs Elaine
Awdry, Daniel	Fairgrieve, Russell	Kershaw, Anthony
Baker, Kenneth	Farr, John	Kimball, Marcus
Banks, Robert	Fell, Anthony	King, Evelyn (South Dorset)
Bell, Ronald	Finsberg, Geoffrey	King, Tom (Bridgwater)
Bennett, Sir Frederic (Torbay)	Fisher, Sir Nigel	Kitson, Sir Timothy
Bennett, Dr Reginald (Fareham)	Fletcher Alex (Edinburgh N)	Knight, Mrs Jill
Benyon, W.	Fletcher-Cooke, Charles	Knox, David
Berry, Hon Anthony	Fookes, Miss Janet	Lamont, Norman
Biffen, John	Fowler, Norman (Sutton C 'f'd)	Lane, David
Biggs-Davison, John	Fox, Marcus	Langford-Holt, Sir John
Blaker, Peter	Fraser, Rt Hon H. (Stafford & St)	Latham, Michael (Melton)
Body, Richard	Fry, Peter	Lawrence, Ivan
Boscawen, Hon Robert	Galbraith, Hon T. G. D.	Lawson, Nigel
Bottomley, Peter	Gardiner, George (Reigale)	Le Marchant, Spencer
Bowden, A. (Brighton, Kemptown)	Gardner, Edward (S Fylde)	Lester, Jim (Beeston)
Boyson, Dr Rhodes (Brent)	Gilmour, Rt Hon Ian (Chesham)	Lewis, Kenneth (Rutland)
Bradford, Rev Robert	Gilmour, Sir John (East Fife)	Lloyd, Ian
Braine, Sir Bernard	Glyn, Dr Alan	Loveridge, John
Brittan, Leon	Godber, Rt Hon Joseph	Luce, Richard
Brotherton, Michael	Goodhart, Philip	McAdden, Sir Stephen
Brown, Sir Edward (Bath)	Goodhew, Victor	McCrindle, Robert
Bryan, Sir Paul	Goodlad, Alastair	McCusker, H.
Buchanan-Smith, Alick	Gorst, John	Macfarlane, Neil
Buck, Antony	Gow, Ian (Eastbourne)	MacGregor, John
Budgen, Nick	Gower, Sir Raymond (Barry)	Macmillan, Rt Hon M. (Farnham)
Bulmer, Esmond	Grant, Anthony (Harrow C)	McNair-Wilson, M. (Newbury)
Burden, F. A.	Gray, Hamish	McNair-Wilson, P. (New Forest)
Carlisle, Mark	Grieve, Percy	Madel, David
Carr, Rt Hon Robert	Griffiths, Eldon	Marshall, Michael (Arundel)
Carson, John	Grist, Ian	Marten, Neil
Chalker, Mrs Lynda	Hall-Davis, A. G. F.	Mates, Michael
Channon, Paul	Hamilton, Michael (Salisbury)	Mather, Carol
Churchill, W. S.	Hampson, Dr Kieth	Maude, Angus
Clark, Alan (Plymouth, Sutton)	Hannam, John	Mawby, Ray
Clark, William (Croydon S)	Harrison, Col Sir Harwood (Eye)	Maxwell-Hyslop, Robin
Clarke, Kenneth (Rushcliffe)	Harvie Anderson, Rt Hon Miss	Mayhew, Patrick
Clegg, Walter	Havers, Sir Michael	Meyer, Sir Anthony
Cockcroft, John	Hawkins, Paul	Miller, Hal (Bromsgrove)
Cooke, Robert (Bristol W)	Hayhoe, Barney	Mills, Peter
Cope, John	Heath, Rt Hon Edward	Miscampbell, Norman
Cormack, Patrick	Heseltine, Michael	Mitchell, David (Basingstoke)
Corrie, John	Hicks, Robert	Moate, Roger
Costain, A. P.	Holland, Philip	Molyneaux, James
Critchley, Julian	Hordern, Peter	Monro, Hector
