HC Deb 23 July 1975 vol 896 cc574-700

Order for Second Reading read.

4.22 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey)

I beg to move, That the Bill be now read a Second time.

Mr. Speaker

I have selected the amendment on the Order Paper in the names of the Leader of the Opposition and her right hon. and hon. Friends: That this House declines to give a Second Reading to a Bill which provides for existing contractual rights to be over-ridden by a White Paper which is not open to Parliamentary amendment; for the legal obligations imposed by the White Paper to be interpreted by a member of the Cabinet instead of by the Courts; which leaves to a further unpublished Bill the specification of additional sanctions referred to in the White Paper; and provides for an undefined increase in indiscriminate housing subsidies.

Sir Geoffrey Howe (Surrey, East)

I rise, Mr. Speaker, to raise briefly a point of order about the further proceedings on the Bill. It appears that the normal printing arrangements for the publication of amendments are not working in relation to the Bill. The amendments tabled on Monday were available yesterday. Those tabled yesterday have only just come into my hands, in duplicated form, presumably now generated by the machinery in the basement of the House.

As it is an important matter, and other amendments are being tabled today, may we have an assurance that by the time we come to the further stages of the Bill tomorrow we shall have a properly marshalled Notice Paper, with all the amendments there set out together?

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short)

I apologise to the House that it has not been possible to produce the normal marshalled amendments for the debate today. The reason is that it was not possible to obtain overtime working in the Parliamentary Press last night. Therefore, the machinery that we installed in the basement had to produce amendment lists by duplicated typed copy today.

However, I understand that 50 or 60 copies are available now, and that the rest will be available before five o'clock. I shall ensure that the normal marshalled list is available for the stages of the Bill tomorrow.

Mr. Healey

Last night the House of Commons, by an overwhelming majority approved the Government's White Paper on The Attack on Inflation. The Conservative Opposition did not oppose this decision. Inevitably, in the two days which preceded the vote the debate ranged very wide, covering many aspects of Government economic policy, particularly on public expenditure, and right hon. and hon. Members gave a good deal of attention to the nature of legislation which would be needed if the Government were to find it necessary to acquire compulsory powers to ensure that the pay limits laid down in the White Paper were observed.

Today our purpose is more limited—to discuss the legislation the Government have proposed to support the voluntary policy for incomes which the House has approved, a voluntary approach preferred by the Government, by both sides of industry and by the right hon. Lady the Leader of the Opposition and her predecessor, the right hon. Member for Sidcup (Mr. Heath), in his remarkable speech yesterday.

What the Bill does is to remove legal obstacles to the effective operation of the voluntary policy, and to ensure that the Government have at their disposal effective means of discouraging employers and their work people, in both the public and the private sectors, from breaking the pay limit. It does not impose legal controls of any kind on pay as such. On the other hand, it ensures that the Government, work people and their employers will have the best possible chance of making sure that the voluntary policy works. The Government will have full information about settlements, made and intended, in the public sector, and informal arrangements cover the bulk of important settlements in the private sector. Thus the Government already have information covering 60 per cent. of the employed population. In addition, the TUC and the CBI are to discuss arrangements for extending monitoring on a voluntary basis, and the flow of information through the Price Commission, about the pay settlements which underlie applications for price increases, will further strengthen the Government's position.

Accordingly, Clause 1 relieves employers of contractual obligations to give remuneration in excess of the pay limit, while Clause 3 looks to an amendment of the Price Code which will ensure that applications for price increases are supported by the relevant information on pay settlements and will provide for the sanction through the Price Code whereby the whole amount of any pay settlement which breaks the pay limit—and not just the excess over that limit—can be disallowed for price increases. Clause 4 provides for a comparable sanction in the local authority field, in giving the Secretary of State power to withhold rate support grant from individual authorities which make pay settlements outside the limit.

But in the case of Government Departments no such sanctions are required. The Government will make certain that Civil Service pay is negotiated within the limit—and, of course, there is no question of inadequate information. Nor in the case of nationalised industries is there any need for additional formal powers for the Government to impose effective sanctions over and above those deriving from the Government's rôle as principal provider of funds for investment and other purposes and those available through the Price Code. The Government will not hesitate to enforce these sanctions should the need arise in specific cases—and the price of excessive pay settlements in these cases is bound to be lost jobs.

What we want most of all—and here I agree with the right hon. Lady—is to have a voluntary policy, and to avoid the establishment of further complex machinery separate from the Government Departments responsible to engage in detailed examination of very large numbers of pay settlements. This is why we are not proposing the establishment of a Pay Board. We already have all the institutions we need now for the operation of an effective voluntary policy. The Price Commission is working well, and the legislation under which it is operating —for whose extension we are providing in the Bill—enables the Government, subject to a proper measure of parliamentary control, to develop their policy for price control flexibly to take account of changing economic conditions.

As for monitoring pay settlements, and determining whether such settlements fall outside the limit, we believe that this is a task for the Government and not for a separate, non-elected body which would not be answerable in Parliament.

Before I turn to the details of the Bill, I must deal with the criticism that the Government are in effect, it is said, legislating by White Paper, and that they are unreasonably asking Parliament to grant powers over whose exercise there would be no effective check. No accusation could be further from the truth. The fact is that Parliament has been able already to debate fully the contents of the White Paper setting out the pay limits, and decided by an overwhelming majority last night to support that White Paper.

No changes will be possible under this Bill in the definition of the pay limit for the purposes of the sanctions or of relieving employers of contractual obligations, without the express consent of both Houses of Parliament. The Bill provides that an Order in Council may be made substituting new pay rules—which would be in a new White Paper—for those in Cmnd. 6151, but that such an order will cease to have effect unless approved by both Houses within 30 sitting days. In practice, we envisage that if such an order were required the Government would ask both Houses to approve the new rules before it came into effect; in other words, that the Government would not bring new pay limit rules into effect without the prior consent of Parliament, and in the next 12 months we envisage using this procedure only if it is necessary to remove rough edges or to block loopholes which have come to light.

I have repeatedly made it clear that we cannot just have a policy for 12 months and then let things rip. We have to get inflation down to 10 per cent., by next autumn, and then we must make further efforts to get it into single figures. We have to get our rate of inflation down to that of our international competitors and keep it there.

It would be unrealistic for the Government—in consultation with the TUC and the CBI—to try to settle now exactly how we should pursue these further objectives a year ahead. But we shall certainly need to pursue them, and the guidance we shall need to give negotiators at that time is bound to be different from the guidance given now by the White Paper. For example, I do not believe that the flat£6 limit could last for more than one year, and I made that clear on Monday.

The common-sense course—as the last Government recognised in 1973—is to provide for changes in the operating rules of the policy, subject to parliamentary control. That is what the Bill does, through the provisions in Clause 2(3), allowing the powers to be prolonged by order for a further year until 31st July 1977, and in Clause 1(2), which allows the White Paper pay limit to be replaced by new rules appropriate to the developing situation. The Government envisage that any new rules should result, like the current rules, from a new agreement with the TUC, in which we hope the CBI might also join. Elimination of the provision for changing the pay limit would make it impossible to allow modifications even where these were wanted by both sides of industry.

I now turn to discuss in more detail what the Bill does, clause by clause. Clause 1(1) relieves employers of contractual obligations to give remuneration in excess of the pay limits imposed by the policy set out in Cmnd. 6151. Without it employers who were anxious to comply with the limits would find themselves unable to do so. Of course, this subsection does not affect employers' rights to bring actions against their employer on any ground other than the one dealt with in it. Subsection (2) provides for new pay rules to be activated by order, subject, under subsection (3), to affirmative resolutions in both Houses. Subsection (4) ensures that the Crown, as employer, enjoys the same protection as other employers. Subsection (5) provides for the Secretary of State for Employment to determine whether or not any remuneration exceeds the limits.

Mr. Peter Rost (Derbyshire, South-East)

How many infringements of the£6 limit, particularly in the private sector, will be reported and tolerated before the second mystery sanctions Bill is introduced?

Mr. Healey

We discussed this matter in great detail on Monday and Tuesday. It has nothing to do with the Bill in front of the House at present.

Mr. Paul Dean (Somerset, North)

On Clause 1—

Mr. Healey

With great respect, I was interrupted 28 times on Monday. I checked it in Hansard. I propose to make this speech in my own way, in my own time, and to give way no more than the right hon. and learned Member for Surrey, East (Sir G. Howe) did yesterday.

Clause 2 sets time limits to the operation of the provisions contained in Clause 1, and enables them to be terminated and reactivated within those limits. It also allows certain provisions of Part II of the Counter-Inflation Act 1973 to be extended, or, if necessary, reactivated, during any period during which Clause 1 is in force. The purpose is to provide for the continuation of the relevant powers of control over prices, dividends and insurance premiums beyond 31st March 1976, when they would otherwise lapse. If this were not done, the Government's powers to control prices and dividends would disappear before the end of the year covered by the White Paper pay limit, and with them would disappear the sanction to disallow the whole cost of excessive pay increases for price increases.

Clause 3 deserves a rather fuller explanation. The present relevant powers of price control are contained in the Counter-Inflation Act 1973. Section 2 of that Act provides for a Price Code to be made. Section 6 requires the Price Commission to exercise the powers conferred by it in such ways as appear to them appropriate for the purpose of ensuring that the provisions of the code…are implemented". The powers are to restrict prices or charges by notice or order.

As a sanction against firms which breach the new pay policy, we intend to amend the Price Code immediately after the Royal Assent so as to require that labour costs arising from pay settlements in excess of the limits in the White Paper are not to be reflected in price increases. Additional sanctions may also be needed for firms with relatively low labour costs. We also propose that the code should provide explicitly that action by the Price Commission to restrict a price in accordance with the sanction shall be taken only on the basis of a certificate from the Secretary of State for Employment that the remuneration is excessive. The Price Commission will have no independent or parallel duty to interpret the limit.

As it is central to enforcement of the limit that the sanction should be imposed through the Price Code, we need to strengthen the powers in the 1973 Act which did not contemplate such a sanction. This is achieved by Clause 3, by virtue of which the sanction need not be limited to disallowance of the excessive remuneration for pricing purposes; it may be such as the Secretary of State considers "appropriate"—total disallowance of offending pay, or more severe if necessary. The Price Code will be amended as soon as the Bill is enacted, and accordingly details of the proposed amendments have already been published by the Secretary of State for Prices and Consumer Protection in a consultative document.

Clause 4 of the Bill implements the statement in the White Paper that the Government would withdraw grant from an individual local authority where that authority made a pay settlement outside the limits.

Mr. Arthur Lewis (Newham, North-West)

This Clause deals with a local authority which pays outside the limit. I understand that the Government can intervene. I should like to put to the Chancellor a situation which has already occurred and which could well occur again. Let us assume that a council wants to take legal advice, and briefs a QC, who can, and does, fix the fee for his brief and his refreshers. QCs have never been party to any type of wage freeze. Let us also assume that the dustmen, who come under the same council, are fighting for a wage increase. Assuming that the council hires the QC at a charge of hundreds of pounds for refreshers, will it be barred from claiming that back or will it be allowed to pay the QC hundreds of pounds?

Mr. Healey

I shall seek to answer that question as best as I can. Many hon. Members will know, not least the right hon. and learned Member for Surrey, East, that effective control of the fees charged by barristers has not proved possible in the past. All I can say is that, even if the Government were to disallow what is regarded as an excessive payment for a lawyer, that disallowance would be unlikely to trouble very much the financial situation of the local authority concerned.

Mr. Arthur Lewis

But it troubles the workers.

Mr. Healey

I know it does, but we are talking about sanctions under the Price Code for excessive payments. I fear that this particular sanction would not be very effective, even supposing that it were possible to apply the rules in a better way. This is one of the many areas which the right hon. Member for Sidcup referred to yesterday when he said that any pay policy is bound to have rough edges and throw up difficulties and anomalies which have so far defied the ability of all Governments which have attempted to deal with the problem to handle successfully.

Mr. Paul Dean


Mr. Healey

I have given way once to an hon. Member on each side of the House. I propose to make a little more progress if the House will allow me to do so.

I do not think anyone would dispute the necessity for such a power taking into account the way rate support grant works. We said in the White Paper that we would base rate support grant and increase orders on only that expenditure which fell within the pay limits. That ensures that we shall not pay grant nationally on national settlements which are in excess of the limits. But it does not deal with the case of the individual authority which rejects what authorities as a whole are doing and decides to pay for some of its own staff greater sums than the pay policy allows. If there were only a few such authorities the restriction of grant in total would not affect them greatly, and they would get the benefit of the resources element to supplement the additional rate demands they made to finance such expenditure. We therefore need special powers to deal with them by withdrawing grant. Such action would be distasteful to us, but our priorities at this point in time are clear. We must ensure that the pay policy works, and we must ensure that where the Government have power to influence bodies through payment of grant, that grant is used to influence them to keep to the policies.

Mr. Timothy Raison (Aylesbury)

Will the Chancellor tell us whether when grant is withheld by the Government there will be any check on local authorities simply slapping the expenditure on the rates?

Mr. Healey

We have considered this matter carefully. The hon. Gentleman knows that it is impossible to interfere with the right of local authorities to fix rates consistent with their independence. This general problem is under consideration by the Layfield Commission. I dare say that we may in consequence find some way of handling the financial arrangements of local authorities which will enable the Government to have this type of power. But the essence of a local authority is that it should have independence of decision in some financial areas. I think that the Opposition would think very carefully before proposing to make the level of rate levied by a local authority subject to agreement by the Government. To do so would completely destroy the independence of local authorities. I think that the hon. Gentleman will accept that.

The Secretary of State will have power to withdraw grant at his discretion after a local authority has had an opportunity to make representations. The intention is to enable him to withhold grant up to, but no further than, the whole cost of any pay settlement which exceeds the limits, following the precedent in the private sector, where the whole cost of a pay settlement outside the limits may be disallowed for price increases.

Clause 5 arises from paragraph 35 of the White Paper. It is proposed to amend the Housing Rents and Subsidies Act 1975 so that the special element of housing subsidy can be paid for 1976–77 as well as for 1975–76. By this means we expect to give sufficient help to local authorities and new town corporations to enable them to contain the rent increases for 1976–77 within a national average of 60p per week. The administrative arrangements for the payment of this subsidy will be worked out as quickly as possible in consultation with the local authority associations. We have the experience of the 1975–76 special element to guide us, though adaptations will be necessary to meet next year's situation.

Mr. Peter Walker (Worcester)


Mr. Healey

I must get on. I will give way to the right hon. Gentleman later. Hon. Members often complain about the length of speeches from the Government Front Bench. If I have to spend 25 minutes, as I did on Monday, dealing with a whole string of interventions, apart from noisy interruptions by groups of hon. Gentlemen opposite, the business of the House will be obstructed in an intolerable way.

I emphasise that this is a special subsidy, payable for one year only, to meet the particular needs of the Government's policy to fight inflation. It will not be payable after 1976–77. The subsidy will act as a strong inducement to local authorities to keep their rent increases down so that they do not on average exceed the rise in prices generally. We are not proposing to restrict their freedom to fix rent levels and manage their housing account for themselves—a freedom we restored to them under the 1975 Act. But should it emerge next year that a significant number of authorities are making unreasonably large rent increases, and in so doing prejudicing the success of the Government's attack on inflation, the rent limiting powers of Section 11 of the Housing Rents and Subsidies Act are available, and my right hon. Friend would not hesitate to use them if he felt it essential to do so.

Mr. Michael Latham (Melton)

Will the right hon. Gentleman give way?

Mr. Healey

With respect, I must ask to be allowed to finish the part relating to local authorities. I will then give way to the right hon. Member for Worcester (Mr. Walker).

Clause 6 is necessary because there is no Scottish equivalent to the "special element subsidy" in England and Wales which is being extended by Clause 5 of the Bill to provide for payments during 1976–77. This clause applies to Scotland only and provides for the payment of a new subsidy—the rent limitation subsidy—to local authorities for the year 1976–77, which will reproduce on rents in Scotland the effect of the extension of the special element subsidy in England and Wales.

Mr. Peter Walker

The Chancellor said that the rent increase would be an average of 60p. Does that mean that those who arc currently paying double the average rent—for example, many people in Greater London and Birmingham—will have to pay an increase of 120p?

Mr. Healey

The Government have no more power to determine the specific rents demanded by local authorities than to determine specific rates. The right hon. Gentleman cannot have it both ways. If we want local authorities to be independent, we must give them financial freedom in certain areas. The areas in which they have such freedom are rents and rates. It may be possible at some stage to change the situation. I do not know whether the Opposition have proposals for changing that situation. I do not believe it would be right to take that power.

Mr. Raison

The Chancellor pointed out that he had power under the Housing Rents and Subsidies Act 1975. Why is he now saying that he has not got that power?

Mr. Healey

The average increase will be 60p next year, just as there was an average increase this year. In some cases it may be more; in others it may be less. We do not propose to intervene in order to establish an absolute uniform increase throughout the country.

Mr. Bruce Douglas-Mann (Mitcham and Morden)

Will my right hon. Friend give way?

Mr. Healey

No. I must proceed.

Clause 7 is needed to provide an appropriately all-embracing definition of "remuneration". If "remuneration" were not widely defined, it would be possible to evade the limits imposed by the policy on the ground that some benefit in lieu of an increase in pay and the arrangements for providing it—for example, provision of a free holiday by an employer to an employee's relative—did not constitute an increase in remuneration and was, therefore, exempt.

Mr. Paul Dean

Will the right hon. Gentleman give way?

Mr. Healey

No. Clause 8 provides in the usual way—

Mr. Paul Dean

On a point of order, Mr. Deputy Speaker. I ask for your guidance and protection. I am trying to ask the Chancellor to explain an important element in the Bill to which he has not yet referred—namely, pension rights. I seek your guidance on when I may ask that question?

Mr. Deputy Speaker (Mr. George Thomas)

The hon. Gentleman has long experience here. He knows that he has got his intervention in. It is not a point of order.

Mr. Healey

I do not know whether the hon. Gentleman was here when I spoke on Monday and answered two identical questions from hon. Gentlemen opposite regarding pension rights under existing schemes. Those will be maintained. My right hon. Friend will deal in detail with the application of the Bill to pensions when he winds up the debate later this evening.

Clause 8 provides in the usual way for expenditure incurred under the Bill and other Acts as a result of the Bill to be met from Votes.

Finally, Clause 9 contains the Short Title of the Bill.

I come now to the amendment tabled by the Conservative Opposition. I must confess I am a little uncertain about its status and purpose. The right hon. Lady the Leader of the Opposition told us on Monday that the Opposition would reserve judgment on the package. She said: We shall ask the country in a year or two what it thinks of it when the country knows how it works in detail."—[Official Report, 21st July 1975; Vol. 896, c. 89.] The right hon. and learned Member for Surrey, East seemed to take a different view. He told us yesterday that his party would not vote for the White Paper, for reasons which had nothing to do with the Bill before us today but because of the Government's commitment to Socialism and because he disagreed with the Government's policy on public spending and with the Government's policy for the recovery of the private sector. On the other hand, he said that the Conservative Party will give my right hon. Friend the Prime Minister its positive and united support when the time comes for him to stand firm on the commitments in the White Paper because the survival of democratic government in this country depends on the willingness of the House of Commons to give just that kind of support to its elected Government".—[Official Report, 22nd July 1975; Vol. 896, c. 318.] I fully agree with him, but is that what the amendment that he signed means?

The right hon. Member for Lowestoft (Mr. Prior) went, if anything, rather further. He undertook: we shall still support the Government when the fight against inflation and even the future of parliamentary democracy hangs in the balance."—[Official Report, 22nd July 1975; Vol. 896, c. 442.] He also paid a well-merited compliment to the immense contribution made by the TUC. I wish it had not been left to the very last speech from the Opposition in the debate before that view was expressed.

Yet having refused to support the White Paper on grounds which have little to do with today's Bill, and having conspicuously refused to oppose it, the right hon. Lady has tabled an amendment which declines to give a Second Reading to a Bill whose only purpose is to make possible a voluntary policy on incomes, which she has undertaken to support. I cannot help feeling a little confused as to what all this manoeuvring means and how it fits in with recent statements from the Opposition Front Bench.

Mr. Peter Walker

It may be that the confusion was caused by the right hon. Gentleman's references to the voluntary policy outlined in the White Paper.

Mr. Healey

I take the right hon. Gentleman's point. This is a voluntary policy, and there is a distinction in the case of a policy for pay whose details have been voluntarily accepted by the TUC, whose broad thrust has been voluntarily accepted by the CBI and which is supported by certain rules laid down in this House to make it impossible for employers to breach the rules that have been voluntarily accepted. Hon. Members have every encouragement from me to laugh, but this type of verbal nitpicking will make a very different impression on the millions of men and women in this country, like the right hon. Member for Worcester who see the current policy as the only hope of saving the country from inflation. I think I can rely on him at least to treat this matter with the seriousness it deserves.

The right hon. and learned Member for Surrey, East seemed to indicate yesterday, that the Conservative Opposition would not vote for their amendment if the Government were able to allay the anxieties they expressed. So may I now deal with the four points raised in the right hon. Lady's amendment.

First, the amendment complains that the Bill provides for existing contractual rates to be overridden by a White Paper which is not open to parliamentary amendment. I think the House will recognise that it would make complete nonsense of a policy for limiting pay settlements to 10 per cent. or£6 if employers were compelled by contractual agreements to pay more. Both the CBI and the TUC fully accept the need for this element in the Bill. I cannot imagine that the Opposition, who claim that they want to support the Government's efforts to limit incomes, will reject this element in the Bill.

It is true that the White Paper is not open to parliamentary amendment—although it was approved as it stands by an overwhelming majority of Parliament last night and was not opposed by the Conservative Opposition. In this respect there is no difference between the procedure followed by the present Government and that followed by their predecessor in the Counter-Inflation Act 1973. On that occasion both the Pay and Price Codes were put into effect by means of parliamentary orders following discussion with both sides of industry. That was a sensible, flexible and necessary arrangement then, and it still is now. I do not see how the Opposition can pretend otherwise without renouncing their whole record when they were in office. There is no substance in the first anxiety.

The second complaint in the Opposition's amendment is that pay limits are to be interpreted by the Secretary of State instead of by the courts. But if the Opposition are seriously concerned with the rights of Parliament this is certainly a better procedure than that which they followed in their legislation when the interpreters of the codes were the Chairmen of the Pay Board and Price Commission, men who had never been submitted to the discipline of election and who had no responsibility to Parliament.

Of course there may be questions arising under the present Bill where it will be open to the parties involved to refer to the courts as there was under the legislation of the previous Government, but the policy is the responsibility of the Government now, as it was then, and it is surely right and sensible that a Minister rather than a judge should take responsibility for explaining it. Is is also far better that the House should be able, as under the present Bill, to question the Minister responsible in a way which was quite impossible when the previous Government transferred the comparable responsibility to the Chairman of the Pay Board. There is nothing in the second anxiety either.

The third anxiety expressed in the Opposition's amendment refers to additional sanctions, by which I suppose is meant the powers in reserve. But this is a Bill the whole purpose of which is to avoid the need for compulsory wage control. The question of what will happen if it proves inadequate will, of course, be for the House to discuss if ever the occasion arises, and I think all of us are determined to do our utmost to see that the occasion does not arise. The right hon. Member for Sidcup made very clear yesterday, and I agree with him, that no one would want a statutory incomes policy if it was possible to avoid it.

Perhaps it might serve to allay genuine anxieties of both sides of the House if I make clear again—my right hon. Friend the Prime Minister did yesterday—that if it ever proved necessary to introduce the Reserve Powers Bill it would not be retrospective. There would be no question of imposing penalties on employers for having made excessive settlements before the Bill was enacted. On the other hand, once the Bill was law the Government could, if they chose, exercise the power to reduce the pay made under an earlier settlement which exceeded the limits laid down in the White Paper down to the permitted level from a date after the Bill had come into force. The employer would be liable to the fines laid down in the Reserve Powers Bill only if he failed to obey an order to enforce the pay limit in this sense. I say again that the powers could be used only from a date after the Bill became law.

Mr. Nigel Lawson (Blaby)

What about employees?

Mr. Healey

If the hon. Gentleman will just contain himself and his natural exuberance for one second, his knowledge will almost equal his exuberance, though I doubt whether it actually could do so. There would be no question of requiring employees to pay back money they had already received under some excessive settlement made before the date of a restriction order or notice. They could not be punished for what they had before then, but the Government would be able in such cases to reduce future pay down to the level permitted by the White Paper.

Mr. Douglas Hurd (Mid-Oxon)

This point came up at Question Time yesterday, but the explanation that was given was in plain contradiction to what the Chancellor told the House on Monday when he said that the reserve powers, the secret Bill, would enable the Government to take action to reduce to the White Paper level any settlements entered into after 1st August. That clearly implied an element of retrospection.

Mr. Healey

Let the make it clear again. From 1st August the policy provided for in the White Paper begins. I hope that it will never be necessary to introduce the reserve powers, but for the sake of argument let us assume that they are introduced in October. Once they become law the Government would be able to reduce an excess pay settlement which had been negotiated and settled between 1st August and that date from the date when the Bill was given the Royal Assent. They would not be able to "roll back" the overpayment to an earlier date, nor would they be able to punish an employer for making a settlement. However, if an order or notice was served against an employer requiring him to reduce the level of payments from that date and he refused to comply with it, as under earlier legislation he would be liable to prosecution under one method or another. I hope I have made this absolutely clear. If the hon. Member reads again my actual words on Monday, he will see that they are totally consistent with this explanation.

In other words, a settlement is not allowed to stand after the Bill has the Royal Assent, even if it was made before that date, but there is no question of punishing the employer for making an agreement or attempting to recover money received by workers between the date of the agreement and the date of Royal Assent. It would operate from the date of the Royal Assent onwards.

The Conservative Opposition's amendment complains that this Bill provides for an undefined increase in housing subsidies. The Opposition have every right to object to the Government's decision that local authority rents should not go up faster than the cost of living. If they do not object, I hope they will make that fact clear. However, I made clear on Monday that the cost of the assistance which will be given by the central Government to local authorities for this purpose will be£80 million for one year only. In other words, the amount is not undefined. The fourth anxiety expressed in the motion therefore falls.

Mr. Douglas-Mann

Will my right hon. Friend assure us that the£80 million will come out of additional tax or revenue from other sources and will not be obtained by reducing expenditure on housing in other spheres, or that rents will not he held down for those who have houses at the expense of those who do not?

Mr. Healey

I made it clear on Monday that this additional£80 million, like the additional£70 million for food subsidies, will be a net addition to public expenditure in the coming year.

This has been a long, hot summer. I think that most hon. Members will agree with most Chancellors, of whatever party, that July is the cruellest month. Tempers can run high and party feeling is sometimes likely to get out of control. But I appeal to right hon. and hon. Members opposite to think very hard about the nation's interest before they vote for their amendment tonight. I do not believe that any of the anxieties expressed in it are justified, still less that they constitute a reason for opposing a Bill which is essential if the Government's attack on inflation is to end in victory.

