INTERPRETATION

HC Deb 29 July 1975 vol 896 cc1737-65

Mr. Lawson

I beg to move Amendment No. 21, in page 5, line 7, at end insert: '(2) In this Act, the monetary value of any non-monetary remuneration shall be the estimated market value of such non-monetary remuneration on the date, being a date between 31st July 1975 and 1st August 1976, on which any increase in such non-monetary remuneration is agreed by the employer.'. It is rather late in our proceedings, and this is the last amendment, but so far as I am aware the amendment concerns a wholly new point in the debates on the Bill. It is an important point, and one which we should not allow to pass without obtaining an answer and definition from the Paymaster-General.

Under the clause, remuneration, which is at the heart of the Bill, is clearly and explicity stated to be non-monetary remuneration, benefits in kind and so on as well as monetary payments—ordinary wages. This echoes paragraph 7 of the TUC annex.

The important question is, how is the value of non-monetary remuneration to be assessed for the purposes of this policy and the limits? There are all sorts of difficulties about this. The Finance Bill which has not yet ended its passage through the House contains changes in the provisions for taxing benefits in kind. When these were discussed in Committee upstairs, we were told that they were introduced because there is already a great increase in the amounts of benefits in kind, and more and more people are getting payment in a sort of non-monetary form for one reason or another. I suspect that it will be of increasing importance as a result of this policy.

Therefore, we must know now, even at this late stage, how this value will be assessed. There are all sorts of problems, but there is one in particular. Some of them arose in the discussions on the Committee stage of the Finance Bill. For example, the Financial Secretary said: It has been asserted that, when a miner receives a ton of coal on his doorstep, the second-hand value of that coal is much less than the value of the coal delivered to a ready and willing customer. In view of that, the Inland Revenue has never sought to claim tax liability on it."—[Official Report, Standing Committee H, 2nd July 1975; c. 699–700.] I do not think that that is the real origin of the extra-statutory concession on miners' coal, but it shows the sort of difficulties that arise in assessing the value of second-hand coal, which I should have thought burnt just as well as new coal, and sometimes even better.

We earlier had the following bit of enlightenment from the Financial Secretary on another kind of non-monetary remuneration, when he said that the free rail travel given to employees of British Rail was of no value. The argument was: Clearly, the railways will run in precisely the same way whether the railwaymen use this facility or not".—[Official Report, Standing Committee H, 1st July 1975; c. 666.] There are, therefore, very real problems of how they will be estimated when there is a strict limit on them.

But the particular problem to which the amendment addresses itself is that a benefit in kind is a form of indexation, as it were, in that the value is going up all the time. Therefore, it may be said under the form of words proposed in the amendment—I am not sure that this is the right answer, but it is important to know what the right answer should be for the purposes of the policy—that if the monetary value of the non-monetary remuneration is taken to be the market value at the time the agreement is concluded, if that non-monetary remuneration continues to be given it will go up in value all the time, and that therefore the person who will obtain a reward in that form will have an advantage over the person receiving cash, the amount of which does not increase.

I take the case of the miners because it is well known. It was referred to in Committee when the Finance Bill was discussed. I could refer to the example of Mr. Arthur Scargill's car or to that of any company director's car. If the price of coal goes up and the miner receives an increased value, must there be compensation? Does the equivalent amount have to be deducted from the£6 which he can obtain in the next pay round? How will that be computed? It is difficult to see how the amount can be computed.

This shows the many uncertainties and difficulties behind the apparent simplicity of the£6 limit and the policy which has been built on it. I am grateful to the Secretary of State for being present. I hope that he will explain this matter.

There is a danger that there will be a complete flight from money. Everyone will want to be paid in kind rather than cash, as that will be the way round the policy. It will pay. If that happened it would have a poetic quality, as this policy is concerned with the flight from money.

I apologise for having raised a new policy at a late stage. However, it is an important point. I look forward to the right hon. Gentleman's reply.

Mr. Foot

I apologise to the hon. Member for Blaby (Mr. Lawson) for having been absent for the first sentence or two of his remarks. However, I hope that that has not undermined my understanding of what he said, which was a statement of pressure to establish the obvious. If I am wrong, perhaps he will enlighten me.