Crouch, David	Howe, Rt Hon Sir Geoffrey	Montgomery, Fergus
Crowder, F. P.	Howell, David (Guildford)	Moore, John (Croydon C)
Davies, Rt Hon J. (Knutsford)	Howell, Ralph (North Norfolk)	More, Jasper (Ludlow)
Dean, Paul (N Somerset)	Hunt, John	Morgan, Geraint
Dodsworth, Geoffrey	Hurd, Douglas	Morgan-Giles, Rear-Admiral
Douglas-Hamilton, Lord James	Hutchison, Michael Clark	Morris, Michael (Northampton S)
Drayson, Burnaby	Irvine, Bryant Godman (Rye)	Morrison, Charles (Devizes)
du Cann, Rt Hon Edward	Irving, Charles (Cheltenham)	Morrison, Hon Peter (Chester)
Dunlop, John	James, David	Mudd, David
Durant, Tony	Jenkin, Rt Hon P. (Wanst'd&W'dt'd)	Neave, Airey
Dykes, Hugh	Jessel, Toby	Nelson, Anthony
Neubert, Michael	Rodgers, Sir John (Sevenoaks)	Taylor, R. (Croydon NW)
Newton, Tony	Ross, William (Londonderry)	Taylor, Teddy (Cathcart)
Normanton, Tom	Rossi, Hugh (Hornsey)	Tebbit, Norman
Nott, John	Rost, Peter (SE Derbyshire)	Temple-Morris, Peter
Oppenheim, Mrs Sally	Royle, Sir Anthony	Thatcher, Rt Hon Margaret
Osborn, John	Sainsbury, Tim	Thomas, Rt Hon P. (Hendon S)
Page, John (Harrow West)	St. John-Stevas, Norman	Townsend, Cyril D.
Page, Rt Hon R. Graham (Crosby)	Scott, Nicholas	Trotter, Neville
Pattie, Geoffrey	Shaw, Giles (Pudsey)	Tugendhat, Christopher
Percival, Ian	Shaw, Michael (Scarborough)	van Straubenzee, W. R.
Peyton, Rt Hon John	Shelton, William (Streatham)	Vaughan, Dr Gerard
Pink, R. Bonner	Shepherd, Colin	Viggers, Peter
Powell, Rt Hon J. Enoch	Shersby, Michael	Wakeham, John
Price, David (Eastleigh)	Silvester, Fred	Walker, Rt Hon P. (Worcester)
Prior, Rt Hon James	Sims, Roger	Walker-Smith, Rt Hon Sir Derek
Pym, Rt Hon Francis	Sinclair, Sir George	Wall, Patrick
Raison, Timothy	Skeet, T. H. H.	Walters, Dennis
Rathbone, Tim	Smith, Dudley (Warwick)	Warren, Kenneth
Rawlinson, Rt Hon Sir Peter	Speed, Keith	Weatherill, Bernard
Rees, Peter (Dover & Deal)	Spence, John	Wells, John
Rees-Davies, W. R.	Spicer, Jim (W Dorset)	Whitelaw, Rt Hon William
Renton, Rt Hon Sir D. (Hunts)	Spicer, Michael (S Worcester)	Wiggin, Jerry
Renton, Tim (Mid-Sussex)	Sproat, Iain	Winterton, Nicholas
Rhys Williams, Sir Brandon	Stanbrook, Ivor	Wood, Rt Hon Richard
Ridley, Hon Nicholas	Stanley, John	Young, Sir G. (Ealing, Acton)
Ridsdale, Julian	Steen, Anthony (Wavertree)	Younger, Hon George
Rifkind Malcolm	Stewart, Ian (Hitchin)
Rippon, Rt Hon Geoffrey	Stokes, John	TELLERS FOR THE AYES:
Roberts, Michael (Cardiff NW)	Stradling Thomas, J	Mr. Adam Butler and
Roberts, Wyn (Conway)	Tapsell, Peter	Mr. Cecil Parkinson.