I say again, as I said on Monday, that I recognise that the White Paper has its rough edges and will produce its anomalies and distortions, as any incomes policy is bound to do. But I ask the Conservatives to ponder seriously the words of the right hon. Member for Sidcup in his historic speech last night. The policy that the Government have put to the House and the nation for limiting the increase in incomes in the coming year offers the only strategy which gives the nation any chance of getting inflation down in time. As the right hon. Gentleman said, and as I said on Monday, the alternatives put forward on both sides of the House, whatever their long-term prospects might be, could not produce the necessary effect over the next 12 months.

There is no practical alternative to the policy that the Government have put forward. The policy—here I agree with the right hon. Member for Sidcup—can function only with consent. The only point on which I disagree with the right hon. Gentleman is that there is now overwhelming evidence that the great majority of people in this country who do not belong to trade unions or take part in CBI activities are as desperately anxious as the representatives of industry that the policy should succeed. It would be a pity if at this moment, when the nation as a whole is united behind a policy which it rightly sees as the only chance of pulling our country through, the House of Commons was the only important body not to join that unity.

5.6 p.m.

Sir Geoffrey Howe (Surrey, East)

I beg to move, to leave out from "That" to the end of the Question and add instead thereof, this House declines to give a Second Reading to a Bill which provides for existing contractual rights to be over-ridden by a White Paper which is not open to Parliamentary amendment; for the legal obligations imposed by the White Paper to be interpreted by a member of the Cabinet instead of by the Courts; which leaves to a further unpublished Bill the specification of additional sanctions referred to in the White Paper; and provides for an undefined increase in indiscriminate housing subsidies. I hope that we have made clear from this side of the House the extent to which we wholly and completely share the concern felt about the grave economic situation now facing the nation and about the necessity for firm and sustained action to deal with it. Yesterday we discussed aspects of the Government's strategy which we do not endorse and those with which we agree, and I do not want to go back over that ground now. Nor do I want to diminish what I said yesterday about how, when the time comes for the Government to stand firm, they will not find us unwilling to support them. However, if the Government are to be able to do that it is important that they should be seen to do so on grounds which now and hereafter can be seen to be defensible.

Many hon. Members on both sides of the House may be understandably concerned about the necessity of resorting to a prices and incomes policy. I am not concerned with that argument. In the present emergency we took the view last night that we should not oppose the White Paper. I am concerned for the purposes of this debate about the way in which the Government are choosing to carry out their solution, about the means they have chosen to achieve their ends. The grounds we have put forward should be of concern to right hon. and hon. Members on both sides of the House, whether they are for or against the general strategy the Government have adopted. It is on those aspects that I want to concentrate.

Our amendment deals in its last point with one quite separate aspect, namely, the increase in housing subsidies. I do not want to spend a great deal of time on that, because if that were the only matter of which we are complaining it might lead us to a different conclusion. Nevertheless that should not be disregarded. It should be recognised that the imposition of a system of price control and, alongside that, the perpetuation of the present pattern of subsidised rents in public authority housing is likely to do grave and increasing damage to the housing situation in this country and to the whole state of our economy. We must all recognise that the intensification of price control and the possible impact it will have on profitability, which the White Paper recognises is under great pressure, is likely to do grave damage if it is continued or tightened further.

Housing subsidies operate in an area where price fixing is leading to fewer houses being available to those who need a house, which leads to a decline in the quality of the nation's housing stock and the expansion of what I called, many years ago, "The waiting list society". These arguments are being recognised by the Secretary of State for the Environment. He has been demonstrating in recent speeches that the continued expansion of open-ended housing subsidies cannot and should not be allowed. The Chancellor himself accepted this fact in his April Budget. He made some reductions in housing subsidies for the next financial year. Now, apparently, that approach is to be abandoned and£80 million extra of subsidies is to be made available.

It is that which causes us concern. To intervene in that way for a short period to affect prices indiscriminately in the housing market will make it still more difficult to resume the path towards sanity which the Government looked like treading. The Secretary of State for the Environment said in May that it would be essential for them"— that is, local authorities— to raise rents substantially so that they make a larger contribution to costs than will obtain this year."—[Official Report, 5th May 1975, Vol. 891, c. 309.] In June he said that unless that happened we are likely to reach a situation in which the taxpayer and ratepayer combined will simply say 'We cannot go on indefinitely footing the bill'."—[Official Report, 11th June 1975; Vol. 893, c. 398.] The Government therefore know that substantial rent increases are inevitable, and we are concerned at their regression from that conclusion and the fact that even in the present situation it is wrong to increase the follies which now abound in our housing market. The decision now to limit rent increases to 60p on average will lead to the necessity of very much larger increases in the years thereafter. The fact that these provisions are contained in the Bill, with no limit on the amount of money to be made available, adds to our concern.

There are other substantial aspects to our amendment. Last night we did not oppose the entire package. There are many aspects on which one could dwell by way of criticism of the strategy adopted by the Government—their commitment to a flat-rate limit which will increase differential problems next year, their predisposition to equality for its own sake, and so on, but it is the damage done to the foundation of law upon which this strategy will rest that we are now most concerned about.

These are the fundamental questions. In an emergency we may have to accept strange effects on the rule of law. I should not like the House to accept that lightly. We have an obligation, if the measure is passed, to see that the minimum damage is done to the rule of law.

Under Clause 1 the Government propose to rely upon the limits imposed by the policy set out in the White Paper. That is an important point. Is the policy which we are being asked to approve voluntary or statutory? The Chancellor was ready to quote the remarks of my right hon. Friend the Member for Sidcup (Mr. Heath). The credibility of the Bill depends on the way in which the Government are prepared to carry it out. My right hon. Friend drew attention to the need for sanctions to support the measure. If, as appears, the measure is more than voluntary, it is important that sanctions should be imposed in a way which people can respect and accept.

The Chancellor said that the Bill was intended to contain effective means of discouraging employers and workpeople from disregarding the limits set out. He said that the Government would not hesitate to enforce the sanctions in the Price Code. He said that the wide definition contained in Clause 7 was necessary to prevent the evasion of the limits set out and that it was necessary for the policy to be supported by rules laid down by Parliament. Those elements have the quality of a statutory policy.

It is not verbal nit-picking to analyse the way in which the Government are to proceed. We object to the measure being proceeded with by means of a policy, set out in the White Paper, which is described in the statute as setting out the limits imposed by the policy. It is difficult to describe a measure involving the imposition of limits as having the quality of voluntarism.

The Chancellor asked what was wrong with that approach. The last Conservative Government, he said, also embodied a prices and pay code in a White Paper.

This is was is wrong with the present proposal. Half of the White Paper, by way of annex, was drafted by the Trades Union Congress. The rest is a commentary by the Government. The Conservative method of using a White Paper was under strong and legitimate pressure from the Labour Opposition. It is true that it was debated by means of an affirmative resolution, which gave it the force of law. But it was also debated in draft. We were pressed to give an undertaking to that effect. That is why at each stage we laid the draft code before the House. It was debated by both Houses. It was the subject of public consultation, which was laid down in the provisions of the Counter-Inflation Act.

All that was in total contradiction to the present White Paper, the necessity for which emerged 24 hours after the Prime Minister said that he would not take panic action, and which we are now invited to accept without a debate on a draft in which the Government may consider our points. We debated the matter in general terms, although there are many more points on which questions can arise and to which we wish to draw attention. The Chancellor did not meet our concern on that point. He said that we need not be concerned about any subsequent changes as they would be brought before the House by means of an affirmative resolution under the provisions of Clause 1(2).

May we be given an assurance that if substantial changes are to be made during the forthcoming recess, they will not be proceeded with before we have had an opportunity to consider them? The Government should not lay the White Paper before the House and expect the Opposition to leave the Government free to do as they like throughout the Summer Recess without debate. That is an important point. The approach will cause further damage to the rule of law.

I appreciate that the Secretary of State for Employment needed to search for a new formula. He could hardly be seen to re-enact the 1966 legislation. That would strain his conscience. Nor would he be welcomed if he re-enacted the proposals contained in the Conservative 1973 legislation. In the event, the Government have produced the worst solution.

There was at least a clear code in the Conservative Party's legislation. It was debated in draft and approved. A board with clear authority was established by Act of Parliament. Its operations were subject to rules. It could not make an order without giving notice to the people against whom it proposed to make an order. There was provision for representation before the board. The Secretary of State, who had oversight of the board, was also accountable to Parliament. He could be called on to answer questions about it. He could exercise powers under the 1973 Act to set aside the decisions of the board, and could be called upon to explain why he did so.

Under the 1966 legislation different machinery was adopted with an accountable board. In that case an order was laid before the House and debated.

We now have a curious non-statutory provision which is capable of overriding contracts, by reference to the annex which was drafted by the TUC, and about which many questions can be raised. My hon. Friend the Member for Somerset, North (Mr. Dean) raised one point. Not many of these points have yet been answered. For instance, does the policy apply so as to secure no more than£6 a week maximum to individuals, on an individual basis? That is what the annex appears to suggest. Or will it apply, as paragraphs 19 and 21 of the White Paper suggest, to settlements on a payroll basis? There is provision to surcharge employers if they make excessive pay settlements. Are they to be free to give£2 to some workers and£8 to others?

Ministers may shake or nod their heads. These questions are being asked by employers. How will the policy apply to incremental scales? The obscure details set out in appendix 4 are not referred to in the White Paper itself. When will the policy start? Paragraph 7 of the White Paper says that it will start from the date of publication of the White Paper. On llth July the Prime Minister said that it would start on 1st August. The TUC annex says that it will start "about" 1st August. How will it apply to the consequences of arbitrations or to agreements entered into before or after the date of publication of the White Paper?

Paragraph 8 contains many obscurities about that. One might ask endless questions, but it is not my intention to do so tonight. I am concerned to draw attention to the way in which those matters are to be resolved. By whom are they to be resolved? They are to be resolved by the Secretary of State in his unfettered discretion. Seldom if ever can one have seen the proposition that Any question arising under this section…shall be referred to and determined by the Secretary of State. It is a classic reproduction of the phrase attributed to Mr. Justice Megarry: "If anything shall seem, the Minister may deem". I hardly expected to see the Secretary of State for Employment exercising ministerial powers of that quality.

There is no provision for notice to be given to any people likely to be affected, not even to a trade union which may have entered into a collective agreement which will be struck down. There is no provision for notice to be given to employers, no right of representation to the Secretary of State and no right of appeal. The Chancellor said that that procedure was all right for a matter of policy to be determined by the Secretary of State, but these will not be matters of policy. They will be detailed interpretations of questions which affect people who claim the rights established by contracts already in existence.

The Secretary of State may remember what happened under the 1966 legislation when a union then, I think, called ASSET and now called ASTMS brought proceedings against Thorn Electrical in the Edmonton County Court in respect of its rights under a pre-existing contractual agreement. There is no guarantee that a similar action will not be brought again. It seems more than probable that those who decline to be convinced of the voluntary quality of this voluntary policy will seek to bring proceedings of that kind. What happens if Mr. Clive Jenkins or his colleagues bring proceedings in the Edmonton County Court against a company, saying "We have a pre-existing agreement, and we wish to have our rights awarded to us under that agreement"? Presumably counsel instructed by the employer or counsel instructed by the Secretary of State—

Mr. Arthur Lewis

At£6 a week.

Sir G. Howe

I do not take issue with the hon. Gentleman on that. Presumably counsel appearing on behalf of the Crown in some capacity would go to the court and say "Your Honour, you cannot deal with this case. The Act says that any question arising shall be referred to and determined by the Secretary of State." The judge will be stopped in his tracks while a deputation goes to St. James's Square to confront the right hon. Gentleman and ask what is the answer.

There is no provision for this eventuality; there is no machinery for it. If one wishes to refer a matter to the European Court of Justice—which the right hon. Gentleman loves so much—there is proper machinery laid down, but in this case the Secretary of State will issue his diktat and that will go back to the county court judge. His diktat will not be sacrosanct; it will be challengeable in the divisional court of the High Court of Justice. A legal merry-go-round of astonishing complexity will he set in motion.

Mr. Healey

The right hon. and learned Gentleman is slightly puzzling many of us on this side of the House. He makes a strong case for a return of a fully-fledged statutory policy of the nature he described so eloquently when he was a Minister in the previous Conservative Government, but my understanding of what the right hon. Lady the Leader of the Opposition said on Monday is that she is very much against that type of policy. The right hon. and learned Gentleman supports the objectives of our policy but he criticises some of its aspects because it is not a fully-fledged statutory policy with a pay code and a pay board like those he introduced. Is he in favour of that sort of policy? If not, what policy is he in favour of? He must at some time in this important debate give us some indication of the positive views of the Conservative Front Bench on these matters.

Sir G. Howe

I fear that the cap fits the heads of right hon. Gentlemen on the Government Front Bench. They have been mesmerised by their own verbal fantasies in seeking to present a statutory policy and describing it as voluntary.

We have here a statute. These questions will affect the rights of working people throughout the country. If they are not considered, the effectiveness of that statutory policy will be discredited. That is why we challenge the way in which the Government are setting about it. If they choose to set aside the rule of law and rule by fiat, they must do it in a clear way for the sake of those who believe in this policy as well as of those who challenge it.

The same is true of Clause 3. We never expected to see these words attributed to the Secretary of State for Employment: The changes made in the price code at a time when section 1 of this Act is in force may include such changes as appear to the Secretary of State as appropriate to provide a sanction against the payment of remuneration in excess of the limits mentioned". What in the name of heaven would the right hon. Gentleman have said if such a clause had been contained in the European Communities Bill?

There is no mention of what the sanction might be. I suppose that it can only be a sanction on the employer, but even that is not clear. So far as I can tell, the right hon. Gentleman could require someone to be hanged at Tyburn Cross under that provision. That is an example of the imprecision with which the Government have acted in introducing this policy which they are seeking to veil from the eyes of the people it will affect.

Even that which I have said so far does not come to the heart of the matter. The heart of the matter is apparent when we come to the undisclosed Bill referred to explicitly in paragraph 26 of the White Paper. There we are told: Legislation has therefore been prepared which, if applied in particular cases, would make it illegal for the employer to exceed the pay limit. The Government will ask Parliament to approve this legislation forthwith if the pay limit is endangered". That is the Bill which the Secretary of State for Employment rightly described last night as the "secret powers" Bill. The legislation has been prepared. How, then, can the Government justify not disclosing it to us? How can they argue that it is still being drafted? If they are to call upon Parliament to enact that legislation, if necessary forthwith, how can we be expected to do so if we have not seen it? Is the House to be recalled at 48 hours' notice during the recess to enact this "secret powers" legislation? At the least, we are entitled to see it. What does it contain? Is it or is it not retrospective?

The Chancellor sought to deal with some aspects of that in his speech this afternoon, but on Monday he said that the Bill would enable the Government to reduce to the White Paper level any settlement made after 1st August 1975. In answer to a question from the Leader of the Liberal Party he said that it would enable the Government to require individual employers to "roll back" pay increases. The Chancellor told us this afternoon that it will be operated only in such a way as to take effect on pay due in the future, after the Bill has been passed—but pay due under agreements entered into between now and then. It seems a little strange to describe the Bill as not having restrospective effect.

People will be entering into collective bargains which, unwittingly or wittingly, may contain provision for the payment of wages which exceed the limit, as that limit will be defined by the Secretary of State at some future date, with all the imprecision attached to that. People will enter into bargains and will commence work upon the promise that they will receive agreed wages. To say that that is not retrospective and that the Government are to take powers to invalidate those agreements entered into between now and the enactment of the Bill is once again, if I may borrow a phrase, legal nit-picking of an extraordinarily unconvincing kind. It is retrospective, and that is implicit in the Chancellor's statement. We know not what other sanctions may be contained in the Bill. We know not whether there will be sanctions which apply to trade unions even if not to employees.

My right hon. Friend the Member for Sidcup yesterday said that the Government's failure to produce the "secret powers" Bill was making it difficult for those who wished to support that policy. It is a matter of great importance and of equal significance to those who believe in the statutory policy which the Government are introducing as it is to those who do not believe in a statutory policy. Those who do not believe in that policy, where-ever they sit in the House, regard this covert way of dressing a statutory wolf in unconvincing voluntary sheep's clothing as intolerable. That is no way of going about it. Those who believe in the policy must regard it as equally unacceptable.

I draw the attention of the Chancellor to a witness whose name he has called in aid several times today, the CBI. The Chancellor says how terrible it will be if the House of Commons fails to endorse everything the Government are doing, their method as well as their objective, when everyone outside the House, including the TUC and the CBI, is overwhelmingly enthusiastic in the way in which they support the Government policy.

Let me remind the Chancellor of the statement issued today by the CBI. I think it is accepted that the CBI accurately reflects the widespread feeling throughout the country that the destructive evil of inflation has to be defeated even at the cost of considerable personal sacrifice. We are all of us making sacrifices to achieve that end. We would not shrink from doing so. We are prepared to do so even though the cost might be high. We are prepared to have regard to the rule of law.

I return to the CBI statement, which reads: However, the Government will not achieve its objective unless it makes it quite clear that it is prepared to stand up and defend its policy. The parliamentary debate on the White Paper casts severe doubts on the Government's strength of will and thus on the workability of its programme. The statement specifically states that the Government has refused to publish the draft reserve powers which would make the pay limit statutory should this prove necessary. That is precisely the point that was made yesterday by my right hon. Friend the Member for Sidcup. How are the Government to carry credibility in support of their policy? And how are we to be able to make a judgment when they are unwilling to make these matters clear?

Why are the Government unwilling to make the secret powers Bill available to the House? Is it because of the understandably contorted but still respectable conscience of the Secretary of State for Employment? If so, so be it. In those circumstances it would not be too high a price for the Government to pay if the right hon. Gentleman were to return to the leadership of those who take a different view. It seems that we have a Government who are concerned more with the unity of their own party than with anything else. The Government should be putting first the interests of the nation. That is why I shall be asking the House to vote for our amendment.

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

The right hon. and learned Gentleman has given us the advantage of his legal opinions on these matters, and I shall try to answer later what he has said, but will he tell us what the legal position would be if the Bill were defeated tonight? What would be the position if the policy contained in the White Paper could not be carried out? What would be the legal position if the right hon. and learned Gentleman's vote were effective and the Bill were defeated? Is it not the case that it would then not be possible to apply effectively the voluntary policy of a£6 limit?

Sir G. Howe

I was just about to come to those questions. I am grateful for the Secretary of State's assurance that he will be answering some of the many questions that will be raised in this debate. The House will remember that the right hon. Gentleman did not do so last night. I note the fact that it is his opinion that the voluntary policy cannot succeed without the enactment of the Bill. How that policy then fails to be a statutory policy I do not know.

I turn to the way in which we invite the House to approach the amendment. We ask the House to vote for it tonight on the basis that we welcome, as we have made clear, the Government's decision to attack inflation. We are not disposed to deny them the means of achieving that.

Mr. Healey


Sir G. Howe

The right hon. Gentleman must try to take these matters seriously. Let him hearken for a change. By no means would we choose to act in this way, but at this stage—this is the substance of our amendment—we decline to approve these means because they do unnecessary damage to the rule of law. Secondly, there is the Government's failure to produce the secret powers Bill. We consider that those matters represent an affront to Parliament and the nation. Thirdly, we believe that there must be grave doubts as to the will and determination of the Government for the reasons given by the CBI.

If the amendment is carried, as we ask the House to do, we shall look to the Government to introduce the fresh Bill which the Secretary of State says is necessary to give statutory force to his voluntary policy. We shall ask for that Bill to be a complete Bill. If we do not succeed in carrying the amendment, I must tell the House that we shall not this evening challenge the Bill's formal Second Reading, which would follow the defeat of our amendment. However—I ask the Chancellor and his right hon. and hon. Friends to take this seriously—throughout the lengthy proceedings in Committee which would necessarily follow if the Bill were to receive a Second Reading, we would press the Government to improve the Bill along the lines I have indicated. It will necessarily be a lengthy period in Committee. We shall ask the Government to eliminate the Bill's worst features. Further, we shall look to the Government for the publication of the secret powers Bill before we come to Third Reading of the Bill now before us.

If by the time we come to Third Reading the House has not been satisfied on both the matters that I have raised, the whole House will seriously have to consider whether the Government have given sufficient evidence of their will and determination, and their acknowledgment of constitutional proprieties, to be entitled to ask the House for a Third Reading.

I conclude by reading the last three sentences of the CBI statement: Unless the Government is prepared to shoulder its own responsibilities we must warn it that it is placing on industry an intolerable burden and putting the whole policy in jeopardy. If it fails, inflation and unemployment will rise still further and a major opportunity for united action to solve this country's economic problems will have been squandered. It is still not too late for the Government to change its mind.

Mr. Healey

The right hon. and learned Gentleman has made an important statement, and I wonder whether I am right in interpreting it, in answer to the questions that I put earlier. It seems that the Opposition are only prepared to support an incomes policy along the lines that the Government have laid down provided that it is fully statutory and similar to earlier legislation in that it contains a pay board, a pay code and compulsory powers affecting not only the employer but working people. I listened carefully to the right hon. and learned Gentleman and it seemed that that was the clear implication of his remarks. He has made an important statement but it fits rather oddly with the speech made by the right hon. Lady the Member for Finchley (Mrs. Thatcher) on Monday.

Sir G. Howe

I appreciate the extent to which the Chancellor is embarrassed by the curious situation in which the Government find themselves. The embarrassment is essentially that of the Government. They have come before the House seeking the enactment of a statute to give force and effectiveness to their policy for incomes and prices. I shall not pursue the semantic argument, but it seems that there is a Bill before the House which apparently requires statutory form if the policy is to be effective. Once the Government have put themselves in that position, it is surely right, necessary and proper for the House to satisfy itself about the coherence and legitimacy of the statutory powers.

The Chancellor asks whether we are asking for a pay board and a further range of sanctions. We are saying that a system which is to depend upon the unfettered solitary diktat of the Secretary of State for Employment, sitting alone in St. James's Square, cannot be regarded as satisfactory from any point of view. It is not an element which a Government should include in their statutory incomes policy. We also see a system which is to depend upon shrouded and veiled secret powers. That does not help the House. It is a policy which cannot be regarded as one that the House should lightly be invited to accept.

5.40 p.m.

Mr. Les Huckfield (Nuneaton)

It has been an intriguing three days for most of us who have sat and watched the tactics on the Opposition benches. We have now heard the fifth Front Bench speech on behalf of the Conservative Party—and I have heard them all. I have not yet heard any Conservative put forward any positive alternative which the Conservative Party feels that it would like to put into practice at the present time. When there are on the same side of the House the right hon. Member for Worcester (Mr. Walker) and the hon. Member for Oswestry (Mr. Biffen), I can see that the Conservative Party faces its difficulties. In matters of economic theory those two Conservatives are poles apart.

The right hon. and learned Member for Surrey, East (Sir G. Howe) did his party no credit at all. He fulminated passionately the other day, with his hon. Friends agreeing, that this was a crisis situation and that something had to be done. He emphasised that inflation was tearing the country apart and bringing the country to its knees. But what happened in respect of the proposals which were put before the House last night? Although allegedly it felt so strongly and passionately about them, the Conservative Party neither voted for those proposals nor voted against them. It seems to me that there is to be a repeat performance tonight. The right hon. and learned Gentleman apparently still feels passionately about these matters, but he refuses to give any support to the policy put forward by the Government. By the same token he is not putting forward any alternative policy.

The Conservative Party has been criticised in The Times, in this House and throughout the country. On the subject of information—and I recognise the difficulties of the hon. Member for Blaby (Mr. Lawson)—and where the Conservative Party stands on the necessity to provide information, we should by now have had more signs of positive economic thinking.

For many of us this is a difficult Bill to support. Many of us recognise that my right hon. Friends the Secretary of State for the Environment and the Secretary of State for Prices and Consumer Protection would be given some broad and wide-ranging powers in the Bill. Even if it is a voluntary policy, the Bill seems to go a pretty long way down a statutory path. Cash limits on the nationalised industries which will automatically determine the level of wages, sanctions on local authorities which pay more than a certain amount to their employees and rigid sanctions through the Price Code and in the private sector seem to me to go a substantial way down a statutory road.

I recognise some of the difficulties and doubts expressed last night by my right hon. Friend the Secretary of State for Employment. I share his doubts, but I am prepared broadly to give this policy my assent. Indeed, I am prepared to give the Bill my consent provided that it remains on the basis of voluntary powers and works on a voluntary basis.

I recognise that for those of us on the Labour benches who consider ourselves to be on the Left of our party our reaction to the Bill represents the acid test of our whole credibility. I believe that if we want to challenge the Bill, it is up to us to put forward realistic alternatives.

I recognise the sincerity with which my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) spoke the other day. I admire my hon. Friend and often follow him into the Division Lobby. I am sorry to say that I was not able to do so last night, and I cannot follow him down the road of the alternatives which he advanced in his speech on Monday.

Having listened to my hon. Friend and having read the letter which was contributed by some of my hon. Friends below the Gangway to The Times yesterday morning, I could not help feeling that the most worrying feature of that letter and the so-called economic alternatives was that in regard to the present crisis most of those alternatives not only are irrelevant but would make the situation worse. The impression given by the letter in The Times is that it would appear that the sterling crisis is almost an optional extra. The letter gives the impression that a 30 per cent. rate of inflation is almost an afterthought. Therefore, I do not believe that the alternatives offered by some of my hon. Friends in the Tribune Group are relevant to the immediate problems which face our economy.

We cannot get away from the fact that Britain happens to be a bank. We cannot change that situation overnight. People have to go on putting money into that bank and lending money to this country if we are to be able to carry out some of the public spending projects to which our party is committed. Some of my hon. Friends talk of liquefying or nationalising the overseas portfolio. That surely would inspire about the same amount of confidence in investors in a bank as would a process of hawking the Crown Jewels down Petticoat Lane on a Sunday morning. It is a desperate act and it does not inspire confidence in our currency or in the economic management of this country.

When some of my hon. Friends speak about indexation of overseas sterling holdings, do they realise the full extent of the cost of that policy in exchange guarantees and indexation? Even if they are prepared to mortgage some of our North Sea oil, which is a precious asset, I am not prepared to do so. [AN HON. MEMBER: "It is already mortgaged."] If we are to have a proper degree of economic control over our national resources, and to bring about an economic recovery in this country we must maintain the fullest possible control over the extraction and utilisation of our North Sea oil resources.

My hon. Friends also talk about import controls. I would remind them that I represent the car manufacturing industry and also textiles and hosiery concerns. I appreciate that import controls have a part to play in a longer-term strategy. In the present situation import controls would not only encourage inflation, but would create and encourage more inflation. A policy of import substitution is always inflationary.

Mr. Ron Thomas (Bristol North-West)

I shall not debate with my hon. Friend policies aimed at protecting sterling, but I wish to ask my hon. Friend a straightforward question. If the foreign bankers and oil States—entities which my hon. Friend wants to appease and to persuade to keep their money in London—insist one way or another on a statutory policy, with the threat that otherwise they will remove their money from London, where will my hon. Friend stand then?

Mr. Huckfield

I am sorry, but my hon. Friend does not seem to understand the workings of the international money market. It involves people being confident enough to keep their money in this country and to continue to invest it here. If they see a Government who are prepared to take determined action, as I believe the present Government are, I believe that we shall see a recovery of the pound and that our economic growth will return to the path from which it seems to have strayed.

If my hon. Friends below the Gangway believe that short-term depositors and overseas long-term investors in this country treat our currency and our economy lightly, they should listen to some of the American analysts who advise American corporations whether to stay in the United Kingdom. These are decisions which they are now taking in respect of their investments in plant, assets and securities in this country. We must face the situation, and it is a situation which the White Paper and the Bill were designed to answer.

The long-term ambitions for a restructuring of the British economy expressed by my hon. Friends below the Gangway are correct, and I wholeheartedly agree with them. I am convinced that if the private sector will not make the investment, the public sector will have to do so and that if private corporations will not provide us with the manufacturing capacity that we need, the National Enterprise Board will.

I agree with my hon. Friends that this Bill is only a short-term palliative. I believe that we must have some long-term remedies as well, and I shall with all my vigour be pressing my right hon. Friends on the Front Bench to carry out some of the longer-term reforms that my hon. Friends have put forward. I am sorry, Mr. Deputy Speaker, to see that my hon. Friend the Member for Walton has to leave the Chamber on hearing what I say.

I should not like the House to get the impression that I wholeheartedly and unreservedly support the White Paper which we debated yesterday, although I voted for it, and I should not like the House to have the impression that I wholeheartedly and unreservedly support the Bill, which gives my right hon. Friends some quite far-reaching powers.

I have some doubts, for example, concerning price increases. What will happen when, time and time again, my right hon. Friend the Secretary of State for Prices and Consumer Protection, despite all her valiant efforts, has to tell the House that a more than 10 per cent. increase is justified because it is a cost increase which has been in the pipeline? We shall have a lot of these situations. Despite the fact that the Government's policy may in the future be operable, we shall still have a lot of larger-than-average wage settlements and commodity price increases which were in the pipeline. But simply to enable my right hon. Friend the Secretary of State for Prices and Consumer Protection to do those things which may appear to her to be necessary does not, in my opinion, go far enough.

I want to know why we cannot have a price stabilisation scheme along the lines of the one developed by the French, whereby we could fix the price of at least 30 key commodities. I have put down a new clause—which I hope that you, Mr. Deputy Speaker, or Mr. Speaker, will call—which asks the Secretary of State to do just that.

I cannot understand why there cannot be at least a six-monthly gap between price increases. I cannot understand why we do not use all the local monitoring centres which we presently use to gather the information for the compilation of the retail prices index and all the monitoring bodies up and down the country, not only to monitor prices in shops but to report to the Government on prices in shops. All these things seem to me to be necessary if we are to have a realistic policy in regard to the prices side of the package.

Although this is called a Remuneration, Charges and Grants Bill, to me it is still a Prices and Incomes Bill. We talk about the cut-off limit of£8,500 a year. I do not know of any shop steward or any convener who cannot give me at least a dozen ways of getting round that cut-off limit, whether it be by means of expenses, cars or cheap mortgages. I should like to hear a little more from my right hon. Friends on the Front Bench as to how on earth they intend to enforce a limit of£8,500 a year and no more. I cannot see how the policy can be policed.

I recognise that this is a policy which has been discussed on a basis of voluntarism and consent with the trade union movement. It would be fair to say that the trade union movement has initiated a great deal of this policy, and that is to its credit. These were not the kinds of discussions that we had in 1966 or in 1973. It was a proud day for the Labour movement when, at the last two elections, the trade union movement and the Labour Party stood four square on the same policy. I am very glad that the trade union movement was brought into the discussions and took a very leading part in the formulation and compilation of the White Paper—

Mr. Sydney Bidwell (Ealing, Southall)


Mr. Huckfield

I recognise the sincerity of my hon. Friend the Member for Ealing, Southall (Mr. Bidwell) and do not doubt his sincerity at all, but this policy has been endorsed by the TUC and by a gradual succession of trade union executives and conferences. It is because it was born of the TUC and the Government, on the basis of voluntary discussion, that I am prepared to give it my support.

Mr. Bidwell

There was a famous figure in history who once said that there was no such thing as a "sincere-ometer" and that people can be judged only by their deeds. Of course we respect each other's decision, and the sincerity of my hon. Friend the Member for Nuneaton (Mr. Huckfield) is accepted. That is assumed in Parliament. But I should like my hon. Friend to deal further with the supposition that the Government have picked on only part of the TUC proposals. He talks as if the rest of it is a throw-away thing, including the ideas of the Tribune Group, which synchromesh to a great extent, and that they are not longer-term propositions that the TUC is putting forward. This will be very urgently shown in the coming months.

Mr. Huckfield

I hope that my hon. Friend has listened carefully to all I have said, because I have fully admitted that this policy is only a short-term palliative. If we are to have an economic recovery and an increase in investment in manufacturing capacity, we shall need a lot more than this Bill. That is why I support some of the alternatives put forward by my hon. Friends. The only alternative which I suspect would be advanced by the hon. Member for Oswestry (Mr. Biffen), and by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) if he were here, is that of massive public spending cuts.

Mr. Lawson

They are coming.

Mr. Huckfield

It has been freely admitted that over the past year we have had no real growth at all in the National Health Service and that we shall have to have very severe restraints indeed imposed on public transport, education and a lot more of our social services. We can all give constituency examples of this.

I want to say for my constituents and for the Labour movement that I believe that the alternative that the Conservative Party would like to see is totally unacceptable to us. I have heard the sorrowful stories of school leavers in my constituency who are trying to find jobs and who have had to sign on for unemployment benefit. One has only to hear these stories to realise some of the difficulties that would be caused in human terms on a much greater scale if the Conservative Party had its way.

I recognise that this is a fairly far-reaching Bill in regard to the powers it gives to some of my right hon. Friends. I recognise that it goes quite a long way down a statutory road, although I agree that it is based on a policy of consent and voluntarism. But because it is to me the only realistic alternative, and because it has been born of the trade union movement, I shall give it my support tonight.

5.59 p.m.

Mr. John Pardoe (Cornwall, North)

It is a great pleasure to follow the hon. Member for Nuneaton (Mr. Huckfield). He has realised—no doubt it has been something of an agonising struggle for him, holding the political views that he does, which we respect—that the condition of this country and the condition of the world today necessitates an introduction of these measures.

The Government claim that the Bill that we are debating today is consequential on the White Paper which we have debated for the past two days. The Prime Minister, in his speech yesterday, implied that the one was so consequential upon the other that no one could vote differently on each of them. I think that the Prime Minister was wrong.

Yesterday, together with my right hon. and hon. Friends, I supported the Government in both votes because we believed they had at last taken the first tentative steps down the road that we had been asking them to take.

The distinction between the White Paper and today's Bill is the distinction between ends and means. The White Paper stated the Government's aim and general purpose in regard to inflation. That aim and purpose ought to be a national aim and purpose, and it ought to have national support, as the right hon. Member for Sidcup (Mr. Heath) said yesterday. My right hon. and hon. Friends did what we could last night to ensure that it got that national support.

Today's Bill is the Government's means of achieving their aim and purpose, and, as such, it falls woefully short of what is required. The Prime Minister and an influential part of the Cabinet, among whom I imagine the Secretary of State for Employment resides, still do not seem to realise the danger confronting our country. I absolve the Chancellor of the Exchequer of that charge. I believe that he does now—and I emphasise the word "now" because he did not until a few weeks or months ago. He now understands what he so lamentably failed to grasp in March last year, again in July and again in the October General Election. I shall resist the temptation to say "I told you so", because there is no credit in being right about such matters as the rate of inflation or the necessity for this economic package. Any fool these past 10 years who has forecast consistently the future of the British economy on the basis of choosing the worst possible result has had a far better than evens chance of being proved right.

Five weeks ago, on 20th June, the Prime Minister announced in a speech that the Government would come forward with proposals to deal with the inflationary crisis within six weeks. The day after, on 21st June, the Chancellor of the Exchequer repeated the pledge. At the time I was visiting America to discuss our economic situation with the International Monetary Fund and American hankers and members of the United States Treasury staff. On the very day that the Prime Minister made that speech, I was in the international exchange department of a large New York bank, and I was given to understand in no uncertain terms that if the Prime Minister thought that he had six weeks in which to stop the rot he would think anything and that it was more likely to be six days—and that with luck.

So it turned out. The Government had to rush out an early statement of intent, and it did the trick for sterling for a while, until the market digested the Bill to which we are asked to give a Second Reading today. Then, I am afraid, the game was up. Yesterday the Bank of England had to take steps to raise the minimum lending rate because our foreign creditors, who were notably absent from the list of those whom the Chancellor of the Exchequer reeled out today as supporting this measure, were somewhat less than impressed. The Chancellor of the Exchequer knows this, even if other members of the Government do not, because the Bank of England, the Treasury and the staff of the IMF have all advised him informally, if not formally, that only a really tough compulsory prices and incomes policy will stop the pound sliding further and further below the horizon.

But the Chancellor, knowing this, is caught in what is the age-old Catch 22 of the Labour Party, that what is economically necessary is politically impossible and that what the world wants and requires of Britain the Secretary of State for Employment cannot stomach. So, in our view, the Bill is not good enough, and it will not stop the fall in the pound. A substantial rise in interest rates may save the Government's face for a while. But before many weeks are past we shall all be back here to pass some very different measure.

We have tried to short-circuit this idiotic waste of time with a series of amendments which to all intents and purposes rewrite the Bill. The resultant amended Bill, in our view, would be the very least that the Government could get away with if their attack on inflation is to have any credibility with our foreign creditors. We shall be able to go into these matters in much more detail in Committee tomorrow. But I hope that tonight the Government will give us some clear idea of their attitude to the broad outlines, some of which have been touched upon already by the right hon. and learned Member for Surrey, East (Sir G. Howe).

First, the Bill itself must be far more specific on the actual pay limits and on what constitutes a breach of those limits. The Bill provides for reference to the White Paper and to the TUC annex, and, although I am aware that a similar provision was in the 1966 Prices and Incomes Act, for which I voted, and in the White Paper, that was a very much better White Paper than the one that we have now.

It is a bad principle to legislate in this way. The courts would be hard put to it to interpret these pay limits of the White Paper, and that is one of the reasons why they will not have anything to do with it. They will not be asked to interpret them. The Secretary of State is to be judge and jury.

The Bill envisages revision of the pay limits by another White Paper, and that revision will become law automatically unless reversed by Parliament. Again, in our view, that is not satisfactory.

The pay limit in the Bill is a cash supplement to remuneration. But what about benefits in kind, and how do the Government propose to overcome the problems of short-time working, overtime rates and absence due to sickness, for instance?

What do the Government propose to do about incremental scales? I believe that in previous prices and incomes legislation and pay restraint, incremental scales for a small privileged section of our society have been a crying scandal, and the Government must be very much tougher on these than they have been so far.

What about reductions in hours? We have already had the threat from the NUR talking about a 35-hour week, with a consequetial increase in overtime, of course. Do the Government intend to forbid a reduction in hours as a way round this legislation?

We want to know about pension contributions. I understand that we are to hear something about them later tonight. But do the Government propose to increase employers' contributions in the£6? Will they also consider telling us something about profit-sharing schemes? Will profits shared also count towards the£6 pay limit?

I come now to the Minister's powers. The Bill gives the Secretary of State complete freedom to decide whether pay limits have been exceeded and controls breached. In our view, that is totally unacceptable. Inevitably, there will arise the suspicion that the Secretary of State is interpreting the law in a politically convenient manner. Sometimes he will find it very inconvenient to say that a breach has occurred. It will usually be less convenient if the union concerned is the NUM, and perhaps it will sometimes be more convenient if the union concerned is that of the Post Office workers or that of the agricultural workers.

We have to remember that one of the Secretaries of State mentioned in the Bill is the Secretary of State for Employment, who in the past said: A Labour Government can survive only if it sustains its links with the trade union movement". What we make of the independence of a judge who said before trying a case in court "This court can survive only if it sustains its links with the plaintiff"? Amazingl'y, the Secretary of State is to exercise these sweeping powers without either party having the right to be heard or consulted.

To overcome this difficulty we propose that all questions on Clause 1 should go to a reconstituted Prices and Incomes Board for a report and a decision. Of course, the final decision will still rest with Parliament, but at least Parliament and the public will be able to form their opinion in the light of an independent report. Accordingly, we have tabled a large number of new clauses which seek to restore the Prices and Incomes Board which existed under the Labour Government's Prices and Incomes Act 1966. Many of these new clauses will be familiar to the Secretary of State. They come, suitably amended, from the 1966 Act, which in our view should never have been repealed.

Exactly what do the Government propose to do about re-entry—the Prime Minister's graphic phrase—because Clause 2 provides for the duration of the present limits? What happens afterwards? What about the appalling problem of differentials, which we shall have to face after 1st August 1976, or whenever it is? It is vital that some body should consider the problem now, because we cannot stagger from week to week until, after the policy has undergone many changes, next July we find that no policy for the future exists. It is, therefore, essential that the Government refer this whole question of the future policy to a body such as the Prices and Incomes Board.

Mr. Foot

I know that the hon. Gentleman has always favoured—and now he has outlined—a more elaborate legal procedure for dealing with this whole matter than has ever been contemplated in this country before. He is proposing to insert that procedure into the Bill. I do not believe that this is the most appropriate way to establish such machinery. What does he think would be the response of the trade union movement if we were to adopt his advice? From all the indications I have, if the Government were to attempt such an elaborate scheme of legal machinery for dealing with this problem as that we should destroy utterly any possibility of co-operation with the trade union movement of this country

Mr. Pardoe

I can best answer the Secretary of State, who may understand what I am getting at, by drawing a historical analogy. What, I wonder, would have been said to Henry VII, when he was challenging the power of the barons of his day, had he been told that he could not set up the splendid courts around the country which he was trying to establish in order to expand the King's justice to men of all status, because the barons simply would not recognise the courts. Would, perhaps, Henry VII have retreated like the Secretary of State and this Government? He did not—thank goodness he did not. If we need another Henry VII, or another Cromwell for that matter, so be it. I hope that democratic procedures will win through. However, if the Secretary of State is suggesting that there is a large body of people in this country called the trade unions which will not abide by the laws passed by this House, I do not quite know what the Secretary of State is doing in this House at all.

Mr. Foot

I hope that the hon. Gentleman will not try to mislead himself—I do not think he will mislead anyone else—by making such a statement. I was not suggesting that the trade union movement would seek to disobey the laws of this country at all. I am saying that if we attempted to deal with the problem with such an elaborate legal machinery as he is suggesting—dealing with every possible device and exception that may arise under this kind of policy—we should destroy any possibility of genuine co-operation with the trade union movement. That is not a question of disobeying the law. It is a question of whether we have a Government who try to govern by persuasion instead of by force.

Mr. Pardoe

The Secretary of State is saying that some trade unions want the laws suitably washed, through some process of the Labour Government, in order that they can abide by them. This is the fundamental question that we face in imposing any prices and incomes policy. Therefore, if I may, because I—

Mr. John Nott (St. Ives)

I hesitate to intervene between the hon. Gentleman and the Secretary of State. I am glad that the hon. Gentleman takes this view. However, did he and his party take this view when the miners were challenging the laws of Parliament in February 1974?

Mr. Pardoe

Yes, indeed; it is absolutely true that we supported the Government of the day on the principle of who rules this country. However, we did not support phase 3 of the Conservative Government's prices and incomes policy. If the hon. Gentleman will refer to the reasons given, he will find that they were two-fold First, the policy asked the House and the country to go to sea in a sieve marked "flexibility", and, secondly, it was based on the idea that commodity prices would fall. We said that they would not fall and, therefore, the thresh-hold agreements would be ruinously inflationary. On both counts we were proved right. However, we supported the Conservative Government on the basic issue of who rules the country.

I am afraid that the country did not respond to that challenge, but I believe that the then Conservative Government chose the wrong battle. They chose a battle with the miners, which was, perhaps, the least wise battle to choose. I have always maintained, and I still do, that the miners had no right to break the law—nor does anyone else. We shall have to deal with the crunch again.

As I have been interrupted over quite a long period, I shall omit the other points I wanted to make because there will be an opportunity to deal with them on the amendment tomorrow.

Briefly, I want to say why it is—and I say it particularly to some Labour Members and to some hon. Members on this side of the House also—that I and my right hon. and hon. Friends have advo- cated a statutory and compulsory incomes policy, and why we do so now. It is not because we believe that it is the only answer to inflation or that wage increases are the only cause of inflation. It is not because we are in love with such a policy for itself. Indeed, the very thought that the Government should for ever be involved in fixing every person's rate of pay is quite obscene.

In the short term it is that if the pound goes on falling because our rate of inflation is higher than that of other countries, the situation is a vicious circle. The only way we can cut into this vicious circle is by a tough incomes policy, because nothing else will work quickly enough. That is not the most important reason but it is the short-term reason. An incomes policy is necessary at this time to cut into that cycle of the falling value of the pound and increasing domestic inflation. In our view, therefore, an incomes policy is inevitable.

However, the inevitability of an incomes policy in the longer term is not the most important part of an anti-inflation strategy. Nor is it intended to be permanent. It is simply a manifestation of the classical remedy for monopoly. Until monopoly can be broken up—or in the rare cases where monopoly is inevitable—the prices charged by monopoly must be controlled by Government. The largest single cause of inflation today is the monopoly bargaining power of the trade unions.

Mr. Lawson

Is the hon. Gentleman saying that the statutory incomes policy should not apply to any pay which is not monopolistically bargained by trade unions?

Mr. Pardoe

The hon. Gentleman is opening up a complicated point. I happen to believe that the economy needs to be divided rigidly between the administered sector and the free enterprise sector, and that if people are prepared to live in the competitive sector of the economy they should not be subject to a long-term prices and incomes policy.

However, I am linking it to a monopoly. In my view the monetarists mistake cause for effect. Inflation cannot happen if the money supply is held constant, but what are the pressures on successive Governments which force the money supply to expand? The largest of these pressures is the monopoly bargaining power of trade unions. This power is exercised through so-called free collective bargaining, which is no more than a device by which one gang of robbers—the unions—conspire with another gang of robbers—the employers—against the interests of the people.

In the debate over the past two days some hon. Members have said that wages are not the problem but that we have problems of investment and overmanning. It is true that nothing contributes so much to the bad investment climate that we have had in this country for a long time as the low return on that investment. Overmanning is the primary cause of that. However, the monopoly bargaining power of trade unions is at the root of overmanning. It is that monopoly power which ensures that we go on using too many people on the new machinery that we introduce with our new investment.

I believe, therefore, that an incomes policy is absolutely inevitable to deal with monopoly power as long as that monopoly power exists. Some may say that that means that I am advocating a permanent statutory incomes policy. I believe that it will be possible in the future for this House to enact legislation for participation, industrial partnership, profit sharing and works councils which will undermine the monopoly bargaining power of the trade unions. Until that time comes, I see no alternative at all.

Yesterday the right hon. Member for Sidcup said that this House should send a message of unity to the nation at this time. But I believe that this House is incapable of doing so, because, in spite of warnings about its own ineffectiveness in the face of pressures building up within our society, this House has failed to prepare its defences. Those defences can be built only by fundamental political reforms. Our system of Government is probably unequal to the task. The task is to ensure that in the next upturn of the business cycle, the fire of inflation next time does not engulf us all.

6.21 p.m.

Mr. Peter Walker (Worcester)

When I had the privilege of catching your eye, Mr. Deputy Speaker, in the Budget debate I expressed my concern at the lack of reality in the debate. We had listened to the Chancellor of the Exchequer analyse the nation's problems and say that runaway wage inflation was creating a crisis which, unless tackled, would result—as he expressed his fear in that debate—in Britain ending up in the hands of our creditors. What surprises me about today's debate, and the debate of the previous two days, is, once again, this lack of reality.

It was expressed by the Secretary of State for Employment when he told the House last night about his talks with the TUC and how well they were going, and said that they were preparing a framework for the future development of the social contract. He said "I was rather worried when the Chancellor suddenly came along to me, and it could have resulted in some bad effects, but fortunately they have all agreed to the new voluntary policy." But it was not the Chancellor coming along to the Secretary of State for Employment. It was the creditors of this country who had gone along to the Chancellor.

We all know the reality. It might have been bad taste on the part of our creditors, but when the Prime Minister attended the Royal Show he was suddenly informed, after making a speech saying how calm and collected the Government were, that he had to fly back to London where talks would take place because there was a great flight from the£ sterling. This was predictable. Since the Budget the Government have pursued a policy knowing that runaway wage inflation was ruining this country and massively damaging our future prospects, but they were unwilling to take any action about it until the creditors made them take that action. That is the whole background of the situation.

Last night the Secretary of State for Employment defended his position and made his remarkable case. He said that this was still a voluntary policy, but the fact is that from 1st August onwards free wage negotiations cease in this country. The right hon. Gentleman shakes his head. If free wage negotiations do not cease, this Bill and the White Paper are useless documents. The whole debate of the last three days has been on the basis that the Government have created a situation in which free wage negotiations end on 1st August.

I remember the debates I used to have with the right hon. Gentleman when we had a statutory policy far fairer than his statutory policy, and the manner in which he endeavoured to encourage those who wished to break that policy during that period when we were offering to the miners, under phase 3, a rather bigger increase than they will obtain under his policy in the coming year. When one recalls that and sees the right hon. Gentleman's name on this Bill to end free wage negotiations on 1st August, one asks why he does not resign. However, I think that the right hon. Gentleman is right in not resigning. Sometimes in politics it needs more courage not to resign than to resign. I think that he would have enjoyed resigning on this matter. The speech he would have made from the Government side of the House would have been well delivered, with immense enthusiasm, and it would have been a great parliamentary occasion. I think he decided not to resign because he genuinely feels, reluctantly, that the policy he is entering into might, at the end of a year, be cast away, and he can then return to the kind of concept that in the past he has believed possible.

However, the matter on which I believe he should resign in the coming months is the ever-increasing unemployment that his policy to do nothing about massive wage increases will create. As each month's figures come in I hope that the right hon. Gentleman will weigh up carefully the policy he has pursued so enthusiastically for the past year and realise that that has been the main cause of that increase in unemployment taking place.

The other lack of reality in the debate is the lack of a sense of how grave is the national economic crisis. Earlier today the Chancellor said that he thought the speech of my right hon. Friend the Member for Sidcup (Mr. Heath) was an historic speech. The main gist of my right hon. Friend's remarks was that the nation should be told just how bad the economic situation is. I do not believe that the nation has been told these facts by the Government Front Bench. The Government endeavoured to create an opinion when they suddenly recognised that there was a bad problem of inflation, and they said "We shall now take these measures for a year".

The Prime Minister said to the miners "All we ask of you is to sacrifice one year." That sacrifice will continue for much more than a year, because what has happened in the 16 months the Labour Party has been in power is that the people have been paid an extra 40 per cent. but have produced 4 per cent, less. That is the gist of the problem that faces the country now. Under the policy pursued by the Government after the General Election, of deliberately having free wage negotiations with no Government intervention, we have had a period in which the nation, already suffering from severe inflation problems due to raw material prices, and suffering from immense problems due to the oil deficit, has decided to pay itself 40 per cent. more but to earn 4 per cent. less. That is the basis of the problem facing us.

The situation is far worse now. In opening the debate on Monday, the Prime Minister once again, as always, made great play of our excellent export performance. In almost every speech Ministers say how magnificent is the improvement that has taken place in our balance of trade and balance of payments, but what they should be doing is telling the country how serious our export position is. The reality is this. Taking, for example, the last quarter for which our export figures are available, one finds that the volume of our export trade for that quarter is 8 per cent. lower than it was in the third quarter of last year, and 4 per cent. lower than it was in the quarter in which we were suffering from the three-day working week. Therefore, the volume of our exports is not increasing; it is going down. All of the latest business surveys show that in the more recent months the number of export orders obtained has become fewer and our firms have been finding things very difficult.

What of the next 12 months? The Government are predicting that over the next 12 months we shall have a very severe rate of inflation in this country, far higher than that of all our major competitors. When the Prime Minister tries, as he frequently does, to say that at least on exports we are obtaining more than our share of trade—he says "After all, we have had a world recession and here are Britain's exports rising"—we should look at what is happening to our major competitors. Comparing the first quarter of this year with the last quarter of last year one finds that the volume of Britain's exports dropped by 8 per cent. The volume of the exports of Germany rose by 5 per cent., that of France by 8 per cent., of Japan by 8 per cent. and of the United States by 10 per cent. It is a remarkable world recession when every major exporting country is expanding its volume of exports.

Already we are beginning to hit the position where our exports are dropping. Therefore, there is no future joy in the next few months as regards exports. The only joy is that the price of our exports has risen due to the speed of inflation.

There has certainly been an improvement in relation to imports. There was a 26 per cent. reduction in raw material prices a month ago, according to the Financial Times Index, as compared with the same period last year. It is a remarkable coincidence that during a year in which we have had a 26 per cent reduction in raw material prices we have also had inflation at 26 per cent.—such is the skill of the economic management of the country by right hon. Members of the Government.

Mr. Foot

The right hon. Gentleman is recalling a bit of the past, delving into history a little. Could he tell the House what was the trade balance of this country at the time when he made his speech about the problems of success?

Mr. Walker

Certainly I can. I will now tell the the right hon. Gentleman where the difference lies. Throughout the period of which I was speaking we were increasing our imports of raw materials and machinery and we were massively increasing our exports as well.

Let us turn to what has happened and I will give the reason for the transformation. Once again the Government are showing that they do not want to face the reality of the situation. If we take the position on imports the situation is that, during the last nine months, the great improvement in our balance of payments that has taken place has been because there has been a reduction in our imports of raw materials and fuel of£631 million while at the same time we have had an increase in imports of finished manufactured goods of£151 million.

As to the future, in the last month there has been a substantial rise in raw material prices; and if we have that uplift in world trade at the end of this year that is predicted by the Government the British economy will be unable to take advantage of that uplift because of the non-competitiveness of its exports, and it will have run down its stocks of raw materials to an all-time low, and will have to buy in those raw materials at much increased prices. So that the economic situation in terms of the balance of payments, which the Government constantly endeavour to pretend is a great blessing and a good feature of what has happened, is such that in the coming months, as a result of a 40 per cent. increase in wages with a 4 per cent. drop in production, we are going to see the punishment.

This particular form of statutory policy which the Government are to introduce will mean that on 1st August free wage negotiations will disappear. That is to be done primarily by means of certain threats and by a piece of legislation which we are unable to see. It was quite remarkable that the right hon. Gentleman the Secretary of State for Employment should have said last night that nothing could be more offensive to 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. What the Government have done, without introducing a Bill, is to brandish it in the face of the House of Commons, the country and the trade unions. And what of this relationship with the trade unions when we can have the vital reserve power which appears in the White Paper and which is a very fundamental part of Government strategy when a draft of the Bill cannot even be discussed with the trade unions which will be very much affected by it?