NOES
Abse, Leo	Corbett, Robin	Fowler, Gerald (The Wrekin)
Allaun, Frank	Cox, Thomas (Tooting)	Fraser, John (Lambeth, N'w'd)
Anderson, Donald	Craigen, J. M. (Maryhill)	Freeson, Reginald
Archer, Peter	Crawford, Douglas	Freud, Clement
Armstrong, Ernest	Crawshaw, Richard	Garrett, John (Norwich S)
Ashley, Jack	Cronin, John	Garrett, W. E. (Wallsend)
Ashton, Joe	Crosland, Rt Hon Anthony	George, Bruce
Atkins, Ronald (Preston N)	Cryer, Bob	Gilbert, Dr John
Atkinson, Norman	Cunningham, G. (Islington S)	Ginsburg, David
Bagier, Gordon A. T.	Cunningham, Dr J. (Whiten)	Golding, John
Bain, Mrs Margaret	Dalyell, Tam	Gould, Bryan
Barnett, Guy (Greenwich)	Davidson, Arthur	Gourlay, Harry
Barnett, Rt Hon Joel (Heywood)	Davies, Bryan (Enfield N)	Graham, Ted
Bates, Alt	Davies, Denzil (Llanelli)	Grant, John (Islington C)
Bean, R. E.	Davies, Ifor (Gower)	Grimond, Rt Hon J.
Beith, A. J.	Davis, Clinton (Hackney C)	Grocott, Bruce
Benn, Rt Hon Anthony Wedgwood	Deakins, Eric	Hamilton, James (Bothwell)
Bennett, Andrew (Stockport N)	Dean, Joseph (Leeds West)	Hamilton, W. W. (Central Fife)
Bidwell, Sydney	Delargy, Hugh	Hardy, Peter
Bishop, E. S.	Dell, Rt Hon Edmund	Harrison, Waller (Wakefield)
Bienkinsop, Arthur	Dempsey, James	Hart, Rt Hon Judith
Boardman, H.	Doig, Peter	Hattersley, Rt Hon Roy
Booth, Albert	Dormand, J. D.	Hatton, Frank
Boothroyd, Miss Betty	Douglas-Mann, Bruce	Hayman, Mrs Helena
Bottomley, Rt Hon Arthur	Duffy, A. E. P.	Healey, Rt Hon Denis
Boyden, James (Bish Auck)	Dunn, James A.	Heffer, Eric S.
Bradley, Tom	Dunnett, Jack	Henderson, Douglas
Bray, Dr Jeremy	Dunwoody, Mrs Gwyneth	Hooley, Frank
Brown, Hugh D. (Provan)	Eadie, Alex	Hooson, Emlyn
Brown, Robert C. (Newcastle W)	Edelman, Maurice	Horam, John
Brown, Ronald (Hackney S)	Edge, Geoff	Howell, Denis (B'ham Sm H)
Buchan, Norman	Edwards, Robert (Wolv SE)	Hoyle, Doug (Nelson)
Buchanan, Richard	Ellis, John (Brigg & Scun)	Huckfield, Les
Butler, Mrs Joyce (Wood Green)	Ellis, Tom (Wrexham)	Hughes, Rt Hon C. (Anglesey)
Callaghan, Rt Hon J. (Cardiff SE)	English, Michael	Hughes, Mark (Durham)
Callaghan, Jim (Middleton & P)	Ennals, David	Hughes, Robert (Aberdeen N)
Campbell, Ian	Evans, Fred (Caerphilly)	Hughes, Roy (Newport)
Canavan, Dennis	Evans, Gwynfor (Carmarthen)	Hunter, Adam
Cant, R. B.	Evans, loan (Aberdare)	Irvine, Rt Hon Sir A. (Edge Hill)
Carmichael, Neil	Evans, John (Newton)	Irving, Rt Hon S. (Dartford)
Carter, Ray	Ewing, Harry (Stirling)	Jackson, Colin(Brlghouse)
Carter-Jones, Lewis	Ewing, Mrs Winifred (Moray)	Jackson, Miss Margaret (Lincoln)
Cartwright, John	Faulds, Andrew	Janner, Greville
Castle, Rt Hon Barbara	Fernyhough, Rt Hon E.	Jay, Rt Hon Douglas
Clemitson, Ivor	Fitch, Alan (Wigan)	Jeger, Mrs Lena
Cocks, Michael (Bristol S)	Flannery, Martin	Jenkins, Hugh (Putney)
Cohen, Stanley	Fletcher Raymond (Ilkeston)	Jenkins, Rt Hon Roy (Stechford)
Coleman, Donald	Fletcher, Ted (Darlington)	John, Brynmor
Concannon, J. D.	Foot, Rt Hon Michael	Johnson, James (Hull West)
Conlan, Bernard	Ford, Ben	Johnson, Walter (Derby S)
Cook, Robin F. (Edin C)	Forrester, John	Johnston, Russell (Inverness)

Jones, Alec (Rhondda)	Moyle, Roland	Spearing, Nigel
Jones, Barry (East Flint)	Mulley, Rt Hon Frederick	Spriggs, Leslie
Jones, Dan (Burnley)	Murray, Rt Hon Ronald King	Stallard, A. W.