The whole system of this statutory incomes policy is based upon a new concept: "We will punish, but we will not tell you how or when we will punish". There is just the vague threat that it will happen, if people do not comply with what the Government lay down. That is a new formula for a future statutory burglary policy. Perhaps the Government will introduce anti-burglary legislation under which burglary will be voluntary but anyone who practises it will be punished. The difference is that under the Government's anti-inflation legislation they intend to punish not the burglar but those who are burgled.

Throughout this legislation the Government wish to keep away from the tough decision making it necessitates. Everybody but the Government can practise it. If the chairman of a nationalised industry is faced with the dilemma of finding himself confronted by the threat of industrial action for£7 a week and decides that if he reduces his investment programme within his cash limits and pays the£7 that will do less damage to his industry than paying only£6, that nationalised industry chairman is to be sacked for pursuing such a policy. If a local authority decides that a threatened dustmen's strike would be intolerable and pays£7 rather than the£6 laid down by the Government the ratepayers will be penalised under the Bill. An employer in the private sector who is short of cash, if he is faced with a wage claim he fears might drive him into bankruptcy but who knows that industrial action will certainly immediately bankrupt him, will if he decides to give way, be punished under this legislation.

This policy cannot be fair. The Government know that the flat£6 a week proposal is a crude device. It is unfair to the skilled as opposed to the unskilled, it is unfair to the energetic as opposed to the lethargic: it is unfair to a whole host of workers.

The Government know that at the end of phase 1 of their policy the flat£6 will create immense problems for phase 2. What are the prospects for phase 2? At the end of the period this legislation and this method will itself have been highly inflationary. Have the Government calculated the inflationary effects of the flat£6 a week? If we take the public sector alone, with the nationalised industries, it will cost something like£600 million. In central Government the flat rate£6 will cost something like£600 million. It will cost local government something like£900 million. Nearly£2,100 million will be added to public expenditure by providing for a flat£6 increase in this way.

The Government should realise the inflationary effect of this, that for local government alone, this year's increase combined with the£6 flat rate, both of which have yet to appear on rate demand notices, will add something like£160 to be paid in rates or taxes by every family of four in the country.

The inflationary effect of this will mean that we shall still be at the top of the league in terms of world inflation, and I do not see how the Government can contemplate that they will be able to ease the situation in 12 months, rather than toughen it. In fairness, they have not contemplated doing so. The only person who has is the right hon. Gentleman the Secretary of State for Employment, who sees the TUC document as a development of the social contract.

When the trade unions embarked on the social contract, did they expect it to develop into a 26 per cent. rate of inflation? Did they expect it to develop into a 32 per cent. increase in wages whilst productivity was falling? Did they expect it to lead to a statutory incomes policy and the ending of free wage bargaining, as it has? Was that a development the trade unions expected to bring about? When we praise the TUC, as I do, for coming now to some sense of reality in its policy, let us appreciate that it is the members of the TUC and the manner in which they have operated the social contract that have resulted in the 26 per cent, inflation and 32 per cent. wage increase in the last 12 months.

So we have a situation where the development of the social contract means, first, the right hon. Gentleman, of all people, having to stand at that Dispatch Box and accept that from 1st August onwards free wage negotiations in this country will end. The second stage will be tougher still, because we shall still be behind in trying to combat inflation, and eventually we shall have to come to reality in an effective statutory incomes policy which brings into its assessment a disastrous 16 months of 40 per cent. increase in earning and a 4 per cent. drop in productivity.

6.39 p.m.

Mr. Giles Radice (Chester-le-Street)

The right hon. Member for Worcester (Mr. Walker) has spoken very passionately, but how is he going to vote tonight? For many people the interesting point about this debate has been the very extraordinary attitude of the official Opposition. Oppositions can occasionally justify abstention on minor matters, but on a matter of national crisis, which they say it is, the posture of the Opposition is really quite incredible. They are always telling the Government to give a lead, but the Opposition, far from giving a lead themselves, have elevated "Don't know" to a matter of high political principle. They really ought to be ashamed of themselves.

In his speech on 21st July the Chancellor asked for support for the Government's policies. I supported them last night, and I shall do so again tonight. Nobody suggests that a prices and incomes policy is the only incredient in an anti-inflationary package, but the Government are telling us that a prices and incomes policy is an essential part of their package. Faced by a dangerously high level of inflation, far higher than that of our main competitors and far higher than we have experienced in our recent history, we find it difficult to say that they are wrong. We also face the pressures of our international creditors.

A number of Opposition Members say that the only way to tackle inflation is by massive public expenditure cuts. But they, and particularly the right hon. Member for Down, South (Mr. Powell), are always very reticent—irresponsibly reticent—about the effects of what they advocate. They do not tell us about the massive unemployment and about what would happen to the social programmes and social fabric of this country. They do not tell us about the social dislocation. They think that all that they advocate could be done without that kind of result. Such an approach may be attractive to some Opposition Members, but it is not a road down which my party should go.

There are others—here I address my remarks to some of my hon. Friends—who refuse to accept the part that income increases have played in the generation of inflation in recent months, and, therefore, do not feel that they are obliged to put forward any solution to the immediate problems that face us. I wish that I could accept their reasoning. During 1973 and a large part of 1974 it was possible to argue that the major factors in our inflation were the increases in oil and commodity prices and the fact that the Conservative Government had let social expenditure get entirely out of control and had resorted to the printing presses. However, it is inescapable that since last autumn incomes have played a predominant part in inflation.

It is for that reason that I support the Government's measures to tighten up the incomes side of the social contract. I welcome their package for three reasons. First, it is simple. The limit of increases is£6 a week. That is a figure that everyone can understand. One of the main criticisms of the social contract as it has operated so far is that many people were not quite sure what was involved. Secondly, it is egalitarian. The right hon. Member for Worcester had a cheek to criticise us for putting forward a flat-rate increase, when that was part of the anti-inflation policy of his own Government. It has a lot to recommend it, although I accept that it cannot last for more than a year or so, because it favours the low paid.

Mr. Ivor Clemitson (Luton, East)

Does my hon. Friend agree that it will favour the lower paid only if the£6 a week becomes not only a maximum but a minimum? In other words, if everyone receives the same flat-rate increase, clearly the lower-paid workers will benefit comparatively. But my right hon. Friend the Chancellor of the Exchequer has said on several occasions that the£6 is only a maximum. That may well imply that the people who will not receive the maximum will be precisely the lower-paid workers.

Mr. Radice

There is a great deal in what my hon. Friend has said, but I think that he will accept that some companies and industries may not be able to afford to pay the£6, and it will be a question of choosing between the£6 and employment.

Thirdly, the policy is based on consent. Whatever the argument about a statutory or a voluntary policy, I think that every hon. Member will accept that for incomes policies to be successful they must be based on consent. Therefore, it is all the more encouraging that what we are debating is broadly the policy of the TUC, supported by a majority of the General Council. I have no doubt that the policy will receive the backing of Congress in September by a majority of at least two to one.

As Lawrence Daly said last Saturday at the Durham Miners' Gala, a vast majority of trade unionists are on the side of the policy. They are sick and tired of having to fight for larger and larger money increases to keep ahead of rapidly rising prices, increases which for many firms in the private sector are threatening their jobs. They desperately want to break out of the vicious inflationary spiral. That is why I find overwhelming popular support for the Government's measures wherever I go. On this question it is the Government, and not their critics, who are speaking for the majority of the British people.

I accept, as anyone must, that there are considerable difficulties ahead. I have no doubt that if the incomes side of the policy is successful prices will come down in line with the White Paper target, but there will be a critical period during next winter when they will still reflect the increases now in the pipeline. During that period it will be extremely difficult for trade union negotiators to settle for£6, and to persuade other members who have already settled for£6 not to come back to ask for more. The Government may then need something more on the prices side. They may need to impose a prices freeze for three or four months in the winter. I hope that they will seriously consider that.

Much has been said about re-entry. I wish that we could choose a better word. I do not know whether its symbolism is spatial or sexual. But I think that in any case it is not an accurate word, for it does not describe what we are talking about.

Mr. Neil Kinnock (Bedwellty)

Coitus interruptus.

Mr. Radice

We are talking not about re-entering anything but about moving into a new phase of policy. It is clear that the more successful the policy is in the year ahead, the more it will be essential to work out what is to follow it, and to do so in good time to prevent the floodgates opening. We shall need a prices and incomes policy for a number of years, and not just for this one year.

I do not believe that one can build a democratic Socialist society without such a policy. However, democratic Socialism is about more than a prices and incomes policy. It is about fundamentals, about the maximisation of equality and freedom, based on the underpinning of a planned growth of employment and wealth. I hope that in the months ahead the Government will not lose sight of their long-term objectives. They must not forget that the attack on inequality is not possible without a high level of public expenditure and social expenditure.

It is undeniable that our public sector deficit must be brought under control. An effective prices and incomes policy will help in that respect. But it would be wrong for a Labour Government to be forced into a position in which they had to embark on massive, slashing cuts in all the key items of social expenditure. That would have a catastrophic effect on the low paid, the sick and the elderly. It would also lead to a level of unemployment which would be unendurable, as has been said a number of times from these benches. Many of us in the Northern Region are already gravely concerned about the present level of unemployment, and particularly about the plight of school leavers.

I accept, as we must accept, that the Government cannot embark on general reflationary measures in the present situation, or until the anti-inflation policy is seen to work. However, the Government have already accepted in principle that there is more room for selective measures. The North-East welcomes the temporary employment subsidy, which we hope the Government will produce very quickly.

I ask the Government to look again at their regional policies. I do not believe that we are getting value for money. I do not believe that we yet have the right institutions, and in that criticism I include the way that the National Enterprise Board will work.

I turn to the essential long-term question of re-equipping British industry. This matter has been mentioned by hon. Members on both sides of the House during the last three days. In this connection I thoroughly support the case for a powerful NEB, and I have voted for it on a number of occasions. I deplore the havoc that has been created by the House of Lords concerning this legislation.

I wish to repeat a point that I have made a number of times; namely, that we cannot restructure British industry by rhetoric, whether it is of the Right-wing or Left-wing variety. We cannot change British industry by the stroke of a pen, as too many people seem to think we can. We cannot even change industry by setting up new institutions. We need a strategy or a plan, and by that I do not mean anything over-elaborate or over-complicated, as was, for example, the national plan of the 1960s. I mean a concentration of resources, energy and time on those industries which play a critical part in our economy, whether it be in terms of export or import savings. That must be done very quickly.

Successful anti-inflation policies can prevent disaster. They can buy us time, but they will not, by themselves, put right the problems of what the right hon. Member for Sidcup (Mr. Heath) called "an unbalanced economy"—only a coherent industrial and economic strategy can do that. We must win the battle against inflation, but in our concern to win that batle we must not forget our basic objectives.

7.3 p.m.

Mr. Paul Channon (Southend, West)

I agree with some of the points raised by the hon. Member for Chester-le-Street (Mr. Radice), but I think he will agree that for all responsible hon. Members, whether they be on the Labour benches or the Opposition benches, the past few months have been agony. We have watched our country bleed away, with continually rising inflation, and with the Government apparently unable or unwilling to do anything effective about it.

Is it not a terrible indictment—one must say these things because lessons must be learned for the future—that we should be faced at the end of July with a situation that has been clearly visible to anyone for months past, with inflation now running at 26 per cent., with the pound having fallen and with still, I suspect, grave dangers for sterling lying ahead? Yet only now have the Government come forward with these measures, some of which, for reasons which have been outlined by many of my hon. Friends during the past few days still are inadequate. I believe that that is a terrible indictment, and it would be wrong for the Government not to recognise at least that fact.

I do not believe that even now people outside the House have woken up to the seriousness of the economic situation. Not only do we have inflation at 26 per cent. but we shall in the next year, 18 months and two years have levels of unemployment that we have not seen for a long time. There is little, if anything, that the Government can do about it at present. Therefore, during the next year, 18 months and two years there will be a combination of record inflation and levels of unemployment certainly not experienced in the post-war period. This will produce a combination of social tensions and pressures that may put very great strains on our society.

Therefore, I come to my first conclusion, which I regret that the House so far has not seen fit to adopt. I believe that in this very trying situation the overriding need at present is for both sides of the House at least to try to work out a policy that most of us can agree upon. I much regret that we are in a situation where the Government, for reasons that I shall come to in a moment are not prepared to take the necessary steps essential for all of us to be able to work together to try to save the country from the appalling situation that lies ahead.

The Bill is inadequate for many reasons which I shall come to later. But when we consider, above all, the principal question—namely, should we, or should we not, have an incomes policy at this time, even such an imperfect one as we are being offered?—I believe that we have to come down on the side of having an incomes policy. I do not believe that any hon. Member is keen on such a policy. I do not believe that even the hon. Member for Cornwall, North (Mr. Pardoe), whose party has been advocating it for quite a considerable period, is anxious to get involved in such a policy. Nobody wants it, but, at present, I believe that it is absolutely inevitable.

Labour Members, and indeed Ministers, have said that we need national consent and that these policies must be based on consent if they are to succeed. It is crucial that it should not just be the consent of half the population, or indeed a quarter of the population. It must be based on the consent of as many people as possible. There must not be a surrender to one particular section or another. There is considerable resentment about what the last Labour Opposition did when my right hon. Friends were engaged 18 months ago in trying to get national consent for a policy to tackle inflation. It is absolutely right that we should be trying to get a policy of national unity and national consent around which the nation can rally. That cannot be done if partisan measures are taken which only half the country will support.

There will inevtiably be sacrifices made in all parts of the House and in constituencies represented by hon. Members in all parts of the House. In many industries—though not all—this slump will be very deep indeed. This is quite inevitable, and it is foolish to pretend otherwise. It is disingenuous of Ministers to pretend that there is much that can be done to deal with the levels of unemployment that we shall face. The OECD report indicates that we shall have 1½million unemployed next year. That may or may not be true, but the people whom I have consulted in industry seem to think that it is more likely to be so than otherwise. I fear that we may see levels of unemployment of 2 million next winter, and that will present serious problems.

If we are trying to get consent, is it not all the more regrettable that the House should be faced with what I believe to be the intolerable situation of being asked to pass a measure like this tonight with no accurate knowledge of what the real back-up measures are that the Government are threatening the country with but are afraid to publish? They are willing to wound but afraid to strike.

The Secretary of State owes the House an explanation why the Government are unprepared to publish the reserve powers of the Bill. There has been considerable confusion about the nature of the retrospective powers that may be required. If we read carefully what the Chancellor said on Monday and what the Prime Minister and the Chancellor said yesterday and today, we find that their words are not wholly consistent. When there is doubt, surely there is all the more reason for the Bill to be published. It is utterly intolerable for the House to be asked to pass this measure tonight, for us to go away and for the country not to know what the real purpose of the Government's back-up Bill is. If drafting considerations are holding it up, the least we should have is another White Paper on what the Government would do if those measures became necessary.

It is fatuous that employers should be threatened if they break the policy. I think that in the past the Prime Minister referred to them as rogue elephants. Yet they have no idea what penalties, if any, will be levied on them if this policy breaks down. That is not the way to handle the House of Commons. Nor is it likely to get the sense of national unity which we require if this policy is to work.

I ask the Secretary of State to tell us why it is impossible for the Government to publish a Bill, and, if they will not publish it, why they will not at least publish a definitive statement saying what they would be prepared to introduce should circumstances demand it. That is the minimum that this House should allow the Government to get away with before giving a Second Reading to the Bill.

Mr. Foot

I do not know whether the House will wish me to traverse the whole subject again tonight. Therefore, I should like to try to answer the hon. Gentleman now. Ministers have made clear statements to the House on what they believe would be incorporated in such legislation, if it were to be brought forward. However, they have also said that they wish to proceed on the voluntary principle which we are now operating. In continuation of that position I have said that, in my opinion, one of the worst constitutional outrages would be to flaunt before the House and the country an unpassed Bill. If a Bill is produced, it should be presented to the House, and the House should decide clause by clause whether it wants it. I suggest that it is quite wrong, particularly on matters of this kind, to have a Bill produced and flaunted in the country without being presented to the House of Commons.

Mr. Channon

It is precisely for that reason that the Government should seriously consider publishing, if not a Bill, at least a second explanatory White Paper outlining what they have in mind. That would be in accordance with precedent and would make clear to people outside this House what was proposed. That would remove any element of doubt.

Mr. Foot

indicated dissent.

Mr Channon

It is no use the right hon. Gentleman shaking his head. There is considerable doubt both inside and outside this House. The only way to remove that doubt is by a definitive statement. When we have Ministers making somewhat differing statements day after day, people outside do not understand what is going on.

Mr. Foot

I was shaking my head because I was disputing the view apparently held by the hon. Gentleman, and shared by other hon. Gentlemen, that it is a good constitutional process to have a Bill published, but not presented to the House of Commons, one which is flaunted round the country threatening people because they do not know whether it will be put into operation or not. A Bill is either presented to the House of Commons or it is not.

Mr. Channon

The right hon. Gentleman knows that my suggestion is that, since the Government are reluctant to publish a Bill, they should publish a White Paper instead.

Mr. Nick Budgen (Wolverhampton, South-West)

Does my hon. Friend agree that, on reflection, he is really suggesting that we should have rule by White Paper? If the Governemnt want the citizen to alter his actions in any way, ought they not to bring forward legislation?

Mr. Channon

If that is what the Government want, that is what they should do. They should not have law, not only by threat, or by White Paper but by an unpublished White Paper, which is what we are having now. So-called law is being made without people knowing what it is. That is what I complain about. If the Government want to take further steps, they should bring a further Bill before the House and ask us to accept or reject it. I accept what my hon. Friend says.

One of the central weaknesses of this policy is the flat-rate £6. Whatever may be said in this House by Ministers, there is no doubt that outside everyone regards the£6 as an entitlement—a minimum. There are many industries where the£6 increase will be more than 10 per cent., and other industries where it will drive people into bankruptcy if it is paid in full.

That is both inflationary and extremely damaging. Already leaders of trade unions have said that the£6 is an entitlement, not a maximum. That will cause great trouble in the next 12 months.

What is the Government's policy on increments? If they are exempting incremental payments, what is the logic behind that decision? People to whom I have spoken find it extremely unfair. I must ask the right hon. Gentleman to tell us what has led the Government to the conclusion that incremental payments should be exempt from the policy.

I think that the White Paper and the Bill will have some effect, but not a great deal, on inflation. I believe that inflation may moderate a little in the short and medium term. Many hon. Members take the view that the policy outlined in the White Paper can at best have only a palliative effect on the course of inflation in this country. I think that we shall get the worst of both possible worlds if we are not careful. We shall have the Bill put forward and a situation of extremely high unemployment. I believe that, for a variety of reasons which have been discussed by many hon. Members, inflation will shoot forward again in 1977, or at the end of 1976, and we shall be in the worst possible situation. If we get into that situation, it will be entirely the fault of the Government, who won two General Elections on fraudulent manifestos and have been unprepared to face the situation that they have created. If we get into that situation, God help this country! I hope that we shall not reach that situation, but my great fear is that we shall.

We are being asked to accept the White Paper and the Bill. Yet, at the same time, the Government are refusing to learn any of the lessons of the last 18 months. We are still being asked. as a Parliament, to go ahead with expensive measures of nationalisation—community land, petroleum, industry, ship building and craft. We are still being asked to increase housing subsidies, with all their distorting effects. We are still being asked to agree to more money being spent on food subsidies. The people in this country are in danger of becoming punch drunk from both inflation and Socialism at the same time.

This game will come to an end. The party is over, as the Secretary of State for the Environment said. I hope that the hon. Member for Chester-le-Street (Mr. Radice), is under no illusion about that. On Monday the Chancellor of the Exchequer, referring to what would happen to public expenditure in two or three years, said: in the course of the current normal annual review of all expenditure programmes over the next five years the Government will be seeking further substantial economies in these programmes, particularly in 1977–78 and 1978–79."—[Official Report, 21st July 1975; Vol. 896, c. 70.] Those economies are essential. What I complain about is that they are not being undertaken now when they are so clearly necessary.

I support the idea that the Government should come forward with a White Paper of this kind and take measures to try to tackle wage inflation, which is only part of the problem confronting this country. But I believe that the indictment on the Government at the end of the day will be, first, that they wounded the country by creating, or making worse, the conditions of inflation from which we now suffer, and, secondly, that they were not prepared to take the necessary steps to save the country in the areas of public expenditure, in particular which I have outlined. These are crucial if we are to get back to a reasonable state of normality, which I believe the country and the majority of hon. Members so fervently desire.

Mr. Speaker

May I make a special plea to hon. Members? We have rather less than two hours before the winding-up speeches begin. The last two days have been very harassing for the Chair with the number of hon. Members who wished to speak and the length of the speeches. I would like to call another 10 or 12 hon. Members tonight, and this will require a self-denying ordinance by speakers to confine themselves to about 10 minutes each.

7.10 p.m.

Mr. Tam Dalyell (West Lothian)

I am not a great one for "yah-boo" politics, and this is not the occasion for them, but when I listened to the speeches of the right hon. Member for Worcester (Mr. Walker) and the hon. Member for Southend, West (Mr. Channon) talking about the conditions that the Government have created, I begin to wonder. I recollect that two years ago they were the enthusiastic young Ministers encouraging the then Tony Barber, as Chancellor, in his profligacy. They were egging him on. If there is one thing we are discussing tonight, it is the economic consequences of Tony Barber.

I am alarmed at the way in which costs of public administration have risen, are rising and may continue to rise even more ominously. The facts are best presented in the TUC's economic review. The share of employment in the manufacturing sector has fallen from 37 per cent. of the total labour force in 1961 to 33.7 per cent. in 1973. This has coincided with gains in the public administration sector, which comprised 5.7 per cent. of total employment in 1961 and had risen to 6.8 per cent. in 1973. Employment in service industries has risen in the same period from 30.5 per cent. to just over 37 per cent. In numerical terms this means that 9,200,000 people were employed in manufacturing industry in 1961 and that this number has fallen by 1,300,000 to 7,900,000.

I am also concerned at the Chancellor of the Exchequer's statement yesterday that the growth of local authorities' spending in 1973–74 was 30 per cent. higher than planned and that over a two-year period it had been 50 per cent. higher than planned.

The Prime Minister said yesterday: 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."—[Official Report, 22nd July 1975; Vol. 896, c. 327.] While making it clear that I am not insinuating wide-scale inefficiencies, let alone corruption, may I ask hon. Members to reflect on their own experiences in their own areas, whether in England or Scotland, of local government reform. Every one of us knows of instances when new administrative jobs have been created and salaries for old jobs, often under new names, have soared up out of all proportion to the General Index of Retail Prices or any other index. As one who has indulged in more than his share of party, political and personal controversy, I have never in 13 years in this House received so much annoyance from level-headed constituents as on the occasion of the rise in salary of local authority officials in the Lothian Region into the mid-teens of thousands of pounds a year range. I acknowledge that a number of hard-working public servants are profoundly embarrassed.

But the costs of change and upheaval in government are of an order that any country and any government must take into account.

Mr. Ralph Howell (Norfolk, North)

I am interested in the figures the hon. Member is putting forward. Does he know that since 1960 we have employed more than 1 million extra people in local government and that since reorganisation 80,000 more have been added to that figure?

Mr. Dalyell

I simply accept those figures and do not comment because of what Mr. Speaker has said about the limited time available to the House.

At business questions after business questions, I have asked my right hon. Friend the Leader of the House, to his not inconsiderable irritation, to provide a financial appendix to the White Paper on devolution. Every upheaval and change has its price tag. It is not simply a question of paying 140 Assemblymen post-Boyle salaries—one could hardly pay them less because many of them will also have to keep up two homes. Infinitely more serious are the costs of carving up the Civil Service and on what matters it will be responsible to the Assembly and on what matters it will be responsible to the Westminster Government. Without going into the problems of serving God and mammon, with which my hon. Friend for Fife, Central (Mr. Hamilton) and I hope to deal if we are lucky enough to get a debate during the Consolidated Fund Bill, there is a problem of leap-frogging of salaries between those paid in the Assembly and those being paid in the regional authorities.

Is a Permanent Secretary responsible to a department in the Scottish Assembly to be paid less than a senior officer of the Strathclyde or Lothian Region? If so, it would be a bit bizarre. The problem is mentioned in Professor Tait's study "The Knife-Edge of Devolution". I hope that this subject will be raised by the Government, as promised in paragraph 15 of the White Paper, when they meet the Convention of Scottish Local Authorities.

I see my hon. Friend the Member for South Ayrshire (Mr. Sillars) looking a little blue. He might like to contemplate the scene in the Whips' Office when they are required to keep some of our hon. Friends here night after night on a constitutional issue on the Floor of the House for the purpose of voting post-Boyle salaries to Scottish Assemblymen while those with huge regional responsibilities in their part of the United Kingdom, or like Scottish regional councillors, get an all-too-meagre attendance allowance. Is it right to pay Assemblymen post-Boyle salary when those who run our great cities, like Manchester, Sheffield, Newcastle, London and Glasgow, are paid only attendance allowances? After what some of us went through at 2.30 a.m. this morning in the Boyle debate, one wonders whether the Government business managers fancy that prospect.

There is only one sound reason why the Scottish Assembly should go ahead in this financial situation and in the economic situation that has been outlined over the past three days. That is the charge of deceit and hypocrisy in relation to Labour's policies in October 1974. I would like to face this head-on. In October the signals were that once the Labour Party became committed to an Assembly, the idea of regions in general and Strathclyde in particular would be frozen. Rightly or wrongly, that was my understanding. By November 1974 the Secretary of State had made clear that it was too late and that many contracts had been signed.

Secondly, the situation which necessitated the "Attack on Inflation" White Paper, if foreseeable, was not quite foreseen by many politicians, and we are in a different ball game now.

At a deeper level, the notion of an Assembly in Edinburgh with its crippling extra costs on the Scottish—or is it British?—taxpayer can be reconciled with the basic promise of the devolution of power. For example, the Treasury should swallow its understandable objection to hypothecated expenditure and allocate a percentage of oil revenues to Strathclyde. I am not a Strathclyde Member, but I think that expenditure should be hypothecated for housing and other deprivations in Strathclyde, Merseyside, Salford and other similar areas. This was the promise of the Labour Party and it was a right policy.

During the debate on the Consolidated Fund Bill I hope to argue that other powers such as the regulation of the licensing laws, as set out in the Clayson Report, should be given to the regions. This is much more sensible since there are different views in the Western Isles than in the Lothian Region, for example. However, the layer of an Assembly would be mighty costly and we should take this into account in discussing the rising costs of local government and public expenditure.

The right approach is for devolution, in which I believe as strongly as most of my colleagues, to be given quickly, in full and generously to the regions of Scotland. This may be second best to some of my hon. Friends, but it is practical and it is sensible financially. It is on the finances of devolution that I beg my right hon. and hon. Friends to exercise their most critical faculties.