Judd, Frank	Newens, Stanley	Steel, David (Roxburgh)
Kaufman, Gerald	Noble, Mike	Stewart, Donald (Western Isles)
Kelley, Richard	Ogden, Eric	Stewart, Rt Hon M. (Fulham)
Kerr, Russell	O'Halloran, Michael	Stoddart, David
Kilfedder, James	O'Malley, Rt Hon Brian	Stott, Roger
Kilroy-Silk, Robert	Orbach, Maurice	Strauss, Rt Hon G. R.
Kinnock, Neil	Orme, Rt Hon Stanley	Summerskill, Hon Dr Shirley
Lambie, David	Ovenden, John	Swain, Thomas
Lamborn, Harry	Owen, Dr David	Taylor, Mrs Ann (Bolton W)
Lamond, James	Padley, Walter	Thomas, Jeffrey (Abertillery)
Leadbitter, Ted	Palmer, Arthur	Thomas, Mike (Newcastle E)
Lee, John	Pardoe, John	Thomas, Ron (Bristol NW)
Lestor, Miss Joan (Eton & Slough)	Park, George	Thompson, George
Lever, Rt Hon Harold	Parker, John	Thorne, Stan (Preston South)
Lewis, Arthur (Newham N)	Parry, Robert	Thorpe, Rt Hon Jeremy (N Devon)
Lewis, Ron (Carlisle)	Pendry, Tom	Tierney, Sydney
Lipton, Marcus	Penhaligon, David	Tinn, James
Litterick, Tom	Perry, Ernest	Tomlinson, John
Lomas, Kenneth	Phipps, Dr Colin	Torney, Tom
Loyden, Eddie	Prentice, Rt Hon Reg	Tuck, Raphael
Luard, Evan	Prescott, John	Urwin, T. W.
Lyon, Alexander (York)	Price, C. (Lewisham W)	Varley, Rt Hon Eric G.
Lyons, Edward (Bradford W)	Price, William (Rugby)	Wainwright, Edwin (Dearne V)
McCartney, Hugh	Radice, Giles	Wainwright, Richard (Colne V)
MacCormick, Iain	Rees, Rt Hon Merlyn (Leeds S)	Walden, Brian (B'ham, L'dyw'd)
McElhone, Frank	Reid, George	Walker, Harold (Doncaster)
MacFarquhar, Roderick	Richardson, Miss Jo	Walker, Terry (Kingswood)
McGuire, Michael (Ince)	Roberts, Albert (Normanton)	Ward, Michael
Mackenzie, Gregor	Roberts, Gwilym (Cannock)	Watkins, David
Mackintosh, John P.	Robertson, John (Paisley)	Watkinson, John
Maclennan, Robert	Roderick, Caerwyn	Weetch, Ken
McMillan, Tom (Glasgow C)	Rodgers, George (Chorley)	Weitzman, David
McNamara, Kevin	Rodgers, William (Stockton)	Wellbeloved, James
Madden, Max	Rooker, J. W.	White, Frank R. (Bury)
Magee, Bryan	Roper, John	White, James (Pollok)
Maguire, Frank (Fermanagh)	Rose, Paul B.	Whitehead, Phillip
Mahon, Simon	Ross, Stephen (Isle of Wight)	Whitlock, William
Mallalieu, J. P. W	Ross, Rt Hon W. (Kilmarnock)	Wigley, Dafydd
Marks, Kenneth	Rowlands, Ted	Willey, Rt Hon Frederick
Marquand, David	Ryman, John	Williams, Alan (Swansea W)
Marshall, Dr Edmund (Goole)	Sandelson, Neville	Williams, Alan Lee (Hornch'ch)
Marshall, Jim (Leicester S)	Sedgemore, Brian	Williams, Rt Hon Shirley (Hertford)