7.21 p.m.

Mr. Nigel Lawson (Blaby)

The first thing to get clear in our minds is what kind of beast it is we are talking about. Is this a statutory or a voluntary incomes policy? Last night the Secretary of State for Employment, when tackled on this point, said that it was a matter of semantics. Suddenly this great matter of principle, a voluntary policy like the social contract or a statutory policy such as we have here, is reduced purely to a matter of semantics. At his Press conference on 11th July the Prime Minister said that it was a matter of terminology.

The Government quite clearly are introducing a statutory policy, and that is why we have a Bill before us. If anyone is in doubt let him listen to what the Chancellor said at that Press conference. He was referring to Clause 1 and he said: This, of course, would prevent payments in excess of the£6 flat rate; prevent payments to anybody earning more than£8,500 a year; prevent the payment of increments or staged increases above the£6 limit; and prevent arbitrators from making awards outside this limit. This is not the language of voluntarism. It is the language of a statutory incomes policy.

The second question is whether we have a temporary emergency package designed to operate for a very short time, which some hon. Members might feel is called for in this crisis, or whether is something more. Of course, it is something a great deal more. It is the first step along a road we have traversed all too often in this country before. At that Press conference the Chancellor said: We see the policy we have announced as covering the wage round over the next 12 months as a policy for the first of several years. He went on: We have agreed already with the TUC and the CBI"— without informing Parliament what had been agreed— to start discussions in the very near future about the formula which should follow the current formula. So we go from formula to formula, from stage I to stage 2 to stage 3, and so on. That is the sort of policy we are being asked to approve. It is a statutory policy, and one that will last an interminable time.

The question is why the Government are setting out upon a road which has inexorably led to the downfall of every Government who have hitherto tried it. It is not because that is the only way of cutting quickly into the rate of inflation. We know the truth. The Governor of the Bank of England informed the Chancellor that unless something were done very quickly all of our sterling would suddenly disappear on some sort of magic carpet back to the gnomes of Arabia. Being an inexperienced Chancellor, the right hon. Gentleman believed it.

Of course, the policy which it is said will cut quickly into the rate of inflation will do nothing of the sort. In the first instance people will discover—and this was pointed out by my right hon. Friend the Member for Sidcup (Mr. Heath) yesterday—that for some time inflation will go on at its current horrendous rate of 25 or 26 per cent. while wage increases will not follow at the same level. Then, later on, inflation will indeed come down. We have already seen the first signs of this even before this policy has been enforced. The wholesale prices index has been rising at a slower rate. All the signs already exist of a lower rate of inflation, and that is what will happen as a result of the change in monetary policy which was initiated by Lord Barber during the latter period of the last Conservative administration. That policy has been more or less continued during this administration. The gathering recession which is upon us is part of the same overall picture as the lower rate of inflation.

All that this incomes policy can possibly do is slightly to mitigate the rate of unemployment which would be accompanied by the further fall in the rate of inflation. In so far as it does that it is strange that we are being told that we should thank the trade unions for something which will reduce unemployment. They should be thanking the Government, because that is presumably what they want. They are not giving us anything except a certain degree of freedom, which it seems they have given up willingly.

The only way in which we shall get our economy straight is to do what the other economies in Western Europe have done. This is essential not merely for dealing with inflation. We must cut this huge public sector borrowing requirement and cut public expenditure. This must be done to prevent still worse inflation in the longer term. It must also be done if the private sector is to survive and if the mixed economy, which most hon. Members want, is to continue. Later, public expenditure could be expanded, when we can afford it.

Mr. Alan Clark (Plymouth, Sutton)

My hon. Friend said that this was the only way of dealing with inflation, but surely there is another way, and it is just as well for the people of this country to realise it. That way is the total Sovietisation of the economy of this country. If there is total State control of the whole of the economy, of the wages and of the pricing, our inflation would probably be no greater than that of the Soviet Union or Communist China.

Mr. Lawson

My hon. Friend is absolutely right, but the only way to deal with the matter within the context of a free society is as I have suggested. The irony is that this is the approach the Government have adopted with the nationalised industries, which is where all the real difficulties over wage policies have occurred in the past.

The part of the White Paper dealing with nationalised industries tells a different story from the burden of this Bill. We are told that the reserve powers will apply only in the private sector. That was made clear by the Prime Minister. Wage increases above the limit in the public sector will not in any circumstances have the reserve powers applied to them. The nationalised industries are told in paragraph 19 that they can pay what they like above the limit but that the Government will not finance them.

The paragraph concludes: All this means that excessive pay settlements will affect employment in the industry concerned. That is what the Government are doing in the context of the nationalised industries.

Yet the private sector already experiences the discipline of recession, falling profits and low liquidity. It cannot pay high wage increases. The Government are now superimposing the absurd statutory incomes policy on the private sector, whereas the truth is that it is the public sector which needs the discipline already experienced by the private sector. The policy is nonsense. It is a contradiction.

Why will the statutory incomes policy cause damage? Yesterday my right hon. Friend the Member for Sidcup, in a remarkable speech, painted only half the picture when he said that an incomes policy pursued by a Government must rest on consent. The truth is that any economic policy, in a free society, must rest on consent. In this difficult time we face a great economic crisis, and the measures required to deal with it will be difficult to apply. There will be a period of great hardship. The crucial questions is, whether the policy most likely to gain consent is a statutory incomes policy. I believe that the reverse is the case.

A telling indication of this comes in the Tribune Group amendment, which says that the policy will reduce the living standards of working people. The fact is that we can no longer go on borrowing at the same vast rate, and this will force living standards to fall. But this fall in living standards will not now appear as inevitable or brought upon the country by the inexorable play of economic forces. It will seem to have been imposed upon the British people as a result of an arbitrary pay limit. The fall in the standard of living will arouse far more hostility than it need have done. It will undermine the Government's authority as a direct result of the Government's opting for a statutory incomes policy.

An incomes policy is redolent of disadvantages and misunderstandings. It nurtures the idea, for example, that there is a deal and that a quid pro quo must be given—quite apart from the fact that the policy, which at best can do no good, is likely to do considerable harm, and is alien to our ideas of how a free society should operate. As the strains increase, so will pressure for a quid pro quo. The Chancellor announced cuts in public spending, although he did not have the courage to put a figure on them. They will be deferred. There will be premature reflation. All sorts of harmful economic measures will be undertaken. All the other aspects of policy will be sacrificed to preserve the tattered remains of the statutory incomes policy.

There is, moreover, a special danger when a Labour Government indulge in this policy. History shows that it is when Labour Governments have adopted such policies that the Communist Party has made headway in the trade unions. In the period between 1966 and 1969, when the last Labour Government introduced such a policy, the Communist Party made great headway, and the Liaison Committee for the Defence of Trade Unions grew up. That happened because trade unionists were told that the Labour Party had betrayed them and that the Communist Party was the workers' friend.

Finally, there is one further disadvantage which my right hon. and hon. Friends in particular should bear in mind. The implementation of a statutory in- comes policy inevitably determines and perverts the nature of the political debate, which becomes focused on the distribution of incomes instead of the creation of wealth. Private enterprise and a mixed economy are the epitome of free Western European society. I do not believe that they can long survive if economic and political debate is perverted in that way.

7.35 p.m.

Mr. Neil Kinnock (Bedwellty)

The hon. Member for Blaby (Mr. Lawson) performed one function for which we should be grateful. He articulated the view held by many members of the Opposition and, what is more important, by people outside Parliament in positions of financial interest. Whatever concessions we make in the form of a policy which is voluntary in its conception but statutory in its application, or a thorough statutory policy, will not fulfil their appetite for changes in economic policy. They think that only massive cuts in public expenditure will resolve the problem.

If the Government are set up on a course which seeks to win a consensus, or the approval of the friends of the hon. Member for Blaby outside Parliament, by moving towards a statutory policy, they must be warned that that will not be enough. No statutory policy—no matter how stringent, thorough and universal—can satisfy the appetities of those who want to change the balance of power in industry. They think that the only way to do that is by means of massive unemployment.

Mr. Lawson

indicated dissent.

Mr. Kinnock

No one admits wanting mass unemployment. I do not accuse the hon. Gentleman of that. However, he must face the direct consequences of the economic policy which he and some of his hon. Friends propose. Some members of the Opposition have the courage to accept that fact. They offer mass unemployment as a joy-through-pain answer to our problems. Some people outside Parliament are stupid enough to accept that.

Other members of the Opposition are not as direct in their approach to the problem. They ask for policies which guarantee mass unemployment, while denying that that is their effect.

I regret that I was carried away into following the remarks of the hon. Gentleman. I hope that over the next two or three days—I suspect that we shall be here well into Saturday afternoon—we shall have an opportunity to discuss the wider aspects of the Bill.

Ever since I became involved in politics and took an interest in economic affairs, I have been informed by authorities that the essence of our problem is wage inflation and that it has been caused and exacerbated by the exercise of monopoly power in wage bargaining. Until recently adequate ways have existed of illustrating that fallacy. Far from being the main cause of inflation, only an increase in disposable income can enable growth to occur. Recently—largely as a reaction to enormous price increases resulting from factors beyond our control, such as raw materials and oil price increases—many wage rises have made a substantial contribution to the level of inflation. I accept that some wage rises play a major part in inflation. We must reduce inflation by means of an incomes policy—not a wages policy. We must evolve a policy for all incomes. A policy on dividends alone is utterly irrevelant. We shall have the opportunity to discuss the matter further in the next few days.

Given that we must have a policy for incomes, as the right hon. Member for Sidcup (Mr. Heath) said, to be able to enforce that policy in a democracy we must have consent. How do we get the consent? If it is now universally orthodox to accept that we need a policy for incomes and that we have to enforce it, that then becomes the central view of any responsible Government. The question is how we enforce it.

The social contract was a method of enforcement in which I believed. The social contract gave an opportunity to the trade union movement to accept a series of guidelines in return for a massive increase in the social wage and job security and all the measures for which this movement has striven over 70 years. Regrettably, because we live in a time of major inflation, for reasons over which we have little or no control, that was the last era in which such an experiment should have taken place. Nevertheless, it achieved some remarkable successes.

If the essence of the Government's policy were that the only way to secure the enforcement of a wages policy was to get consent and keep consent, trust and assent, we should not be so bruised as we are. The radical part of the Labour Party is bruised, and the bruise extends way beyond the Tribune Group, to which I belong, to fellow-members of the Parliamentary Labour Party and right out into the trade union movement.

To illustrate how deep and black is the bruise I will read to the House a resolution of the Finance and General Purposes Committee of the Transport and General Workers' Union, to which I belong. On the day before the Prime Minister announced the White Paper "The Attack on Inflation", the following resolution was passed: The Finance and General Purposes Committee endorses the efforts of the TGWU members on the TUC General Council and whilst approving the approach made by the TUC the Committee considers that any development of reserve powers legislation would be against our strong advice. Nevertheless the Union will continue to support the Labour Government on the basis of TUC policy (including the Social Contract). We further urge all Ministers who share the views of the TUC to remain at their posts with a view to ensuring a united Labour Movement during this difficult period. That is the most explicit and graphic illustration of the torture that the British trade union movement is going through. To get on to the Finance and General Purposes Committee it is necessary for a man to come from the shop floor. The members of the committee are not professional, executive trade unionists. They are men who have gone through the struggles of the 1930s and younger men whose starkest experience was the disaster of the years between 1966 and 1970. However old or young they are, these men, although they are sound of mind and in full possession of their faculties, have been prepared to freeze their memories, freeze their instincts and pass that resolution to give the Labour Government its "One Last Chance".

These men are showing back-breaking loyalty, not the loyalty of sheep, excuse-seekers or the mindless. Even those in the trade union movement who do not agree with that assessment of the position and the action those men have taken would not accuse them of anything worse than having too much trust. Only fools would accuse those men of treachery or timidity, and only bigger fools would mistake their uneasy compliance With the Government's policy for dumb consent to that policy.

The real danger to the Labour movement lies at that point. An inch—the biggest inch in British Labour history—has been given by the TUC General Council to the Labour Government. If the Government take the proverbial mile —or, should I say, the statutory mile, the unemployment mile or the public expenditure cuts mile—they will deserve and get all the loathing of which the organised British working class is capable. That does not mean survival for our programme or survival for our Government. It means the destruction of both, not destruction by simple opposition but destruction born of contempt and distrust.

That is what we are gambling with when we approach this matter. There is no bond of personal or collective loyalty to individuals, to the Government or to the Parliamentary Labour Party that will be able to withstand the betrayal of the support which has been given by the TUC General Council to the Government within the past 16 months and most crucially within the last week or so.

My right hon. Friend the Secretary of State for Employment fully understands that situation. Indeed, more than anyone else in the House he has fought to bring a much more civilised and serene arrangement into being. Now we have to use what we have to try to escape from the disasters that could confound us. He understands that, and some of his ministerial colleagues will understand it, but I am not sure that the understanding is universal in the Cabinet room or, indeed, in the offices of the Government or in the Parliamentary Labour Party. Those who do not understand will have to learn. They can learn the hard way, through a series of conflicts which would make the experience of the hon. Member for Sidcup look like a love-in, or they can learn the other way, by implementing the proposals of the TUC contained in "The Development of the Social Contract", by forgetting the self-destroying nonsense of wages policy enforcement powers and by seeking a Socialist solution to this capitalist crisis.

It is not a soft option. If the Government want to prove their virility by undertaking tough measures, the policy contained in our manifesto of a in mental and irreversible shift n the balance of wealth and power is a much tougher option than giving 16-year-old children an apprenticeship of misery in the dole queue, putting their fathers out of work or condemning 58-year-old redundant workers to the death cell of early retirement. That is where the challenge lies, not in taking on the workers, but in taking on the daleks in the Treasury, taking on the sterling holders, taking on the greed of the creditors. Those are the traditional enemies of the Labour movement. When shall we in the Labour movement realise who are our supporters to whom we owe our existence, and when shall we start rewarding them for that? They will reward us with trust, but they understand the position we are in. In our every action we must indicate that we are striving with might and main to bring our policies to fruition so as to keep their trust, affection and support, because without it this policy and the Government have no chance. I think the Government understand that that is the essential challenge.

In fact, the White Paper and this extraordinary Bill have been presented as shamefaced alternatives, so-called, to unemployment rather than as a proud strategy. The Government would not even publish the Bill defining the reserve powers. We can have an argument about that, as I am sure we shall, at a later stage. It appears that the Bill is regarded as some kind of Dr. Jekyll potion. It seems that the Government are afraid that if they publish it they will turn into hideous Tory monsters. We all know what happened to dear old Dr. Jekyll. However, the Government have imposed cash limits, and there are the possibilities of unemployment in the nationalised industries. The Government propose sanctions against£6-busting local authorities, with unemployment and public expenditure implications. I fear that the Government are well on the road to changing their personality. However, there is still time for an antidote.

The TUC General Council, in accepting the £6 limit, specified the need for price targets and limitations. It specified a major reduction in unemployment and further improvements in the social wage. My hon. Friends in the Tribune Group have spelt out another strategy. Indeed, scattered throughout the Labour movement there are various alternative strategies to the orthodoxy which the Government once again seem to be embracing like a nervous virgin.

The question has arisen of whether the Government'spolicy is a temporary palliative. Will the Government's policy get us out of our present problems? What about the long-term and short-term situations? I have had difficulty in finding one of my hon. Friends who disagrees in the long-term with the motion that appeared on the Order Paper yesterday. It seems that everyone is prepared to say that the Tribune Group's policy is great for the "long term". What we have to ask is when the short-term ends and the long-term starts.

We have been postponing the beginning of the long-term approach for years. Now is the time for action. This is the crisis in which we can develop that action. If we wait for balmier days we know that the very fact those days will be stable and warm will mean that people will say "There is no need for change". It is now, when the great demand is for dramatic and resolute change, that we must take the opportunity of introducing socialist measures.

It has been explained to us that the previous Labour Government were blown off course. We could attribute that to inexperienced navigation, but if the present Labour Government are blown off course it will not be inexperienced navigation but downright piracy. If that happens we will not be forgiven.

Mr. Deputy Speaker (Mr. Oscar Murton)

I remind the House of Mr. Speaker's request that right hon. and hon. Members should attempt to confine themselves to 10-minute speeches so as to enable all hon. Members who wish to speak to have the opportunity of doing so.

7.54 p.m.

Mr. Maurice Macmillan (Farnham)

The hon. Member for Bedwellty (Mr. Kinnock) has made it plain to the House why the Government's policies as put forward in the White Paper and the Bill are incomplete and incompetent. The hon. Gentleman's ultimatum has pointed the dilemma that faces the Treasury Bench and set out the divisions that exist on the Government benches weakening in the support that the Government can command from their back-bench Members for then. policies.

I believe that no one in the House can have less liking, from experiences of operating them, for incomes policies —voluntary, statutory or voluntary with statutory back-up, whatever that may mean—than myself. However, for all the reasons that have been given by hon. Members from both sides of the House, I believe that such a policy is necessary at this time. I have always believed that the purpose of a prices and incomes policy was limited. In fact, such policies are limited to only two purposes. First, they have to act as evidence that the Government of the day are prepared to stand firm on all their measures. Secondly, they have to protect employers—particularly small employers —and employees from some of the pressures which would otherwise be added to those put upon them by the monetary and other policies demanded by the economic situation.

We are discussing no new problem. Indeed, as the right hon. Member for Down, South (Mr. Powell) said yesterday, what is remarkable about the subject we are now debating is its staggering lack of novelty. I agree with the right hon. Gentleman. He referred to the previous Labour Government's attempts at an incomes policy. He referred to their determined efforts to destroy our policy in 1972 and 1974. He harked back 10 or 15 years when, as he said, this sort of policy was a new adventure. I believe that even in 1961 we were discussing what was a political as much as an economic problem.

That is one of the reasons why I welcomed the statesmanlike speech of my right hon. Friend the Member for Sidcup (Mr. Heath). My right hon. Friend made it clear that the policies of a democratic Government and a democratic country must depend upon the political consent of the House and of the people. They depend not merely on the agreement of the TUC or the CBI, important as those bodies may be. For I would remind the House that of the 22 million men and women who work in this country only just one half are members of a union. The TUC cannot speak for them. Some 40 per cent. of our gross domestic product comes from firms employing 500 people or less. Probably many of those firms would feel that their points of view are not fully represented by the CBI. It is important that we should get the widest possible consent, bearing in mind the hardships and difficulties that the country will be asked to face.

My right hon. Friend the Member for Sidcup then summarised the reasons which have prevented us from running the economy at any reasonable level, without the sort of crisis that we now face, for some 30 years or more. My right hon. Friend was right to lay stress on the imbalances, regional, structural, industrial and political. Only if we can achieve the sort of balance that he described can we get away from these recurring crises and the need for statutory or voluntary policies and the control of prices. Only if we can achieve the coherence which he demanded can we preserve the structure of a free society with an economy which is not, to refer to the words of the Secretary of State for Prices and Consumer Protection, constrained by powerful interests on both sides of industry. This is a political question, for the only way that that can be stopped is if those interests themselves are constrained within the law and are brought to accept the responsibilities that should go with their powers.

This matter has eluded Governments of both political complexions. It was the strength of "over-powerful subjects" which defeated the efforts of the previous Labour Government when they brought forward "In Place of Strife ". Those same forces, encouraged to their great discredit by Labour Members destroyed the Conservative Government's Industrial Relations Act. In facing the issues of inflation and the economic policies which they require, we must face firmly the political issue of what kind of country we want to be. Nobody as yet, so far as I have followed these debates, has spelt out this issue, which in some ways has been fudged since 1961. It cannot be fudged any more.

There is a great deal to be done to clarify this issue—in industrial democracy, in transforming the nature of the capitalist system and reforming many of our institutions. If I had time I could go into considerable detail about my ideas in this respect. All I will say now is that to obtain the kind of support which the present Government, or indeed any Government, need in the situation that confronts our nation, there must be far more understanding on all sides.

We on the Conservative benches must accept that in some industries nationalisation is here to stay. We also have to accept a degree of Government intervention in the private sector. Perhaps we can look to the United States, where such a prospect is not regarded with quite such horror as it is in this country. We must accept legal constraints on economic activity. This is as old as Lord Shaftesbury and the Factories Acts. We must accept that there is a limit to the level of unemployment which is acceptable, not only to the unemployed or to those who might become unemployed but to the conscience of our people as a whole. We must accept that the rights of capital are not unlimited; but we also have the right to demand that the other side of the House accepts that the rights of labour are not unlimited either. It must recognise that free collective bargaining is a function of free enterprise. In a system of State Socialism that some hon. Members would like to see, there is no room for free collective bargaining because there is no market for labour and no free market in anything. We must ask them to accept that in a free society capital investment is generated by the saving of the people and cannot be wholly dependent on taxation for Government borrowing. They must also accept that profit and profitability are as important as production and productivity and that this has major implications and limitations for what they can hope to do in future policies on taxation, and indeed nationalisation.

I am not suggesting a great degree of consensus, still less some sort of coalition approach, but I suggest that the House will never come to a successful solution to the problems which we are now discussing unless and until each of the major parties makes its own decision—and it is that decision which is beginning to be demanded of politicians by the people.

The Labour Party must decide whether its democratic Socialism is the democratic Socialism of West Germany or of East Germany. Conversely, the Conservative Party has to decide whether it intends to revert to a Cobdenite Whig concept or to remain in the traditional rôle of radical Tories. Perhaps we could both take with profit the resolution that when we have decided, we shall stay the same in Opposition as we were in office. In this way I believe that we can meet what my hon. Friend the Member for Blaby (Mr. Lawson) rightly described as the most pressing need for economic recovery. This is to turn the problems which we debate in this Chamber and which affect the lives of all our people away from the problems of distribution to what is far more important—namely, the problems of the creation of new wealth and the spread of its ownership among the people.

8.6 p.m.

Mr. Stan Thorne (Preston, South)

There appears to be on the part of the Government Front Bench an attempt to suggest that the Trades Union Congress is satisfied with the Bill. My right hon. Friend the Chancellor of the Exchequer suggested that the trade union movement voluntarily agreed to the proposals which were put before the House. I find that extremely difficult to believe. What happened was that a majority of the General Council of the TUC concurred with the Government's proposals. Therefore, it is somewhat premature to say whether the trade union movement agrees or accepts them. The events which we shall experience in Britain in the next four to six months will give us the answer to the question whether the trade union movement supports the measures which we shall consider this week.

Among those measures reference is made to a£6 maximum, and my right hon. Friend the Prime Minister in his speech yesterday referred to the position of USDAW in regard to the General Council's decision. That union is in an interesting position, because few of its members are likely to receive the£6 maximum involved in this legislation. Many shop workers would be extremely pleased to receive an increase of that amount. It remains to be seen whether its trade union strength—because that is what may be involved in the final analysis—will enable those workers to obtain that£6 a week.

My right hon. Friend the Chancellor of the Exchequer said that the TUC will oppose any settlement in excess of the£6 limit. In what way will the TUC oppose such a settlement? If, for example, in the engineering manufacturing industry there is a claim supported by highly organised workers who do not subscribe to the decisions we are taking this week, in what way and with what sanctions will the TUC seek to ensure their conformity? The Government have not revealed whether the TUC has spelt out precisely what would arise in this situation. We do not know whether it will be left to some degree of speculation as to the various aspects of this legislation with which I shall deal in a moment.

It may be true, as the Prime Minister indicated in reply to a question from my colleague the Member for Liverpool, Walton (Mr. Heifer), that shifts have taken place in respect of those who were in the minority when the Trades Union Congress General Council considered this matter, but, as I said earlier, I am much more concerned about the feelings of trade unionists over the next few months as the realisation of what has been decided here comes home to them. I am concerned with the attitude they will adopt, particularly in the period when the real intent of the stautory powers begins to emerge. By the time that the September Trades Union Congress takes place, the movement may be in no mood to give its majority support to the General Council.

Not long after that, the October Labour Party conference will take place. I hope I am not being mischievous when I ask whether there is any coincidence between the imminence of those two conferences, in September and October, and the fact that we have not had spelt out clearly the powers that the Government intend to use to ensure that their policy is carried through. Is there an expectation that, if those powers are really understood, the Government will not stand a cat in hell's chance of being supported at the TUC? I must admit to being somewhat sceptical about those things. Will the Government's policy on this and on many other issues survive the attacks that will be clearly launched against them at those conferences?

In my view, the feeling within the movement is clear, that over the last few months the Government have drifted inexorably from the path upon which the tremendous support of the rank and file was engendered to win the two General Elections in 1974.

There has been a debate of some sort about whether this is a stautory proposal. I am sorry that the Secretary of State for Employment has left the Chamber, because it was clear when he spoke yesterday that he was grappling with a situation in which, behind semantics, he sought to escape the inevitability of his position. The Labour movement is entitled to know, I repeat, what secret powers are involved in the legislation referred to in "The Attack on Inflation".

The fact that these are, it is said, powers to be used against employers does not make them any more palatable in this situation. The very concept of secret powers, about which this House is unaware, in my view smacks of the corporate State. Preventing employers from paying wage increases is, of course, a very strange phenomenon to many working class people. They have had difficulty over many years in obtaining increases in pay, rather than seeing legislation enacted against employers in relation to what may be paid.

With rising unemployment, the position that has obtained from time to time—my hon. Friend the Member for Walton, may well have experience of this—has been that employers have increased the amount they are prepared to pay as a result of the shortage of certain skills, but is that to be the position during the next few months? It seems to me that the contrary will be the position. Rising unemployment will ensure that many employers will not even have to pay those increases to attract the sort of skill they require. One wonders just how far it is realistic to talk about preventing employers from paying over the£6 maximum.

In the final analysis, I suspect that we are again back to the question of the exercise of trade union power, and when we get down to brass tacks we have to recognise that every trade union in Britain today is in business to protect the interests of its members industrially in terms of wages. That is an inescapable fact that we cannot ignore.

A previous speaker referred to the Government having repealed the Industrial Relations Act. We all welcomed it. The pay machinery associated therewith was set on one side. But it seems to me that we are back on the same road to confrontation with the trade union movement—whose creation this party is—and, in the interests of my constituents and my trade union colleagues, T shall have to withhold my support tonight for what I consider to be a piece of anti-workingclass legislation. I voted against it yseterday. Although I understand that the Conservative Party will be doing one of its usual acrobatic acts, I do not propose to join Conservative Members in the "No" Lobby.

In the past the Government have moved extremely speedily when faced with what they considered to be an emergency situation. Budget measures were introduced extremely speedily, and various Bills followed. The question that I again ask myself in this situation is whether the Front Bench will have the will to get down in real terms to that irreversible shift of power—this phrase comes back again and again—to working people and their families which is contained within Labour's 1974 manifesto.

If our economic problems are really to be tackled, a number of essential things must be done, and done speedily. The first is the freezing of prices. Had the Government Front Bench devoted its energies to that question in the same way as it has to this particular piece of legislation, many housewives in Britain today would be applauding the Government with tremendous enthusiasm. The next is to restore collective bargaining. Then, as an urgent matter, we have to tackle the problem of poverty, not by bringing in an increase for one-parent families in April 1976 or 1977 but by special dispensation at the earliest available date. It can be done. Next, we have to slash investments abroad, and sell British overseas investments to the tune of£7,500 million. I would recomend that that be done without any hesitation. Military expenditure must be cut by£1,000 million this year. Import controls must be imposed on inessential imports. The wealth tax, that we have been promised again and again, must be introduced. The economy must be expanded by restoring full employment and encouraging increases in terms of rewards rather than decreases.

To do that, in my view it is essesntial to expand public ownership into the monopolies, the banks and the financial institutions, and to pursue the nationalisation of the oil industry as a matter of urgent priority. What is more, the expansion of food production is somewhat overdue. Finally, because it is crucial to the policy emanating from the Treasury Bench at present, it is essential to end the de facto coalition which exists in this House.

These are some of the measures required to put Britain's economy on its feet and to begin the process of social change which is so vital to meeting people's needs. I recognise that the only long-term solution is the establishment of a Socialist society. In the short term, let us at least respond to yet another capitalist crisis with Socialist solutions.

8.21 p.m.

Mr. Peter Hordern (Horsham and Crawley)

In the past two days the House has agreed generally that we are in the middle of a very severe economic crisis. Some of my right hon. and hon. Friends and a number of Government supporters believe that the crisis can best be solved by political means because they feel that economic means are inappropriate to its solution, so severe is the crisis. But solution by political means, especially by a statutory prices and incomes policy—for that is what the Bill is—seems to elevate such a policy into a principle.

That action does not absolve us as a House from careful analysis of the reasons why we find ourselves in this situation, and still less does it absolve us from taking action now. I dare say that a political solution to the economic crisis may be good in forging national unity. I do not offer a judgment on that. All I say is that it is not a good way of curbing inflation.

A number of hon. Members on both sides of the House have said that however much we may dislike it—and everyone seems to dislike a prices and incomes policy—we must regret but accept the necessity for one now, so rapid is the rate of inflation. However, they do not like this form of prices and incomes policy. To those who feel like that, I say that if that is the situation—and no one can deny that inflation is proceeding very rapidly—why do not we have a simple straightforward freeze for a period of six months? That is a statutory policy, and it is one which would be seen by everyone to be very rough but simple justice. After that, we could go back to a free economy once more.

I ask the House to consider the alternative. If we adopt the form of statutory policy proposed by the Government, we shall not get out of it in a hurry. Yesterday the Prime Minister "referred to reentry problems". But there will be deeper problems than simply re-entry problems into what some of us would hope would be a free economy. We would not find ourselves with a free economy. We would find ourselves with permanent organisation already built up, composed of the CBI and the TUC in close conjunction with the Government of the day, deciding what the level of prices and incomes should be.

Why do we go on adopting prices and incomes policies as the solution for inflationary problems and balance of payments problems? We all have the greatest possible doubts about a prices and incomes policy as a means of controlling inflation—and with very good reason. We know from bitter experience that these policies do not work, and it does not matter whether they are launched at Lancaster House with great ceremony or whether they are launched at an agricultural fair, where I thought the Prime Minister introduced a novel touch by tightening the belt of the nation over a bowl of strawberries and cream. It does not matter where it is done.

What is the truth about union monopoly power, which is cited as a prime reason for the rapid rate of inflation? Ten years ago the proportion of the gross national product taken up by wages and salaries was 67½per cent. The latest figure which I have is 68 per cent. In other words, after 10 years, all that Jack Jones, Mr. Scanlon, Joe Gormley and all the other mythical figures who are said to be so harmful to the economy have done has been to get their share of the GNP up by ½per cent. If their members knew how little they had achieved they would be surprised, if not amazed. I do not call that a significant achievement.

However, that does not mean that union power does not have an effect. It can have a marked effect on unemployment. So there is a good reason for regular consultation with the trade unions, because it means that they can judge for themselves the consequences of their actions. But union monopoly power has nothing to do with inflation.

Let us consider the consequences of proceeding with a prices and incomes policy. It means that some central authority composed of CBI and TUC members will dictate permanently the level of prices and incomes. We in Parliament will be left to discuss not what the Government propose in any Bill that is brought before us but the findings of this corporate body. I do not regard that as an attractive prospect for Parliament. Nor do I know why we should devalue ourselves so much. It is as though we have found ourselves becalmed at sea. We spent our time wrestling with the sails, when all the time we have a powerful engine at our disposal which is solely under our command; namely, the control of public expenditure. It is a control which every other modern industrialised country uses to the full. We decline to use it at all.

Every other country controls its public expenditure. We do not. During this past year, no other country has resorted to a compulsory prices and incomes policy, yet it is what we propose. Every other country has reduced its rate of inflation markedly. We have not.

No one can say that the situation in which we find ourselves is a new phenomenon. It has been going on for years past. However, there is something about controlling public expenditure which sounds intensely unattractive—Scroogelike. We all want, in our own way, to increase public expenditure. But we hope that the bills will not be presented or, if they are to be presented, that they will be presented in such a way that someone else will pay at some time or another. Governments of both parties have been guilty of this.

We look forward to the exploitation of the North Sea. If it is not the North Sea, it is the Irish Sea. I dare say that when the Prime Minister goes on holiday he will make some discovery in the Scilly Isles. It is always the begging bowl, never the cheque.

What can be done in a practical way to solve this problem? I cannot help thinking that the organisation of the Treasury—if I may say so to Treasury Ministers—is archaic. In the old days we used always to work on the basis that the Budget should be balanced. We have a Chief Secretary to do that. What do we find today? We find that neither the Paymaster-General nor the Chief Secretary is a member of the Cabinet. If the Government are serious about controlling public expenditure, both the Paymaster-General and the Chief Secretary should be members of the Cabinet. They should spend far more time on blocking Government departmental expenditure than on blocking loopholes in legislation, on which they seem to spend most of their time.

No one wants to cut public expenditure, but surely there is now no alternative. The figures simply do not add up otherwise. We were told in the financial statement that the public sector deficit this year would be£7,500 million. We now have the figures for the first quarter, and they show a deficit running at an annual rate of£8,500 million. Supplementary Estimates of some£2,000 million have already been presented to the House.

All this will have to be financed by the overseas and private sectors. Happily, the overseas sector is improving rapidly at present, and it is possible that we shall be running at a deficit of some£1,200 million for the year. Yet this will put an intense strain on the private sector—individuals and companies—which will have to make up£7,300 million, according to my calculations, to counteract the financial deficit of the public sector. To the extent that this is met, it will be met by running down stocks and by cutting investment. To the extent that it is not met, it will have to be met by boosting the money supply, thus starting the whole process again.

How did we get ourselves into this mess of a consistently large public sector deficit? During the 13 years of hallowed memory before 1964, industry was allowed to get on with its job, and we had a rate of growth which was moderate by the standards of other countries but nevertheless it was a genuine rate of growth. There was no Government deficit to speak of in those days. Then we had the national plan and the commitment to growth by successive Governments. It is time that we took stock of this policy of growth.

Although the two parties differ fundamentally on the place of a planned economy, Governments of both parties have tried to get growth by boosting demand through deficit financing, whenever the balance of payments allowed them to do so. This policy has not been followed in other countries to the extent that it has here—indeed, their monetary mechanisms would have made it impossible for them to have done so. The test surely is whether, after 10 years of this policy, we are able to spend less of our resources on imports than we did, and whether we have been able to produce more per head than our competitors.

The evidence is that we now have to spend twice as much on the same volume of imports after 10 years as do Germany, Belgium and the Netherlands. We have to spend 35 per cent. more than France and Germany and 20 per cent. more than the United States and Italy. As for growth in real terms, over the past 10 years only the United States has shown as little at 50 per cent. more growth than we have. All that has happened is that the Government have taken more and more of the national cake, leaving an ever-smaller share for the private sector.

To have any hope of satisfying the public sector, individuals will have to accept a cut in their standard of living and companies will have to reduce their stocks and cut investment. I do not doubt that the rate of inflation will ease during the coming months, not because of anything in the White Paper but because of the damage already done to the private sector. If we seek, as we do, a genuine economic recovery, this can be achieved only through a recovery in the private sector and by holding down rigidly the growth of the public sector.

The people have been asked too many times to make sacrifices for troubles that are not of their making. They will be asked to make many more before many months are out. They do not deserve a quack remedy to carry out this objective. That is what the Bill amounts to.

Mr. Deputy Speaker (Mr. George Thomas)

I would remind the House that time moves on.

8.34 p.m.

Mr. Ivor Clemitson (Luton, East)

There are those who have sought this week to bury the TUC's pay guidelines phase 1 and not to praise them. However, the funeral oration should contain not a few words of praise.

It is too easily forgotten that two of the major guidelines were the progress towards equal pay for women and special consideration for the lower paid. There is considerable evidence that there has been a great improvement in both those areas and that both those groups of workers have fared better than average. We should not forget, too, that there are several groups of workers who had fallen behind over the years, from miners to nurses, school teachers and so on, who have also been brought into more equitable positions as compared with others.

But we must remember that there are those who did not agree with having any guidelines at all. Free collective bargaining, in their view, should be totally unfettered. The "free" must be a free-for-all. I am not talking about those who live in a dream world of perfect competition presided over benignly by the spirit of Adam Smith. I am talking about those who predict and, indeed, will the imminent collapse of the present system. It is quite consistent for them that they think that a free-for-all would expedite the end of the system. For those of us, however, who want to change to a different system but who wish to do it in a democratic manner—that is, to do it as far as possible taking people along with us and doing it with the minimum of suffering in the process—freedom must be exercised with responsibility.

If we have accepted the concept of voluntary collective bargaining guidelines over the past 12 months, the question becomes whether the proposed more restrictive guidelines are acceptable and, if so, under what conditions, and not whether any sort of guidelines at all are acceptable. First, it must be repeated that inflation is not a short-term problem with simply detectable causes. That has been said, rightly, over and over again during the past three days.

Inflation is a deep-seated phenomenon of the kind of Western industrial society in which we live. It will not be cured by simple short-term solutions and panaceas. To say that rising costs mean rising prices comes precious close to being a tautology. It is so superficial as hardly to need saying. In this country we are obsessed, and we have been over a long time, with the short run. Since the war we have staggered from crisis to crisis, and the crises have become steadily worse over the years. We have failed, by and large, to come to grips with the underlying causes and to make the fundamental changes which are needed. The motto which all Governments seem to have followed is that in the long run we are all dead.

Having said all that, however, the short-term immediate problems are with us. Those who point quite rightly to the longer run must also prescribe for the short run as well, because if we do not survive the short run there may not be a long run worth talking about. There is currently a popular song which contains a memorable couplet. I shall not attempt to sing it but it goes thus: There's a load of compromisin' On the road to my horizon. That is a beautiful piece of poetry. This particular set of compromises represented by the present policy may be some of the compromises we have to swallow on the road to our horizon.

Clearly raw material prices have, for the time being at any rate, eased off from the hair-raising climbs of last year. Clearly the costs which have risen and are rising most are wage costs. If this vicious circle is to be broken into in the short run, voluntary restraint on wage demands is needed at a more stringent level than was true of phase I of the voluntary guidelines. But our acceptance of this policy must not be unconditional.

The constantly repeated calls from the Opposition benches over the past three days that we should drop our longer-term plans, whether they be plans for public ownership, plans of investment under public control or plans of movement towards industrial democracy, are the politics of Mr. Magoo. If anybody needs an explanation of who Mr. Magoo is, he is a short-sighted character in a cartoon. There must be no going back on our policies and our programmes. Not only must we not drop any of our policies but we need to integrate them into a coherent strategy and to expedite their introduc- tion. We need to invest more—that is common ground among many hon. Members—and we need to do it under public control of various forms.

It needs to be under public control, first, because that is the only way in which we can guarantee that investment will take place in the right places and the right amounts at the right time; and secondly, so that the results of investment can accrue in all their various forms to society at large. I would therefore argue, first, that we must not go back on our commitments to deal with the deep-seated causes of our economic and social ills and indeed we should develop them.

Secondly, we come to the question of public expenditure. What are the arguments for cutting it? They seem to me to be several and mutually contradictory. On the one hand we have those who argue that we should cut public expenditure so that resources are released which will find their way into investment and export. On the other hand we have those who want to cut back public expenditure so that the general level of economic activity will be reduced. The first of those propositions is questionable because it assumes that somehow, by some miracle contrary to all past evidence, resources will be released and will go into investment. Where is the evidence for that?

The second proposition is unacceptable because it would have disastrous results on the level of unemployment. One certain result of cutting back on public expenditure is that it will directly result in more unemployment—witness what is happening in teaching; and indirectly it will also contribute to unemployment—witness what is happening in the building trade. What we must not do is so to deal with the short-run problems that we find ourselves facing in the wrong direction when and if, as we hope, we get through the present crisis. We must so devise our short-term policies that we do not make it impossible or extremely difficult for long-term policies to have their desired effect.

We must, of course, be concerned to bring down the rate of inflation and to do so in such a way as to minimise the adverse effect on the level of employment. But we cannot deal with the problems of unemployment sensibly, or plan for the future properly, unless we take full account of the long-term changes which are taking place in employment and which have already taken place over the last 10 or 15 years. We must not go on deluding ourselves that there is a happy coincidence between extra investment in manufacturing industry and more employment in that field of industry. There is ample evidence that it is precisely in those industries where there has been the most investment and greatest increases in productivity that there have been considerable falls in their work force.

We must, of course, invest more, but if we think that we can produce more, become more productive and more competitive and more fully employ the millions of under-employed people in industry at the present time while at the same time increasing employment in manufacturing industry, I suggest that we are living in a dream world.

It is precisely here that the real case for public ownership and planning comes in. We must use the possibilities of the situation to improve the quality of life in every respect. In the future more people will inevitably be engaged in public services. There may well be a movement, as there is already in a piecemeal fashion, to earlier retirement. There should be an expansion of educational provision for all ages.

All of these matters and many more will mean more, not less, public expenditure as the years go by. We must produce the wealth out of which this can come. But if we cut back even further now, beyond the cuts which have already been announced, we shall be queering the pitch for the future even more than we have done already. The obvious example of teacher training comes to mind. It is not to cuts in public expenditure that we should look for the resources to generate wealth; it is to funds which are available and so often misused outside the public sector.

To sum up briefly, I accept the proposals in the White Paper and in the Bill, with two basic provisos: that we do not cut back further on essential public expenditure and that we do not depart from our long-term structural changes. We must survive the short run in order to be economically alive in the long run, if I may stand Keynes on his head. But we must not slip back into our old, evil ways. We must learn the lessons of the perils of pragmatism.

Mr. Deputy Speaker

Mr. Graham Page.

Mr. Graham Page (Crosby) rose

Mr. John Page (Harrow, West)

On a point of order, Mr. Deputy Speaker. Did I mishear you? I thought there might have been some confusion.

Mr. Deputy Speaker

No. I called Mr. Graham Page.

8.47 p.m.

Mr. Graham Page

We usually receive each other's invitations, but not tonight.

I hope that the hon. Member for Luton, East (Mr. Clemitson) will forgive me if I do not follow his short-sighted Mr. Magoo down the road to Katmandu or wherever it was that he went, or if I cap his couplet by saying that I will not keep my eyes on the distant horizon but on the Bill itself. I hope that I shall not be thought pedantic or legalistic if I do so.

If I correctly understood what the Chancellor of the Exchequer said in moving the Second Reading, it was that when the Bill becomes a statute it will not contain a statutory policy, because it leaves the creation of the law and judicial decisions on the law to the executive, to the Secretary of State. It is all so vague that it is voluntary.

I hold the view that legislation should be precise, in order to protect the citizen. The law which the Government have chosen as their instrument in the Bill is the civil law. It is nothing to do with criminal law. I gather that that is why the policy is not statutory but voluntary. However, when one is dealing with law it must be statutory, and we are dealing with a statute which will create law.

The Bill interferes with the rights and duties of the citizen. It interferes between employer and employee as individuals, or between organised employers and employees, over wage negotiations. In doing so it leaves those rights and duties floating in the clouds.

The Bill's injunction is that we must keep within the limits imposed by the policy. That is the essence of uncertainty. There are no strict limits set out in the White Paper to which the Bill refers us. To say that we must keep to a policy is not a legal phrase. Let us take the simple case of the employee suing his employer for wages in arrear, to whom the employer says "You are not entitled to them. You are asking for more than is in the White Paper." The employee cannot go to the court. He must go to the Secretary of State first to have an interpretation of whether the remuneration is within the terms of the White Paper.

What will happen? Will the employee get some sort of certificate from the Secretary of State? Will he be heard by anyone? Will he apply in writing? Will the Secretary of State personally hear every claim for interpretation, or will the job be handed over to be decided by an unknown and faceless civil servant? Will the claimant then trot off to the county court with a certificate of interpretation from the Secretary of State which the judge will have to obey? We are left in great doubt.

In my view the Bill provides that every man is his own legislator by arbitration before the Secretary of State, but at his own expense because there is no legal aid to assist him. I am not sure whether, when the Secretary of State interprets people's rights under the Bill, he will be acting as a legislator or a judge.

Let us examine the other powers given in the Bill to the Secretary of State, namely, the powers of delegated legislation. I applaud the powers in Clause 2(5) whereby a draft order has to come before the House before alterations can be made. Why was that not used in Clause A new White Paper can be introduced as part of the law and can be law for a month before Parliament has a chance to debate it. Why cannot we use the draft order procedure?

Clause 2(6) provides the negative procedure. Everyone knows that it is never debated in the House. Therefore, it can go through without debate.

Clause 6 gives power to the Secretary of State to pay a rent limitation subsidy by any amount he chooses, simply by a stroke of the pen, without bringing the matter before the House.

Clause 3 provides that the Secretary of State can amend the Price Code and create sanctions for an endeavour to include an increase in wages in a price. I do not know what is meant by that sanction. Does it mean that the Secretary of State can, by order, require a penal reduction if he has said that a retailer must not sell his goods at more than 25 per cent. of their cost to him, because he has slightly increased his employees' wages? This shows the Government's ignorance of and contempt for the sovereignty of Parliament and the rule of law.

The principle which the Government have enshrined in the Bill seems to be that, so that it shall not be a statutory policy, we are breaching almost every element in the rule of law.

Under Clause 4, by a mere certificate—it will not be brought before the House —the Secretary of State can alter the rate support grant for any particular local authority. How will the local authorities judge their future policies and rate collections if they have this Sword of Damocles hanging over their heads? How will the expenditure be monitored by the local authorities? How will the Secretary of State know about these wage increases? I assure him that monitoring is a thankless job. I have tried it myself and it is not very effective.

What guidelines will be issued? It appears that if the rate support grant is to be cut the ratepayers will pay. The Chancellor of the Exchequer said, and I agree with him, that he was reluctant to impose any limits on local authorities concerning the amount of rates which they collected. I think that this would be wise for a short time. The independence of local authorities is not necessarily sacrosanct. They are selling services and goods to the public and there is no real reason why we should not impose some restrictions on the amounts which they charge the public for providing those services and goods.

What about the increase in the number of local authority employees? I am not sure whether this is the interpretation of the White Paper. If a local authority increases the number of its employees, will it suffer a cut in its rate support grant? For example, what about the 14,000 new employees who will be required to carry out the provisions of the Community Land Bill? Some of them are starting already. For example, Hampshire is already employing and paying people to prepare what in dealing with the Bill we have been calling the LAMS—the Land Acquisition and Management Scheme. What will happen about that? The White Paper states that it will be illegal for employers to do certain things. Will it be illegal under this secret Bill for councillors and officials of local authorities to do what I have described? Will they find that they are criminals by doing it?

I am getting involved in a Bill—a secret Bill—about which we know nothing. I promised to stick to this Bill. After all, we have sufficient breaches of the constitution in this Bill to which we are asked to give a Second Reading tonight.

8.56 p.m.

Mr. James Sillars (South Ayrshire)

I am flattered by the belief of the Chair that in five minutes I shall manage to cover the whole canvas of this subject in a comprehensive manner which some hon. Members who spoke for 41, 44, 23, 21, 20, 18, 17 and 19 minutes did not manage to complete.

I have sat here since half-past three. It struck me that, as well as a prices and income policy, we should be debating whether the Chair runs a list and, if so, how it should operate. At one stage today there was a wild rumour that the Chair was subject to pressure from the Patronage Secretary, who is not here to confirm or deny that rumour. I am sure that it would be denied by the Chair. Nevertheless, this rumour did float around.

Mr. Deputy Speaker

Order. The hon. Gentleman is out of order with his references to the Chair. He has very little time. I suggest that he sticks to the main subject of the debate.

Mr. Sillars

I am aware of what I am saying, Mr. Deputy Speaker. I have been here for some time. Between half-past three and now I have been trying to make up my mind what to say in the five minutes at my disposal. I thought that I should register that opinion with you, however inaccurate it might be, and an inaccurate opinion in this House is not unusual, as we all know.

In the two or three minutes remaining to me, because I promise to sit down at 9 o'clock, I should like to point out that my main concern about the Bill is its effect on the Labour movement in this country. I am sorry that neither the Secretary of State for Employment nor the Prime Minister is on the Front Bench. The Labour movement, which is important to democracy and progress in both the social and the economic sphere, is in a low state of morale, a poor state of organisation, and in great danger of losing its essential faith in its ability to do a job of work for the people of this country.

Earlier this week the Prime Minister launched an attack on some members of the rank and file of the Labour Party concerning goings-on tonight in a London constituency. I should like to point out —there are one or two of my right hon. Friends on the Front Bench who might convey this to the Prime Minister—that when he became the Leader of the Labour Party we were opposed to a prices and incomes policy. At that time he inherited a party which was in very good heart and organisationally sound. I think that it is fair for someone else in the Labour Party to ask the Prime Minister whether he has not some responsibility for the situation in which the party finds itself when so-called Left extremists can so easily, as he alleges, infiltrate the constituency organisations.

I remind the Prime Minister that when he became Leader of the Labour Party he had a slogan—that he stood for "a home, a job, and a place in the sun" for the people of the United Kingdom. Now, a number of years after he became Leader, we have more homeless than ever before, almost 1 million people looking for jobs, and a cloud across the face of the sun of the Labour movement.

I said I would sit down at 9 o'clock and I will.

In October, when I went electioneering in South Ayrshire and other parts of Scotland, I was well aware what I meant when I said I would never vote for a statutory incomes policy. I accepted that there were problems in the social contract and that there would be further problems from those interests opposed to the Labour movement succeeding in Government in this country. I took that into account. However much it hurts to be on a different side from my right hon. Friend the Secretary of State for Employment, I cannot vote for a statutory incomes policy tonight.

9.1 p.m.

Mr. John Nott (St. Ives)

With the Second Reading of the Bill, we commence the third attempt in a decade to enforce control of incomes through statutory sanction. If experience taught the Government anything at all, this attempt should be more successful than the others. I must confess that if this debate is to be any guide, the signs do not look particularly promising. The majority of the TUC General Council has given these measures its blessing, and, were it not for the demands being made by the TUC in return, this could be wholly welcomed. It is for the trade union movement to decide whether it is wise to become implicated in the successes or failures of Governments. I think it might be rather unwise but I leave it therefor now.

One powerful section of the community has given its consent, and this is obviously a substantial public relations boost for the Government. Whether or not the policy proves to be successful, only time will tell, but the launching of the measures has been helped, in a short-term practical sense at least, by the consent of the TUC.

Unfortunately, when we come to study the substance of the Bill, the whole package gives the impression of having been hastily contrived. This debate is the first we have had on the specific details of the measure, as opposed to the generalities of the White Paper, and it has shown, as experience will show even more, that the Government have not learned all the lessons they might be expected to have learned on the third time round this course.

One of the least attractive features of the speeches from the Government Front Bench—although they are not unique in this—has been the repeated calls for patriotism. In one of the many unattractive jibes which the Chancellor of the Exchequer threw across the Floor of the House yesterday from a sedentary position, he shouted sarcastically at my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe): "Tory patriot". He did not mean that, of course. He meant that my right hon. and learned Friend was in some way being treacherous by not agreeing with the Chancellor's own views. The Chancellor should not confuse patriotism with his own peculiar prejudices nor, I would suggest, with his own personal career and record. It would however be quite as wrong to define patriotism and national interest as the exact antithesis of the Chancellor's views as it is for hon. Members or the Press to suggest that the national interest is upheld by voting for a policy with which one disagrees.

At least we have before us the actual set of proposals, and the debate on the Government's measures has been taken forward more satisfactorily now that we have been able to examine the Bill in detail.

I think that if the national interest is to be invoked in respect of particular economic and social policies it should at least embrace two features. One would be that they should be broadly acceptable to the major political parties at least, and another that all sections of the community should be expected to share in any sacrifice that is being called for. On the first point there seems to be not the slightest possibility of the Labour Government abandoning any part of their Socialist programme with which we most violently disagree. On the second point there clearly is the widest divergence of views in this House on what "equality of sacrifice" actually means. Therefore in these debates, which will now stretch before us, no doubt, for many years, we might perhaps leave the national interest to one side and just get down to discussions of the policies.

One or two particular matters have arisen during these debates. I think the first was the very valuable and interesting point by the hon. Member for Liverpool, Walton (Mr. Heifer) when he made the relevant observation in Monday's debate that wages have not actually varied very much as a percentage of the gross national product in the last 20 years. There was some dispute over the figures with my lion. Friend the Member for Horsham and Crawley (Mr. Hordern), who was talking about employment income as a percentage of gross domestic product. Those figures show, however, almost precisely the same story. Incomes policies may come and go, but the proportion of gross national product taken by wages and salaries has remained relatively constant throughout the whole of this period.

I can accept that statutory incomes policies have been successful in the short-term in de-escalating wage settlements. I believe that stages 1 and 2 and, until it was broken, stage 3 of the Conservative policy were successful in de-escalating wage settlements for a short period. Where the majority of my hon. Friends have honest doubts is whether these incomes policies have made the slightest difference over the medium term to the solution of our economic and social difficulties. Some of my hon. Friends would say, and I think some Labour Members would agree with them, that the results have been downright damaging and perverse.

Let us, therefore, not be deluded in this to think that we are now embarked upon just a short sharp shock which will be successful or otherwise in de-escalating wage settlements. The very method chosen to control income—the£6 flat rate—has set us on a course where the dictation of incomes by the State must seem an almost inevitable long-term necessity, and the Chancellor seemed to me to indicate as much in his remarks.

I agree with my right hon. Friend the Member for Worcester (Mr. Walker)—and I do not mean to be facetious here —when he said that he was glad that the Secretary of State had not resigned. I am delighted that he has not. Resignation is normally an exercise of personal ego rather than an act of conscience. I hope that he remains in office to fight his corner, but his position, quite frankly, will look more and more exposed as the policies proceed and, more particularly, when the £6 flat rate has to give way to the next phase of the incomes policy.