Mason, Rt Hon Roy	Selby, Harry	Williams, W. T. (Warrington)
Maynard, Miss Joan	Shaw, Arnold (Ilford South)	Wilson, Alexander (Hamilton)
Meacher, Michael	Sheldon, Robert (Ashton-u-Lyne)	Wilson, Gordon (Dundee E)
Mellish, Rt Hon Robert	Shore, Rt Hon Peter	Wilson, Rt Hon H. (Huyton)
Mendelson, John	Short, Rt Hon E. (Newcastle C)	Wilson, William (Coventry SE)
Mikardo, Ian	Short, Mrs Renée (Wolv NE)	Wise, Mrs Audrey
Millan, Bruce	Silkin, Rt Hon John (Deptford)	Woodall, Alec
Miller, Dr M. S. (E Kilbride)	Silkin, Rt Hon S. C. (Dulwich)	Woof, Robert
Miller, Mrs Millie (Ilford N)	Sillars, James	Young, David (Bolton E)
Mitchell, R. C. (Soton, ltchen)	Silverman, Julius
Molloy, William	Skinner, Dennis	TELLERS FOR THE NOES:
Moonman, Eric	Small, William	Mr. Joseph Harper and
Morris, Alfred (Wythenshawe)	Smith, Cyril (Rochdale)	Mr. Laurie Pavitt.
Morris, Charles R. (Openshaw)	Smith, John (N Lanarkshire)
Morris, Rt Hon J. (Aberavon)	Snape, Peter

Qusetion accordingly negatived.

Main Question put:—

The House divided: Ayes 262, Noes 54.

Division No. 292.]	AYES	[10.14 p.m.
Abse, Leo	Boyden, James (Bish Auck)	Clemitson, Ivor
Anderson, Donald	Bradley, Tom	Cocks, Michael (Bristol S)
Archer, Peter	Bray, Dr Jeremy	Cohen, Stanley
Armstrong, Ernest	Brown, Hugh D. (Provan)	Coleman, Donald
Ashley, Jack	Brown, Robert C. (Newcastle W)	Concannon, J. D.
Bagier, Gordon A. T.	Brown, Ronald (Hackney S)	Conlan, Bernard
Barnett, Rt Hon Joel (Heywood)	Buchanan, Richard	Corbett, Robin
Bates, Alf	Butler, Mrs Joyce (Wood Green)	Cox, Thomas (Tooting)
Bean, R. E.	Callaghan, Rt Hon J. (Cardiff SE)	Craigen, J. M. (Maryhill)
Beith, A. J.	Campbell, Ian	Crawshaw, Richard
Benn, Rt Hon Anthony Wedgwood	Cant, R. B.	Cronin, John
Bishop, E. S.	Carmichael, Neil	Crosland, Rt Hon Anthony
Blenkinsop, Arthur	Carter, Ray	Cunningham, G. (Islington S)
Boardman, H.	Carter-Jones, Lewis	Cunningham, Dr J. (Whiteh)
Booth, Albert	Cartwright, John	Dalyell, Tam
Boothroyd, Miss Betty	Castle, Rt Hon Barbara	Davidson, Arthur
Davies, Bryan (Enfield N)	Jenkins, Rt Hon Roy (Stechford)	Radice, Giles
Davies, Denzil (Llanelli)	John, Brynmor	Rees, Rt Hon Merlyn (Leeds S)
Davies, Ifor (Gower)	Johnson, James (Hull West)	Roberts, Albert (Normanton)
Davis, Clinton (Hackney C)	Johnson, Walter (Derby S)	Roberts, Gwilym (Cannock)
Deakins, Eric	Johnston, Russell (Inverness)	Rodgers, William (Stockton)
Dean, Joseph (Leeds West)	Jones, Alec (Rhondda)	Rooker, J. W.