Many of my hon. Friends, not least my right hon. Friend the Member for Farnham (Mr. Macmillan) and my hon. Friend the Member for Southend. West (Mr. Channon), have made the obvious point that, as well as trade unionists, there happen to be consumers, working people who are not members of trade unions, the self-employed and employers. There is even a place called Parliament in which, in my naivety, I used to believe that the Secretary of State for Employment actually believed. In my first two years in Parliament I told many of my friends that the right hon. Gentleman was our greatest parliamentarian. My faith in the Secretary of State has been sadly eroded year by year. The Leader of the House has allocated one day and one night for the discussion of the Bill. I hoped that after the long private debates between the CBI and the TUC we might have been treated to something better than that.

If we are being asked by the Chancellor to back his policy, I hope that something can be done about the language of the Prime Minister, who referred to rogue employers who might seek to poach scarce labour from more responsible rivals by wage increases higher than those allowed. What does the Prime Minister mean by "scarce labour"? The OECD figures forecast 1½million unemployed. What does the Prime Minister mean by "poaching scarce labour"? We are also puzzled about the word "responsible". An employer is not more responsible if he pays lower wages than another for the same work. The Prime Minister used the word "rogue". That implies that there is something criminal about an employer who, for the sake of his business, seeks to attract skills where they are most needed. The most obvious example is an employer who finds it desirable to double wages to meet a delivery schedule for the extraction of oil from the North Sea. That employer, apart from being branded by the Prime Minister as a rogue, as irresponsible and guilty of attracting scarce labour from the pool of unemployed, will also be denounced by his workers as a wicked capitalist exploiter for not paying them the wages he wishes them to receive. He will then either be declared bankrupt under the policy, or branded as a criminal, according to the Bill's reserve powers Bill which we have not yet seen.

The only rogue and irresponsible employer in the land is the Government. Since 1971 the public sector recruited an additional 500,000 people at a cost of£2.5 billion. The total labour cost of the public sector, excluding the nationalised industries, amounting to about£20 billion, which is about 20 per cent. of the gross domestic product. It is calculated that the number of employees working in health, education and public administration will rise from 4 million in 1971 to 5.2 million in 1981—at a cost of over£25 billion at today's wage levels.

When we speak of public spending and pay, we could perhaps examine our own back yard. New Palace Yard provides an admirable example of what happens with public expenditure. We can learn from the Official Report of last night's debate something of what goes on in public sector pay. I hope that the hon. Member for Bassetlaw (Mr. Ashton) will not mind my referring to his remarks, which he deliberately put on public record. He told a story about the shop stewards, the committee of 13, who went to see the Prime Minister at a quarter to three. They alleged that the Prime Minister said it had all been arranged, and that on Question No. 5 the leader of the liaison committee would stand up and catch Mr. Speaker's eye.

The hon. Member for Bassetlaw asked the Prime Minister whether he realised that if Members of Parliament got even a£1-a-week rise it would bring down the opprobrium of the Press. The answer, according to the Member for Bassetlaw was that that would be opprobium worth having. I must confess that that is one of the few matters on which I wholeheartedly agree with the Prime Minister.

My right hon. Friends lay so much stress on the public sector because it is 60 per cent. labour-intensive and exists primarily as an organisation to spend money on providing more expensive and higher-quality services. We all want higher-quality services, but our national resources are insufficient to allow that trend to go on. It has to be reversed.

In the past 18 months government expenditure has risen by£20 billion, or£4,000 million in real terms, and that is equivalent to the whole of the defence budget. It is also equivalent to the whole of the health and personal social services budget. Our resources are finite, not infinite. It is impossible for room to be found for exports, investment and the reasonable maintenance of personal living standards over the medium term unless the public sector stops sucking in manpower and resources away from the very sectors upon which our personal survival depends.

A start has to be made in transferring these resources back into the private sector. That will not be done just by holding wages down. Virtually every one of my hon. Friends who has spoken said that he hoped the pay policy would not merely be a palliative. My hon. Friends asked for substantial measures going beyond the pay policy to deal with the problem of resources.

One of the most depressing moments in the debate was when the Chancellor shouted from his seat "What about the RPI?" Nothing is more destructive of economic policy than RPI-watching. To do the Chancellor justice, he has endeavoured to remove suppressed inflation by refusing to subsidise nationalised industry prices, and he argued to phase out food subsidies and reduce housing subsidies. But, before the Bill has even had a Second Reading, we are nearly back in the familiar old country where if we want the consent of the TUC for wage restraint we have to buy it. The TUC will not give its consent to wage restraint without asking for something in return.

Let us look at what the Chancellor has already given away. He is already backing away from his commitment to phase out subsidies, although he has said again and again how essential that is. Already he has overturned percentage rates—against the inclination of all people who have had experience of prices and incomes policies—and agreed to a flat-rate basis, which will vastly increase all the problems of re-entry. He has already accepted the principle that as living standards start to fall it may be necessary to take tighter price controls.

The hon. Member for South Ayrshire (Mr. Sillars) said that we should not, purely as a result of a pay policy, go back on the removal of the deep-seated causes of inflation. The pressures upon the Chancellor to reflate, to subsidise prices and to take all the actions he knows it is wrong to take will grow and grow as unemployment grows. The consent of the TUC to pay restraint will come only if the Chancellor gives up other policies which are just as fundamental to the solution of our problems.

Mr. Eric S. Heffer (Liverpool, Walton)

I was just going to ask the hon. Gentleman whether he is aware that some of us feel that the TUC's price was much too low?

Mr. Nott

I am sure that is the case. No doubt when the Chancellor finds that he can no longer hold the£6 flat pay increase the TUC will demand a much larger pound of flesh so that the policy can be allowed to proceed to stage 2. That is precisely the point that I am making. The tragedy is that half the misery could have been avoided if only the Government had acted sooner in a way that many of us have been demanding for many months.

This chapter opened at the Royal Agricultural Show. The Prime Minister made reference to what he described as the moaning minnies, the wet hens, the restless heifers and all the rest. In fact, we are back on the same old treadmill once again.

It is interesting that this policy is being introduced at a time when wholesale prices are beginning to decline. The latest figures show that earnings are probably coming down with the recession. That is even before the policy begins. At the moment commodity prices are helping us. Subject to the actions of OPEC, we may be entering a period of declining world prices regardless of the Government's policy. I think that we can expect the policy to appear to succeed for some time, but what we should be preparing ourselves for now is the upturn in world trade. That was the point made by my right hon. Friend the Member for Worcester.

When commodity prices start to rise with the upturn in world trade, when industry is restocking, when bank advances are rising strongly and investment confidence returns—that will be happening all over the Western world—the demand upon resources will accelerate. On top of the huge public sector deficits which we now see throughout the Western world there will be the enormous additional pressure of demand. That is when inflation is likely to take off, unless we can put our house in order by transferring resources out of the public sector and into the productive sectors of the economy.

In 1977 and 1978 we could be talking not about 26 per cent. inflation but about 50 per cent. and 100 per cent. inflation, rates of hyper-inflation. When that happens—I cannot say exactly when it would be—there can be only one end result—namely, a massive slump throughout the Western world of a proportion which will make 1931 look like a picnic. We must prepare ourselves for what some people regard as a likely eventuality.

I return specifically to the Bill. This has been a wide-ranging debate, but I now ask the Secretary of State for Employment some questions. I do not expect for one moment that he will answer them. He will prefer, as I prefer, to make a more general speech. Nevertheless, I must return to the Bill and ask the right hon. Gentleman some questions which were raised by my right hon. and learned Friend the Member for Surrey, East, my right hon. Friend the Member fcr Worcester, my hon. Friend the Member for Southend, West and the hon. Member for Cornwall, North (Mr. Pardoe). All of them put forward fundamental reasons for objecting to the Bill even if one were to approve of a pay policy. As I understand it, my right hon. Friend the Member for Worcester is hi favour of a pay policy but not this one. That is what I take him to mean.

At last we have had presented to us an actual policy. We can now debate that policy instead of talking in semantic terms. The first and fundamental question that we all want answered is whether the£6 limit applies to every individual in the public and private sectors or whether it is to apply to payrolls. The TUC annex says that it applies to every individual, but that was not what the Chancellor said. The right hon. Gentleman implied that it applied to the public sector payrolls. That is fundamental to the whole policy. We still have no answer on that matter. What is the position of incremental scales? The whole situation is in total confusion.

The CBI only a few days ago was wholeheartedly in favour of this policy. We are now debating the Second Reading of the Bill. We have not yet voted upon it, but already the CBI appears to be changing its mind. I quote from the document issued today by the CBI: Parliamentary debates on the White Paper cast severe doubts on the Government's strength of will and on the workability of its programme. That is before we have even voted on the Bill.

When does the policy begin? What are the sanctions described in paragraph 26 which will be part of the law? It is no use the Secretary of State talking about the flaunting of an unpassed Bill. He must realise that the Bill, as yet unpublished, is being incorporated in law because it is mentioned in paragraph 26, and the White Paper will become part of the law of the land.

Is the£6 a maximum? If so, it is grossly inflationary when earnings apparently are already falling. The Chancellor of the Exchequer said that it was not an entitlement, but I ask the Secretary of State for Employment to read the TUC's annex which implies that the£6 is an entitlement. Throughout the whole White Paper there is a conflict between what Ministers and the Government say and what the TUC annex says about the policy.

Mr. Norviraain Tebbit (Chingford)

My hon. Friend may not have seen the statement on the news tapes this evening by Mr. Len Murray implying that it is the TUC's view that the£6 is a sum to which each individual is entitled.

Mr. Dennis Canavan (West Stirling-shire)

As a minimum.

Mr. Nott

If that is right,£6 for every individual as a minimum will prove to be grossly inflationary. This applies to what we are trying to decide tonight. We have studied the legal definition between the quasi-judicial powers of a pay board or of the Price Commission and the powers contained in the Bill. But as my right hon. and learned Friend the Member for Surrey, East said, there are vital differences between our legislation and this legislation which are fundamental.

We cannot accept that there has been a continual movement away from the traditional concept of our constitutional law and practice. Sometimes I believe that our judges as well as our Parliament should talk a little less about necessity. Necessity has been the cry of tyrants throughout the ages. The dividing line, as events in India show, between the claims of necessity and the more fragile claims of democracy are narrow indeed.

Now that the executive is both the law-making power through the control of political parties and the Government, we must be more vigilant than ever in Parliament to make sure that Parliament does not become an instrument of tyranny or an instrument which will end in the destruction of the liberties which we are here to protect.

This Bill, whatever view one may take of its contents and the threats of the other unpublished measure which it incorporates, will be a statute. My hon. Friend the Member for Eastleigh (Mr. Price) said that the new policy was about as voluntary as a subscription to the Mafia in the city of Palermo. I thought that was an admirable comment on the whole package. Perhaps the Secretary of State for Employment has experience of the Mafia and what goes on in the city of Palermo. He is the expert on the voluntary nature of the Bill.

Our objection to the Bill is that it incorporates a White Paper, which itself incorporated a document by the TUC, which itself, so far as one can understand, is to become the law of England, Scotland, Wales and Northern Ireland. The TUC document does not contain the kind of consent which we believe is necessary to make a pay policy of this sort stick. The Bill gives to a Minister lawmaking powers of an unlimited nature which can be exercised by him without any appeal. We regard the Bill, regardless of the Government's policy generally, as a constitutional outrage and we believe that it should be withdrawn. On that basis, I ask my right hon. and hon. Friends to vote for our amendment.

9.30 p.m.

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

The hon. Member for St. Ives (Mr. Nott) asked me a number of detailed questions, and, much to the amazement of the House, I shall do my best in a minute or two to answer them. I hope I shall be able to deal with all the questions that he raised, and with most of the others that have come from other hon. and right hon. Gentlemen during the course of the debate; but, as he reminded us, and as I remind the House, we have still some further time for consideration to be given to the Bill.

The hon. Gentleman began his speech by suggesting that in some way or other I had departed from the views I hold about Parliament. That is not the case: I believe that, of course, Ministers are the servants of Governments and the servants of the House. They should be not merely dismissed, when necessary, by the House, but all their deeds should be properly scrutinised by the House. I am not making any complaint that these matters should be scrutinised here. Indeed, when we come to discuss that part of the Bill I shall seek to argue—if I have the time after answering all the detailed questions—that the Bill respects the rights of Parliament perhaps better than some previous legislation on this subject. But let me come to that in a moment.

Perhaps I may say to the hon. Gentleman that I also would sometimes prefer to discuss some of the wider aspects of this matter, and particularly when I heard the accents of the hon. Gentleman I was shaking my head and wondering where I had heard them so recently. Of course, it was in the speech of the right hon. Member for Down, South (Mr. Powell) that we heard the authentic voice of the official Opposition. We hear a lot about the infiltration of small groups into awkward places at these times, but what sort of group has penetrated the Conservative Front Bench? I would not wish to misrepresent the right hon. Gentleman in any way at all. I would only say to him—and I say it, he knows, with the utmost respect for his eloquence—that his authority over the Conservative Front Bench is much greater than people like to assume, and he should never underrate his powers and the process of conversion which is going on all the time.

In replying to the detailed questions I shall try to elaborate or to underline the section of the White Paper which appears at the end, and which was agreed between the Government and the General Council of the TUC in regard to most of the particulars. There are one or two matters on which we have differences of view or differences of emphasis, and those differences still prevail, as the hon. Gentleman has indicated, in the case of the£6 entitlement as against the£6 upper limit. There are differences of emphasis in this respect, but we believe that, if we examine these matters carefully and state them carefully, the country will understand. In particular, we do not wish that these matters should be incorporated in specific legal enactments, because we believe that that would lead to all the dangers of a full statutory policy, to which attention has been drawn from both sides of the House during the course of the debate.

First, the£6 should be the maximum increase over the year for full-time adult employees, and pro-rata for part-timers and juveniles. The increase should be made as a straightforward supplement to earnings and should not be reflected in overtime or other premium payments. The£6 limit does not, however, prevent the payment of anything higher which may be necessary for the attainment of equal pay. The statutory obligation to achieve this by the end of the year must be complied with, and that part of the law stands.

Mr. Heffer

I am sorry to interrupt my right hon. Friend, but perhaps I might ask him to clear up one matter. How would this apply to workers in the construction industry and in other industries who are self-employed—on the "lump"? There is no question of negotiating rates there.

Mr. Foot

I understand that there are special difficulties about the "lump". Legislation was introduced in the Finance Bill which we hope will go some way to deal with the problem. But it is a difficult one. It is not merely a difficult one in applying an incomes policy. The problem about the "lump" arises with or without an incomes policy.

I should like first to cover some of the detailed matters raised in the debate, and then possibly there will be an opportunity for further interchanges on some of these matters.

Sir G. Howe

The first and most important question asked by a number of my hon. Friends was whether the£6 upper limit was to be applied on an individual basis or on a payroll basis. In relation to both the nationalised industries and the private sector, the White Paper says that a firm which makes an excessive pay settlement will not be allowed to pass it on in prices. That implies that a firm is entitled to make a settlement on a payroll basis so long as it does not exceed over all£6 a head. Which way will it be done?

Mr. Foot

We believe that the£6 should be an individual allotment across the board on the basis which I have already indicated of the different emphasis between the TUC about entitlement and the question of bargaining within the£6 limit. We agree with the interpretation that the TUC has put on it about the individual application of the£6, except in the case of incremental arrangements, which I shall come to in a moment and which I hope will deal with the point.

Sir G. Howe

If a firm makes a pay settlement which does not exceed on a payroll basis the arithmetical implication of£6 per head, however distributed, that firm need not apply for price increases. It will not be reflected in the Price Code. There appears to be nothing to prevent the firm distributing the£6 on a payroll basis as it likes.

Mr. Foot

I think that that is a wrong interpretation of the situation, but if I am mistaken, I shall make arrangements to put it right. However, I do not think that I am wrong.

I said at the beginning, and I believe that it is the proper interpretation of the situation, that the£6 allotment should be on an individual basis. That is the basis on which it must be conducted.

Secondly, there should be no improvement in non-wage benefits outside the£6 limit except for any relating to job security or improvements to occupational pension schemes, as I shall explain later. Any other improvements have to be contained within the limit.

Thirdly, no one earning£8,500 a year or more should take an increase of any kind in the coming year, whether in the form of increments, prior commitments or anything else.

Fourthly, the policy applies to all settlements implemented on or after 1st August. Any who are due to reach a settlement with an annual operative date before 1st August should do so on the basis of the existing TUC guidelines. The 12-months' interval between major pay increases continues to apply, and no one should bring forward the normal anniversary date of settlement or take an interim increase to evade the policy.

Then there are the limited transitional arrangements referred to in paragraph 8 of the White Paper. They permit the implementation in full of wages council proposals agreed before 11th July and of arbitration awards where the formal reference was made before 11th July. In both these cases the timing of payments is out of the parties' hands.

In addition, the Government think it right that those who were expecting to implement settlements with anniversary dates between 1st August and 1st September should have the chance to do so if they had reached agreements before 11th July. This provision is made to avoid disrupting arrangements for implementation which are already in train. It will not remove all problems, but the Government believe that it will ease the transition and that it is a reasonable provision to make.

Against this background let me deal with particular points which have been raised on the pay guidelines—

Mr. Graham Page


Mr. Foot

I shall cover the point the right hon. Gentleman raised but, first, perhaps I could deal with some of the detailed questions put to me by other hon. Members earlier in the debate.

Questions were asked about forward commitments. I have been asked what happens to settlements already made for pay increases in the 12 months after 1st August. Such settlements fall into two categories—the normal annual settlement which has been fixed, for whatever reason, well in advance; and, secondly, current agreements of which the first payment was made before 11th July but where there are commitments to further payments on or after 1st August.

The first category—annual settlements made in advance—will have to comply with the£6 limit and be renegotiated, if necessary, to bring them into line. The only exception will be settlements with anniversary dates between 1st August and 1st September 1975 which were agreed before 11th July and which are, therefore, allowed to stand under the transitional arrangements that I have described.

In the case of current agreements, where a settlement has been made in the present round and the first payment was made before 11th July, forward commitments in the form of staggered payments, thresholds or indexation may be paid in full. Any commitments of this kind payable on or after 1st August will be set against the£6 limit, and only the balance, if any, can be paid at the time of the annual settlement in the coming round.

Of course, no payments can be made of forward commitments to people on£8,500 or above. [Laughter.] The hon. Member for Blaby (Mr. Lawson) may laugh about it, but these were some of the questions that some of his hon. Friends asked and which I believe should be answered.

Mr. Graham Page


Mr. Foot

I shall deal with the point raised by the right hon. Gentleman later on.

Sir G. Howe

On the footing on which the Secretary of State has put this policy before the House, are the citizens of this country entirely free to disregard each and every word that has been uttered from the brief he has just read?

Mr. Foot

Perhaps the right hon. and learned Gentleman would have the courtesy to allow me to answer some of the questions put by some of his hon. Friends. I will, as I promised at the beginning of my remarks, deal with the constitutional question that he put in his speech. I am entitled to answer these questions because there is some confusion over them.

The right hon. and learned Gentleman asked about personal increments. Incremental and wage-for-age payments which are made according to a well-defined range or scale already in operation before 11th July may continue at the same level as in preceding years for those earning less than£8,500 a year. This is on the condition that, together with the annual pay increase, the payments under such a scheme do not raise the pay bill for the group concerned by more than£6 a head. Merit payments have to be kept within the£6 limit for the individual.

I was asked about productivity schemes and how they will apply. As far as productivity and payment-by-results schemes are concerned, existing schemes established before 11th July may obviously continue unchanged. However, payments under any new scheme or under improvements to existing schemes will, together with the annual settlement, have to be kept within the£6 a head limit.

I turn to the question of pensions. This was raised—or perhaps not raised—by the hon. Member for Somerset, North (Mr. Dean), who has been seeking to raise this matter on a number of occasions. The arrangements for payments to pensioners under existing schemes may continue unchanged and are not affected by the pay limit. I think that that disposes of some of the concern that the hon. Gentleman had and which was expressed in his local newspaper in North Somerset, which I read yesterday, which expressed the feeling that this matter had not been clarified. It will also be open to those concerned to decide, if they wish, to continue to calculate pension entitlements on the basis of the rate of pay to which the employer was committed before 11th July, even though that commitment may be limited by the new policy.

As to improvements in occupational pension schemes, these must in general be subject to the£6 limit. But such improvements may take place separately from that limit where the employer had agreed to them before 1st July or where the parties concerned can show that they have been negotiating, during the three months before that date, on specific proposals for a new or improved scheme to come into force within the 12 months from 1st August next.

I hope that what I have said on this matter will assist hon. Members who came here eager to have the reply on this question. I understand that that does not apply to every hon. Member, and those who have not been gratified by my replies hitherto will, I hope, be gratified by what I have to say in the next 15 minutes.

Mr. Paul Dean

I am much obliged to the right hon. Gentleman for clarifying some of the points. Will he explain briefly how he squares what he has just said about the Equal Pay Act with what he said about the lack of improvement in occupational pensions? How is it possible to give a square deal in pensions for women unless he will allow pension rights to be improved along with the improvement in their earnings?

Mr. Foot

We certainly hope that the arrangements that I have described will assist the occupational schemes to go ahead and that they will assist the improvement which the hon. Gentleman and the Government are certainly eager to foster.

But as regards the equal pay arrangement, that was one of the exceptions— indeed, the principal exception—to which the Government agreed and which the TUC urged. We agreed to it for the very simple reason that the Equal Pay Act is, of course, on the statute book in any case, and we wanted to make sure that it was carried out and fulfilled.

What I have been describing and what I emphasise once again—and I emphasise it to some of my hon. Friends who have expressed their concern in some ways about entering into such details on this question—is the understanding which the Government reached with the representatives of the General Council of the TUC. We reached understandings with them on the general approach we should make to dealing with the menace of inflation. But we also discussed with them many of these detailed questions which I have been describing.

We are not saying that we can lay down an interpretation that stands for ever on all these points. Certainly these particular points do not bear with them the force of law, because it is, as I have emphasised, a voluntary policy. [HON. MEMBERS: "Oh."]. When I said yesterday that I regarded this as a voluntary policy and did not regard this Bill, and particularly Clause 1, as a breach of a voluntary policy, this was greeted with some hilarity in the House. I should like to explain the matter further, because I do not believe that what I am claiming can be contested.

I shall come a little later to the way in which we seek to achieve the purpose of Clause 1. I know that it is a ground for complaint from the Opposition. What I am concerned with at present is the purpose of what we are seeking to achieve in Clause 1—not merely the long-term purpose of how we defeat inflation but how we are to make possible the carrying into effect of the agreement we have made with the TUC on the£6 limit. The question is this. If we did not lift the contractual obligations on employers in Clause 1, it would make the voluntary agreement we have reached with the TUC impossible to carry into effect. Without Clause 1, any employer who had made an agreement with his employees to pay above that limit could be subject to legal action demanding that he should pay the full amount. If the Bill did not lift this contractual obligation, we would certainly never be able to carry through, for example, the provision that there is to be no increase for those earning above£8,500 during the period. We have to lift the contractual obligation if the voluntary agreement we have made with the TUC is to be translated into action.

I must, therefore, emphasise to the House that in my judgment the Bill is a voluntary Bill. If we did not have this provision in it, I emphasise again that it would be impossible for us to carry out what we have agreed with the TUC. Indeed, if the clause and the Bill were to be defeated tonight the effect would be that we could not carry into effect at all the agreement that we have made with the TUC. It would be the equivalent of sabotaging that agreement. Some hon. Members on the other side of the House—I do not know how numerous they are —may wish to sabotage that agreement. Some of them dislike our agreement with the TUC for a variety of reasons. The hon. Member for St. Ives dislikes it because he says the TUC may ask for other things in return, and that may very well be true. But to my hon. Friends on this side of the House I want to say that if we were to lose the Bill we could not carry out the voluntary agreement that we have made with the TUC.

Mr. Peter Tapsell (Horncastle)

While not at all disagreeing with the point the right hon. Gentleman has just made, may I put it to him that a great majority of our fellow-countrymen outside this House particularly those with experience in industry and the City, will regard the whole of this debate as an "Alice in Wonderland" exercise, because the whole country knows perfectly well that we need a proper statutory policy, and that that is what we are going to get in November.

Mr. Foot

The hon. Gentleman puts his case very fairly but brings me to the exact point about the nature of the Bill itself, and the complaints which have come from hon. and right hon. Gentle-merit against the Bill and, in particular, the complaint of the hon. Member for Cornwall, North (Mr. Pardoe). the hon. Member for St. Ives and the right hon. Member for Worcester (Mr. Peter Walker), all of whom are complaining that we have not got the full panoply of a statutory policy for carrying into effect all the provisions they wish to see. Increments, prior commitments, arrangements and everything, according to their desires and claims, should be dealt with by legislative action. It is to that policy that we on this side of the House are strongly opposed, and that is the explanation of the form in which the Bill is presented to the House.

I am not sure whether the hon. Member for St. Ives is a full supporter of a full statutory policy or not, for he has never declared himself upon it. At any rate, he goes along with his colleagues who have been demanding that we should have produced a Bill with all the massive, complicated ramifications of a full statutory policy. That is what the right hon. Member for Worcester argued for in his speech, and that is what he is going to seek in amendments he has put down for tomorrow, when we shall be able to debate them. I say to the right hon. Gentleman, as I said when I interrupted earlier, that if we had tried to proceed on that basis and were now to say to the TUC "We want to have the whole paraphernalia of a statutory policy, a compulsory policy right across the board." certainly it would not be possible for the Labour Party to carry out its undertaking to continue in co-operation with the TUC. One would never obtain the co-operation of the TUC for that kind of policy.

Mr. James Prior (Lowestoft)

I am grateful to the right hon. Gentleman for giving way, because I know that he has given way a number of times already. Will he now answer the question posed by my hon. Friend the Member for St. Ives (Mr. Nott)? Clause 1(1) clearly states that the policy set out in the document laid before Parliament"— in other words, the White Paper—is the policy that the Government are following. Paragraphs 25 and 26 of the White Paper talk about reserve powers. Are the reserve powers incorporated in the Bill? Why do we not have a chance to discuss them?

Mr. Foot

That is a quite different question. The matter of reserve powers was discussed yesterday, and I do not think that any addition to the argument needs to be made now. What I am discussing, in response to the speeches from the right hon. Gentleman's Front Bench, is why our Bill for dealing with the situation is so different from the Bills introduced by the Conservative Government to deal with such matters. The fundamental reason is that we are seeking, as we say clearly in the White Paper, to pursue a voluntary policy, and these are measures designed to suit a voluntary policy, whereas what Conservative Members have argued for throughout most of the day—I have listened to the whole debate—in speech after speech is that there should be a full statutory policy.

Sir G. Howe rose

Mr. Foot

Let me deal finally with what the hon. Member for St. Ives said at the beginning and end of his speech. I believe this to be crucial to the success of the whole policy. The hon. Gentleman complained because in our discussions with it the TUC did not talk only about wages and the matters incorporated in some of the provisions of the Bill. Of course not. The TUC also talked about all the other matters of major significance—employment, the provisions of legislation, the Industry Bill, investment. We shall seek agreement with the TUC on those subjects, too.

Opposition Members have given the game away. They have revealed why it is impossible for them ever to reach agreement with the TUC. It is because they do not want any of those subjects to be raised, because they cannot agree with the trade union movement on any of those major subjects. That is why they are on the Opposition Benches and why my hon. Friends should join together to keep them there.

Sir G. Howerose

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

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

Sir G. Howe

On a point of order, Mr. Speaker—

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

Question put, That the amendment be mad:—

The House divided: Ayes 260, Noes 320.

Division No. 296.] AYES 10.0 p.m.
Adley, Robert Fry, Peter Madel, David
Aitken, Jonathan Galbraith, Hon T. G. D. Marshall, Michael (Arundel)
Alison, Michael Gardiner, George (Reigate) Marten, Neil
Amery, Rt Hon Julian Gardner, Edward (S Fylde) Mates, Michael
Arnold, Tom Gilmour, Rt Hon Ian (Chesham) Mather, Carol
Atkins, Rt Hon H. (Spelthorne) Gilmour, Sir John (East Fife) Maude, Angus
Awdry, Daniel Glyn, Dr Alan Mawby, Ray
Baker, Kenneth Godber, Rt Hon Joseph Maxwell-Hyslop, Robin
Banks, Robert Goodhart, Philip Mayhew, Patrick
Bell, Ronald Goodhew, Victor Meyer, Sir Anthony
Bennett, Sir Frederic (Torbay) Goodlad, Alastair Miller, Hal (Bromsgrove)
Bennett, Dr Reginald (Fareham) Gorst, John Mills, Peter
Benyon, W. Gow, Ian (Eastbourne) Miscampbell, Norman
Berry, Hon Anthony Gower, Sir Raymond (Barry) Mitchell, David (Basingstoke)
Biffen, John Grant, Anthony (Harrow C) Moate, Roger
Biggs-Davison, John Gray, Hamish Molyneaux, James
Blaker, Peter Grieve, Percy Monro, Hector
Body, Richard Griffiths, Eldon Montgomery, Fergus
Boscawen, Hon Robert Grist, Ian Moore, John (Croydon C)
Bottomley, Peter Hall-Davis, A. G. F. More, Jasper (Ludlow)
Bowden, A. (Brighton, Kemptown) Hamilton, Michael (Salisbury) Morgan, Geraint
Boyson, Dr Rhodes (Brent) Hampson, Dr Keith Morgan-Giles, Rear-Admiral
Bradford, Rev Robert Hannam, John Morris, Michael (Northampton S)
Braine, Sir Bernard Harrison, Col Sir Harwood (Eye) Morrison, Charles (Devizes)
Brittan, Leon Harvie Anderson, Rt Hon Miss Morrison, Hon Peter (Chester)
Brotherton, Michael Havers, Sir Michael Neave, Airey
Brown, Sir Edward (Bath) Hawkins, Paul Nelson, Anthony
Bryan, Sir Paul Hayhoe, Barney Neubert, Michael
Buchanan-Smith, Alick Heseltine, Michael Newton, Tony
Buck, Antony Holland, Philip Normanton, Tom
Budgen, Nick Hordern, Peter Nott, John
Bulmer, Esmond Howe, Rt Hon Sir Geoffrey Oppenheim, Mrs Sally
Burden, F. A. Howell, David (Guildford) Osborn, John
Carlisle, Mark Howell, Ralph (North Norfolk) Page, John (Harrow West)
Carson, John Hunt, John Page, Rt Hon R. Graham (Crosby)
Chalker, Mrs Lynda Hurd, Douglas Percival, Ian
Channon, Paul Hutchison, Michael Clark Peyton, Rt Hon John
Churchill, W. S. Irvine, Bryant Godman (Rye) Pink, R. Bonner
Clark, Alan (Plymouth, Sutton) Irving, Charles (Cheltenham) Powell, Rt Hon J. Enoch
Clark, William (Croydon S) James, David Price, David (Eastleigh)
Clarke, Kenneth (Rushcliffe) Jenkin, Rt Hon P. (Wanst'd & W'df'd) Prior, Rt Hon James
Clegg, Walter Jessel, Toby Pym, Rt Hon Francis
Cockcroft, John Johnson Smith, G. (E Grinstead) Raison, Timothy
Cooke, Robert (Bristol W) Jones, Arthur (Daventry) Rathbone, Tim
Cope, John Jopling, Michael Rawlinson, Rt Hon Sir Peter
Cormack, Patrick Joseph, Rt Hon Sir Keith Rees, Peter (Dover & Deal)
Corrie, John Kaberry, Sir Donald Rees-Davies, W. R.
Costain, A. P. Kellett-Bowman, Mrs Elaine Renton, Rt Hon Sir D. (Hunts)
Critchley, Julian Kershaw, Anthony Ronton, Tim (Mid-Sussex)
Crouch, David Kimball, Marcus Rhys Williams, Sir Brandon
Crowder, F. P. King, Evelyn (South Dorset) Ridley, Hon Nicholas
Davies, Rt Hon J. (Knutsford) King, Tom (Bridgwater) Ridsdale, Julian
Dean, Paul (N Somerset) Kirk, Peter Rifkind, Malcolm
Dodsworth, Geoffrey Kitson, Sir Timothy Rippon, Rt Hon Geoffrey
Douglas-Hamilton, Lord James Knight, Mrs Jill Roberts, Michael (Cardiff NW)
Drayson, Burnaby Lamont, Norman Roberts, Wyn (Conway)
du Cann, Rt Hon Edward Lane, David Rodgers, Sir John (Sevenoaks)
Dunlop, John Langford-Holt, Sir John Ross, William (Londonderry)
Durant, Tony Latham, Michael (Melton) Rossi, Hugh (Hornsey)
Eden, Rt Hon Sir John Lawrence, Ivan Rost, Peter (SE Derbyshire)
Edwards, Nicholas (Pembroke) Lawson, Nigel Royle, Sir Anthony
Elliott, Sir William Le Marchant, Spencer Sainsbury, Tim
Emery, Peter Lester, Jim (Beeston) St. John-Stevas, Norman
Eyre, Reginald Lewis, Kenneth (Rutland) Scott, Nicholas
Fairbairn, Nicholas Lloyd, Ian Shaw, Giles (Pudsey)
Faingrieve, Russell Loveridge, John Shaw, Michael (Scarborough)
Farr, John Luce, Richard Shelton, William (Streatham)
Fell, Anthony McAdden, Sir Stephen Shepherd, Colin
Finsberg, Geoffrey McCrindle, Robert Shersby, Michael
Fisher, Sir Nigel McCusker, H. Silvester, Fred
Fletcher Alex (Edinburgh N) Macfarlane, Neil Sims, Roger
Fookes Miss Janet MacGregor, John Sinclair, Sir George
Fowler, Norman (Sutton C'f'd) Macmillan, Rt Hon M. (Farnham) Skeet, T. H. H.
Fox, Marcus McNair-Wilson, M. (Newbury) Smith, Dudley (Warwick)
Fraser, Rt Hon H. (Stafford & St) McNair-Wilson, P. (New Forest) Speed, Keith
Spence, John Tebbit, Norman Wall, Patrick
Spicer, Jim (W Dorset) Temple-Morris, Peter Walters, Dennis
Spicer, Michael (S Worcester) Thatcher, Rt Hon Margaret Weatherill, Bernard
Sproat, Iain Thomas, Rt Hon P. (Hendon S) Wells, John
Stanbrook, Ivor Townsend, Cyril D. Wiggin, Jerry
Stanley, John Trotter, Neville Winterton, Nicholas
Steen, Anthony (Wavertree) Tugendhat, Christopher Wood, Rt Hon Richard
Stewart, Ian (Hitchin) van Straubenzee, W. R. Young, Sir G. (Ealing, Acton)
Stokes, John Vaughan, Dr Gerard Younger, Hon George
Stradling Thomas, J. Viggers, Peter
Tapsell, Peter Wakeham, John TELLERS FOR THE AYES:
Taylor, R. (Croydon NW) Walker, Rt Hon P. (Worcester) Mr. Adam Butler and
Taylor, Teddy (Cathcart) Walker-Smith, Rt Hon Sir Derek Mr. Cecil Parkinson.
Abse, Leo Delargy, Hugh Hughes, Roy (Newport)
Allaun, Frank Dell, Rt Hon Edmund Hunter, Adam
Anderson, Donald Dempsey, James Irvine, Rt Hon Sir A. (Edge Hill)
Archer, Peter Doig, Peter Irving, Rt Hon S. (Dartford)
Armstrong, Ernest Dormand, J. D. Jackson, Colin (Brighouse)
Ashley, Jack Douglas-Mann, Bruce Jackson, Miss Margaret (Lincoln)
Ashton, Joe Duffy, A. E. P. Janner, Greville
Atkins, Ronald (Preston N) Dunn, James A. Jay, Rt Hon Douglas
Atkinson, Norman Dunnett, Jack Jeger, Mrs Lena
Bagier, Gordon A. T. Dunwoody, Mrs Gwyneth Jenkins, Hugh (Putney)
Barnett, Guy (Greenwich) Eadie, Alex Jenkins, Rt Hon Roy (Stechford)
Barnett, Rt Hon Joel (Heywood) Edelman, Maurice John, Brynmor
Bales, Alf Edge, Geoff Johnson, James (Hull West)
Bean, R. E. Edwards, Robert (Wolv SE) Johnson, Walter (Derby S)
Beith, A. J. Ellis, John (Brigg & Scun) Johnston, Russell (Inverness)
Benn, Rt Hon Anthony Wedgwood Ellis, Tom (Wrexham) Jones, Alec (Rhondda)
Bennett, Andrew (Stockport N) English, Michael Jones, Barry (East Flint)
Bidwell, Sydney Ennals, David Judd, Frank
Bishop, E. S. Evans, Fred (Caerphilly) Kaufman, Gerald
Blenkinsop, Arthur Evans, loan (Aberdare) Kelley, Richard
Boardman, H. Evans, John (Newton) Kilfedder, James
Booth, Albert Ewing, Harry (Stirling) Kifroy-Silk, Robert
Boothfoyd, Miss Betty Faulds, Andrew Kinnock, Neil
Bottomley, Rt Hon Arthur Fernyhough, Rt Hon E. Lambie, David
Boyden, James (Blsh Auck) Fitch, Alan (Wigan) Lamborn, Harry
Bradley, Tom Fitt, Gerard (Belfast W) Lamont, Norman
Bray, Dr Jeremy Flannery, Martin Leadbitter, Ted
Brown, Hugh D. (Provan) Fletcher Raymond (Ilkeston) Lee, John
Brown, Robert C. (Newcastle W) Fletcher, Ted (Darlington) Lestor, Miss Joan (Eton & Slough)
Brown, Ronald (Hackney S) Foot, Rt Hon Michael Lever, Rt Hon Harold
Buchan, Norman Ford, Ben Lewis, Arthur (Newham N)
Buchanan, Richard Forrester, John Lewis, Ron (Carlisle)
Butler, Mrs Joyce (Wood Green) Fowler, Gerald (The Wrekin) Lipton, Marcus
Callaghan, Rt Hon J. (Cardiff SE) Fraser, John (Lambeth, N'w'd) Litterick, Tom
Callaghan, Jim (Middleton & P) Freeson, Reginald Lomas, Kenneth
Campbell, Ian Freud, Clement Loyden, Eddie
Canavan, Dennis Garrett, John (Norwich S) Luard, Evan
Cant, R. B. Garrett, W. E. (Wallsend) Lyon, Alexander (York)
Carmichael, Neil George, Bruce Lyons, Edward (Bradford W)
Carter, Ray Gilbert, Dr John McCartney, Hugh
Carter-Jones, Lewis Ginsburg, David McElhone, Frank
Cartwright, John Golding, John MacFarquhar, Roderick
Castle, Rt Hon Barbara Gould, Bryan McGuire, Michael (Ince)
Clemitson, Ivor Gourlay, Harry Mackenzie, Gregor
Cocks, Michael (Bristol S) Graham, Ted Mackintosh, John P.
Cohen, Stanley Grant, George (Morpeth) Maclennan, Robert
Coleman, Donald Grant, John (Islington C) McMillan, Tom (Glasgow C)
Concannon, J. D. Grimond, Rt Hon J. McNamara, Kevin
Conlan, Bernard Grocott, Bruce Madden, Max
Cook, Robin F. (Edin C) Hamilton, James (Bothwell) Magee, Bryan
Corbett, Robin Hamilton, W. W. (Central Fife) Mahon, Simon
Cox, Thomas (Tooting) Hardy, Peter Mallalieu, J. P. W.
Craigen, J. M. (Maryhill) Harper, Joseph Marks, Kenneth
Crawshaw, Richard Harrison, Walter (Wakefield) Marquand, David
Cronin, John Hart, Rt Hon Judith Marshall, Dr Edmund (Goole)
Crosland, Rt Hon Anthony Hattersley, Rt Hon Roy Marshall, Jim (Leicester S)
Cryer, Bob Hatton, Frank Mason, Rt Hon Roy
Cunningham, G. (Islington S) Hayman, Mrs Helene Maynard, Miss Joan
Cunningham, Dr J. (Whiten) Healey, Rt Hon Denis Meacher, Michael
Dalyell, Tam Heffer, Eric S. Mellish, Rt Hon Robert
Davidson, Arthur Hooley, Frank Mendelson, John
Davies, Bryan (Enfield N) Hooson, Emlyn Mikardo, Ian
Davies, Denzil (Llanelli) Horam, John Millan, Bruce
Davies, Ifor (Gower) Howell, Denis (B'ham Sm H) Miller, Dr M. S. (E Kilbride)
Davis, Clinton (Hackney C) Hoyle, Doug (Nelson) Miller, Mrs Millie (llford N)
Deakins, Eric Huckfield, Les Mitchell, R. C. (Solon, lichen;
Dean, Joseph (Leeds West) Hughes, Rt Hon C. (Anglesey) Molloy, William
de Freitas, Rt Hon Sir Geoffrey Hughes, Robert (Aberdeen N) Moonman, Eric
Morris, Alfred (Wythenshawe) Roper, John Tierney, Sydney
Morris, Charles R. (Openshaw) Rose, Paul B. Tinn, James
Morris, Rt Hon J. (Aberavon) Ross, Stephen (Isle of Wight) Tomlinson, John
Moyle, Roland Ross, Rt Hon W. (Kilmarnock) Tomney, Frank
Mudd, David Rowlands, Ted Torney, Tom
Mulley, Rt Hon Frederick Ryman, John Tuck, Raphael
Murray, Rt Hon Ronald King Sandelson, Neville Urwin, T. W.
Newens, Stanley Sedgemore, Brian Varley, Rt Hon Eric G.
Noble, Mike Selby, Harry Wainwright, Edwin (Dearne V)
Oakes, Gordon Shaw, Arnold (llford South) Wainwright, Richard (Colne V)
Ogden, Eric Sheldon, Robert (Ashton-u-Lyne) Walden, Brian (B'ham, L'dyw'd)
O'Halloran, Michael Shore, Rt Hon Peter Walker, Harold (Doncaster)
Orbach, Maurice Short, Rt Hon E. (Newcastle C) Walker, Terry (Kingswood)
Orme, Rt Hon Stanley Snort, Mrs Renée (Wolv NE) Ward, Michael
Ovenden, John Silkin, Rt Hon John (Deptford) Watkins, David
Owen, Dr David Silkin, Rt Hon S. C. (Dulwich) Watkinson, John
Padley, Walter Sillars, James Weetch, Ken
Palmer, Arthur Silverman, Julius Weitzman, David
Pardoe, John Skinner, Dennis Wellbeloved, James
Park, George Small, William White, Frank R. (Bury)
Parker, John Smith, Cyril (Rochdale) White, James (Pollok)
Parry, Robert Smith, John (N Lanarkshire) Whitehead, Phillip
Peart, Rt Hon Fred Snape, Peter Whitlock, William
Pendry, Tom Spearing, Nigel Wigley, Dafydd
Penhaligon, David Spriggs, Leslie Willey, Rt Hon Frederick
Perry, Ernest Stallard, A. W. Williams, Alan (Swansea W)
Phipps, Dr Colin Steel, David (Roxburgh) Williams, Alan Lee (Hornch'ch)
Prescott, John Stewart, Rt Hon M. (Fulham) Williams, Rt Hon Shirley (Hertford)
Price, C. (Lewisham W) Stott, Roger Williams, W. T. (Warrington)
Price, William (Rugby) Strang, Gavin Wilson, Alexander (Hamilton)
Radice, Giles Strauss, Rt Hon G. R. Wilson, Rt Hon H. (Huyton)
Rees, Rt Hon Merlyn (Leeds S) Summerskill, Hon Dr Shirley Wilson, William (Coventry SE)
Richardson, Miss Jo Swain, Thomas Wise, Mrs Audrey
Roberts, Albert (Normanton) Taylor, Mrs Ann (Bolton W) Woodall, Alec
Roberts, Gwilym (Cannock) Thomas, Dafydd (Merioneth) Woof, Robert
Robertson, John (Paisley) Thomas, Jeffrey (Abertillery) Young, David (Bolton E)
Roderick, Caerwyn Thomas, Mike (Newcastle E)
Rodgers, George (Chorley) Thomas, Ron (Bristol NW) TELLERS FOR THE NOES
Rodgers, William (Stockton) Thorne, Stan (Preston South) Mr. Laurie Pavitt and
Rooker, J. W. Thorpe, Rt Hon Jeremy (N Devon) Mr. David Stoddart.

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order NO. 39 (Amendment on Second or Third reading):

The House divided: Ayes 294, Noes 16.

Division No. 297.] AYES (10.14 p.m.
Abse, Leo Carter, Ray Douglas-Mann, Bruce
Anderson, Donald Carter-Jones, Lewis Duffy, A. E. P.
Archer, Peter Cartwright, John Dunn, James A.
Armstrong, Ernest Castle, Rt Hon Barbara Dunnett, Jack
Ashley, Jack Clemitson, Ivor Dunwoody, Mrs Gwyneth
Ashton, Joe Cocks, Michael (Bristol S) Eadie, Alex
Atkinson, Norman Cohen, Stanley Edelman, Maurice
Bagier, Gordon A. T. Coleman, Donald Edge, Geoff
Barnett, Guy (Greenwich) Concannon, J. D. Ellis, Tom (Wrexham)
Barnett, Rt Hon Joel (Heywood) Conlan, Bernard English, Michael
Bates, All Cook, Robin F. (Edin C) Ennals, David
Bean, R. E. Corbett, Robin Evans, loan (Aberdare)
Beith, A. J. Cox, Thomas (Tooting) Evans, John (Newton)
Benn, Rt Hon Anthony Wedgwood Craigen, J. M. (Maryhill) Ewing, Harry (Stirling)
Bennett, Andrew (Stockport N) Crawshaw, Richard Faulds, Andrew
Bidwell, Sydney Cronin, John Femyhough, Rt Hon E.
Bishop, E. S. Crosland, Rt Hon Anthony Fitch, Alan (Wigan)
Blenkinsop, Arthur Cryer, Bob Fitt, Gerard (Belfast W)
Boardman, H. Cunningham, G. (Islington S) Fletcher Raymond (Ilkeston)
Booth, Albert Cunningham, Dr J. (Whiteh) Fletcher, Ted (Darlington)
Boyden, James (Bish Auck) Dalyell, Tarn Foot, Rt Hon Michael
Bradley, Tom Davidson, Arthur Ford, Ben
Bray, Dr Jeremy Davies, Bryan (Enfield N) Forrester, John
Brown, Hugh D. (Provan) Davies, Denzil (Llanelli) Fowler, Gerald (The Wrekin)
Brown, Robert C. (Newcastle W) Davis, Clinton (Hackney C) Fraser, John (Lambeth, N'w'd)
Brown, Ronald (Hackney S) Deakins, Eric Freeson, Reginald
Buchan, Norman Dean, Joseph (Leeds West) Garrett, John (Norwich S)
Buchanan, Richard de Freitas, Rt Hon Sir Geoffrey Garrett, W. E. (Wallsend)
Butler, Mrs Joyce (Wood Green) Delargy, Hugh George, Bruce
Callaghan, Rt Hon J. (Cardiff SE) Dell, Rt Hon Edmund Gilbert, Dr John
Campbell, Ian Dempsey, James Ginsburg, David
Cant, R. B. Dolg, Peter Golding, John
Carmichael, Neil Dormand, J. D. Gould, Bryan
Gourlay, Harry Mackenzie, Gregor Ryman, John
Graham, Ted Mackintosh, John P. Sandelson, Neville
Grant, George (Morpeth) Maclennan, Robert Sedgemore, Brian
Grant, John (Islington C) McMillan, Tom (Glasgow C) Shaw, Arnold (llford South)
Grimond, Rt Hon J. McNamara, Kevin Sheldon, Robert (Ashton-u-Lyne)
Grocott, Bruce Magee, Bryan Shore, Rt Hon Peter
Hamilton, James (Bothwell) Mahon, Simon Short, Rt Hon E. (Newcastle C)
Hamilton, W. W. (Central File) Mallalieu, J. P. W. Short, Mrs Renée (Wolv NE)
Hardy, Peter Marks, Kenneth Silkin, Rt Hon John (Deptford)
Harper, Joseph Marquand, David Silkin, Rt Hon S. C. (Dulwich)
Harrison, Walter (Wakefield) Marshall, Dr Edmund (Goole) Silverman, Julius
Hart, Rt Hon Judith Marshall, Jim (Leicester S) Smith, Cyril (Rochdale)
Hattersley, Rt Hon Roy Mason, Rt Hon Roy Smith, John (N Lanarkshire)
Hatton, Frank Meacher, Michael Spearing, Nigel
Hayman, Mrs Helene Mellish, Rt Hon Robert Spriggs, Leslie
Healey, Rt Hon Denis Mendelson, John Stallard, A. W.
Heifer, Eric S. Mikardo, Ian Steel, David (Roxburgh)
Hooley, Frank Millan, Bruce Stewart, Rt Hon M. (Fulham)
Hooson, Emlyn Miller, Dr M. S. (E Kilbride) Stoddart, David
Horam, John Miller, Mrs Millie (llford N) Stott, Roger
Howell, Denis (B'ham Sm H) Mitchell, R. C. (Soton, lichen) Strang, Gavin
Hoyle, Doug (Nelson) Molloy, William Strauss, Rt Hon G. R.
Huckfield, Les Moonman, Eric Summerskill, Hon Dr Shirley
Hughes, Rt Hon C. (Anglesey) Morris, Alfred (Wythenshawe) Swain, Thomas
Hughes Robert (Aberdeen N) Morris, Charles R. (Openshaw) Taylor, Mrs Ann (Bolton W)
Hughes Roy (Newport) Morris, Rt Hon J. (Aberavon) Thomas, Jeffrey (Abertillery)
Hunter, Adam Moyle, Roland Thomas, Mike (Newcastle E)
Irvine, Rt Hon Sir A. (Edge Hill) Mudd, David Thomas, Ron (Bristol NW)
Irving, Rt Hon S. (Dartford) Mulley, Rt Hon Frederick Thorpe, Rt Hon Jeremy (N Devon)
Jackson, Colin (Brighouse) Murray, Rt Hon Ronald King Tierney, Sydney
Jackson, Miss Margaret (Lincoln) Noble, Mike Tinn, James
Jannar, Greville Oakes, Gordon Tomlinson, John
Jay, Rt Hon Douglas Ogden, Eric Torney, Tom
Jeger, Mrs Lena O'Halloran, Michael Tuck, Raphael
John, Brynmor Orbach, Maurice Urwin, T. W.
Jenkins, Hugh (Putney) Orme, Rt Hon Stanley Varley, Rt Hon Eric G.
Jenkins, Rt Hon Roy (Stechford) Ovenden, John Wainwright, Edwin (Dearne V)
Johnson, James (Hull West) Owen, Dr David Wainwright, Richard (Colne V)
Johnson, Walter (Derby S) Padley, Walter Walden, Brian (B'ham, L'dyw'd)
Johnston, Russell (Inverness) Palmer, Arthur Walker, Harold (Doncaster)
Pardoe, John Walker, Terry (Kingswood)
Jones, Alec (Rhondda) Park, George Ward, Michael
Jones, Barry (East Flint) Parker, John Watkins, David
Judd, Frank Parry, Robert Watkinson, John
Kaufman, Gerald Pavitt, Laurie Weetch, Ken
Kelley, Richard Peart, Rt Hon Fred Weitzman, David
Kilfedder, James Pendry, Tom Wellbeloved, Jamas
Kilroy-Silk, Robert Penhaligon, David White, Frank R. (Bury)
Kinnock, Neil Perry, Ernest White, James (Pollok)
Lamborn, Harry Phipps, Dr Colin Whitehead, Phillip
Lamond, James Prescott, John Whitlock, William
Leadbitter, Ted Price, C. (Lewisham W) Willey, Rt Hon Frederick
Lee, John Price, William (Rugby) Williams, Alan (Swansea W)
Lestor, Miss Joan (Eton & Slough) Radice, Giles Williams, Alan Lee (Kornch'ch)
Lever, Rt Hon Harold Rees, Rt Hon Merlyn (Leeds S) Williams, Rt Hon Shirley (Hertford)
Lewis, Arthur (Newham N) Richardson, Miss Jo Williams, W. T. (Warrington)
Lewis, Ron (Carlisle) Roberts, Albert (Normanton) Wilson Alexander (Hamilton)
Lipton, Marcus Roberts, Gwilym (Cannock) Wilson, Rt Hon H. (Huyton)
Litterick, Tom Roderick, Caerwyn Wilson, William (Coventry SE)
Lomas, Kenneth Rodgers, George (Chorley) Woodall, Alec
Luard, Evan Rodgers, William (Stockton) Woof, Robert
Lyon, Alexander (York) Rooker, J. W. Young, David (Bolton E)
Lyons, Edward (Bradford W) Roper, John
McCartney, Hugh Rose, Paul B. TELLERS FOR THE AYES:
McElhone, Frank Ross, Stephen (Isle of Wight) Miss Betty Boothroyd and
MacFarquhar, Roderick Ross, Rt Hon W. (Kilmarnock) Mr John Ellis
McGuire, Michael (Ince) Rowlands, Ted
Bain, Mrs Margaret McCusker, H. Watt, Hamish
Bradford, Rev Robert Molyneaux, James Wigley, Dafydd
Carson, John Powell, Rt Hon J. Enoch
Crawford, Douglas Ross, William (Londonderry) TELLERS FOR THE NOES
Dunlop, John Stewart, Donald (Western Isles) Mr Douglas Henderson and
Lambie, David Thomas, Dafydd (Merioneth) Mr Gordon Wilson
MacCormick, Iain Thompson, George

Question accordingly agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Miss Jackson.]

Committee tomorrow.