Delargy, Hugh	Jones, Barry (East Flint)	Roper, John
Dell, Rt Hon Edmund	Jones, Dan (Burnley)	Rose, Paul B.
Dempsey, James	Judd, Frank	Ross, Stephen (Isle of Wight)
Dodsworth, Geoffrey	Kaufman, Gerald	Ross, Rt Hon W. (Kilmarnock)
Doig, Peter	Kilfedder, James	Rowlands, Ted
Dormand, J. D.	Kilroy-Silk, Robert	Ryman, John
Douglas-Mann, Bruce	Lamborn, Harry	Sandelson, Neville
Duffy, A. E. P.	Leadbitter, Ted	Shaw, Arnold (Ilford South)
Dunn, James A.	Lestor, Miss Joan (Eton & Slough)	Sheldon, Robert (Ashton-u-Lyne)
Dunnett, Jack	Lever, Rt Hon Harold	Shore, Rt Hon Peter
Dunwoody, Mrs Gwyneth	Lewis, Ron (Carlisle)	Short, Rt Hon E. (Newcastle C)
Eadie, Alex	Lipton, Marcus	Silkin, Rt Hon John (Deptford)
Edelman, Maurice	Lomas, Kenneth	Silkin, Rt Hon S. C. (Dulwich)
Edwards, Robert (Wolv SE)	Luard, Evan	Silverman, Julius
Ellis, John (Brigg & Scun)	Lyon, Alexander (York)	Small, William
Ellis, Tom (Wrexham)	Lyons, Edward (Bradford W)	Smith, Cyril (Rochdale)
English, Michael	McCartney, Hugh	Smith, John (N Lanarkshire)
Ennals, David	McElhone, Frank	Spearing, Nigel
Evans, loan (Aberdare)	MacFarquhar, Roderick	Spriggs, Leslie
Evans, John (Newton)	McGuire, Michael (Ince)	Stallard, A. W.
Ewing, Harry (Stirling)	Mackenzie, Gregor	Steel, David (Roxburgh)
Faulds, Andrew	Mackintosh, John P.	Stewart, Rt Hon M. (Fulham)
Fernyhough, Rt Hon E.	Maclennan, Robert	Stoddart, David
Fitch, Alan (Wigan)	McMillan, Tom (Glasgow C)	Stott, Roger
Fletcher Raymond (Ilkeston)	McNamara, Kevin	Strauss, Rt Hon G. R.
Foot, Rt Hon Michael	Magee, Bryan	Summerskill, Hon Dr Shirley
Ford, Ben	Maguire, Frank (Fermanagh)	Taylor, Mrs Ann (Bolton W)
Forrester, John	Mahon, Simon	Thomas, Jeffrey (Abertillery)
Fowler, Gerald (The Wrekin)	Mallalieu, J. P. W.	Thomas, Mike (Newcastle E)
Fraser, John (Lambeth, N'w'd)	Marks, Kenneth	Thorpe, Rt Hon Jeremy (N Devon)
Freeson, Reginald	Marquand, David	Tierney, Sydney
Freud, Clement	Marshall, Dr Edmund (Goole)	Tinn, James
Garrett, W. E. (Wallsend)	Mason, Rt Hon Roy	Tomlinson, John
George, Bruce	Mawby, Ray	Tuck, Raphael
Gilbert, Dr John	Meacher, Michael	Urwin, T. W.
Ginsburg, David	Mellish, Rt Hon Robert	Varley, Rt Hon Eric G.
Golding, John	Mendelson, John	Wainwright, Edwin (Dearne V)
Gould, Bryan	Millan, Bruce	Wainwright, Richard (Colne V)
Gourlay, Harry	Mitchell, R. C. (Soton, Itchen)	Walden, Brian (B'ham, L'dyw'd)
Graham, Ted	Molloy, William	Walker, Harold (Doncaster)
Grant, John (Islington C)	Moonman, Eric	Walker, Terry (Kingswood)
Grimond, Rt Hon J.	Morris, Alfred (Wythenshawe)	Ward, Michael
Grocott, Bruce	Morris, Charles R. (Openshaw)	Watkins, David
Hamilton, James (Bothwell)	Morris, Rt Hon J. (Aberavon)	Watkinson, John
Hamilton, W. W. (Central Fife)	Movie, Roland	Weetch, Ken
Hardy, Peter	Mulley, Rt Hon Frederick	Weitzman, David
Harrison, Walter (Wakefield)	Murray, Rt Hon Ronald King	Wellbeloved, James
Hattersley, Rt Hon Roy	Noble, Mike	White, Frank R. (Bury)
Hatton, Frank	Ogden, Eric	White, James (Pollok)
Hayman, Mrs Helena	O'Halloran, Michael	Whitehead, Phillip
Healey, Rt Hon Denis	O'Malley, Rt Hon Brian	Whitlock, William
Hooley, Frank	Orbach, Maurice	Willey, Rt Hon Frederick
Hoosort, Emlyn	Orme, Rt Hon Stanley	Williams, Alan (Swansea W)
Horam, John	Ovenden, John	Williams, Alan Lee (Hornch'ch)
Howell, Denis (B'ham Sm H)	Owen, Dr David	Williams, Rt Hon Shirley (Hertford)
Huckfield, Les	Padley, Walter	Williams, W. T. (Warrington)
Hughes, Rt Hon C. (Anglesey)	Palmer, Arthur	Wilson, Alexander (Hamilton)
Hughes, Mark (Durham)	Pardoe, John	Wilson, Rt Hon H. (Huyton)
Hunter, Adam	Park, George	Wilson, William (Coventry SE)
Irvine, Rt Hon Sir A. (Edge Hill)	Parker, John	Woodall, Alec
Irving, Rt Hon S. (Dartford)	Pendry, Tom	Woof, Robert
Jackson, Colin(Brighouse)	Penhaligon, David	Young, David (Bolton E)
Jackson, Miss Margaret (Lincoln)	Perry, Ernest
Janner, Greville	Phipps, Dr Colin	TELLERS FOR THE AYES:
Jay, Rt Hon Douglas	Prentice, Rt Hon Reg	Mr. Joseph Harper and
Jeger, Mrs Lena	Price, C. (Lewisham W)	Mr. Laurie Pavitt.
Jenkins, Hugh (Putney)	Price, William (Rugby)
NOES
Allaun, Frank	Buchan, Norman	Fell, Anthony
Atkins, Ronald (Preston N)	Callaghan, Jim (Middleton & P)	Flannery, Martin
Atkinson, Norman	Canavan, Dennis	Hart, Rt Hon Judith
Bain, Mrs Margaret	Carson, John	Heller, Eric S.
Bennett, Andrew (Stockport N)	Crawford, Douglas	Henderson, Douglas
Bidwell, Sydney	Cryer, Bob	Hoyle, Doug (Nelson)
Bradford, Rev Robert	Evans, Gwynfor (Carmarthen)	Hughes, Robert (Aberdeen N)
Brotherton, Michael	Ewing, Mrs Winifred (Moray)	Hughes, Roy (Newport)

Lambie, David	Parry, Robert	Thomas, Ron (Bristol NW)
Lee, John	Powell, Rt Hon J. Enoch	Thompson, George
Lewis, Arthur (Newham N)	Reid, George	Thorne, Stan (Preston South)
Litterick, Tom	Richardson, Miss Jo	Wigley, Datydd
Loyden, Eddie	Rodgers, George (Chorley)	Wilson, Gordon (Dundee E)
MacCormick, Iain	Ross, William (Londonderry)	Wise, Mrs Audrey
McCusker, H.	Sedgemore, Brian
Madden, Max	Selby, Harry	TELLERS FOR THE NOES:
Maynard, Miss Joan	Skeet, T. H. H.	Mr. Russell Kerr and
Miller, Mrs Millie (Ilford N)	Skinner, Dennis	Mr. Ian Mikardo.
Molyneaux, James	Stewart, Donald (Western Isles)
Newens, Stanley	Swain, Thomas

Question accordingly agreed to.

Resolved, That this House approves the White Paper on The Attack on Inflation (Command Paper No. 6151).