There has been one or two other proposals for altering the definition of remuneration. There was some discussion of this at the end of the proceedings in Committee. I shall refer to those discussions before coming to the hon. Gentleman's amendment. This matter was raised in Committee by my hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo) and others. They suggested that the definition in the Bill would cover desirable benefits such as free transport for workers and other concessions. I promised to consider the point.

It would be difficult to list in specific terms every non-wage benefit of this kind for which an argument for exclusion might exist. In the process we would create fresh difficulties of discrimination. There is no general phrase which would let through improvements of a kind which my hon. Friends would consider desirable without also letting through other improvements and fringe benefits which they did not wish to allow. In the previous discussions they referred to the benefits which they wished to exclude. There are problems involved in this definition as there are in any policy which depends for its strength on simplicity. But I believe that we must hold to that simplicity in the form which we have adopted and which the Government have endorsed. If we narrowed the definition of remuneration, as my hon. Friends suggested, or if we sought to spell it out, as the hon. Gentleman suggested, we would open up greater difficulties throughout the rest of the Bill.

3.45 a.m.

Mr. Lawson

I do not blame the right hon. Gentleman for having come into the debate a little late, but it may have caused him to be somewhat confused. The question in this amendment is not which benefits in kind should be brought within the policy and which should be outside it. It is accepted, as is clear from the TUC Annex and the Bill, that non-monetary remuneration—benefits in kind—should be within the policy. The question at issue is how the value is to be calculated for the purposes of the£6 limit. That is the question, and nothing else.

Mr. Foot

I think that I understood what the hon. Gentleman said. If not, I apologised in advance. What I was doing—because this is the only opportunity I have—was to refer to what my hon. Friends said at the end of the Committee stage. Although they put down an amendment which was different from the hon. Gentleman's amendment, I perfectly understood that they referred to the definition. They wanted to narrow the definition in a way which made it more difficult to apply the policy. To have accepted that amendment would have opened up the possibility of loopholes not in the way they wished but in a way that would confound the policy.

The hon. Gentleman has a different proposition as to how these non-wage benefits shall be estimated and how they shall be operated under the policy. The answer is that any improvements in non-wage benefits would count against the policy. There may be some difficulty in estimating them, although I gather that on previous occasions the definition has operated in this way without difficulty.

Mr. Lawson

It is not simply a question of estimating the value of the improvement when an improvement is granted. There is also the problem that at a time of inflation—I am sure the right hon. Gentleman will agree that prices will continue to rise—the value of a non-wage benefit is going up all the time. What account will be taken of that? Will it pay someone to ask to be paid wholly in kind, in baked beans or whatever it happens to be?

Mr. Foot

I understand the hon. Gentleman's point. I do not think that we should solve it by introducing a series of fresh definitions to accommodate the changes that may occur. Such changes may occur over this coming year, but to write in special arrangements to complications. That is the view that has cover them would lead to much greater been taken about the operation of similar definitions in past Bills, so I do not think that the difficulty will arise in the form stated by the hon. Gentleman. In any case, the policy will not go on for ever, so some of the difficulties envisaged by the hon. Gentleman will not occur.

Mr. Lawson

I am delighted to hear from the right hon. Gentleman that the policy will not last for ever. That perhaps is a happy note on which to end this stage. But the right hon. Gentleman has left doubt and confusion in the mind of everyone who has to operate this policy.

Amendment negatived.

Motion made, and Question proposed, That the Bill he now read the Third time.—[Mr. Foot.]

3.50 a.m.

Mr. Foot

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

3.51 a.m.

Sir G. Howe

Plainly the House does not wish to be detained for a great length of time at this hour of the morning on Third Reading, but it is important that we should make some observations on the Bill before it speeds on its way to another place. As at the end of our proceedings in Committee, I extend the appreciation of the Opposition to the Secretary of State for the amount of time that he has devoted to consideration of the Bill.

We may seem to have spent quite a deal of time on what the right hon. Gentleman has described as the semantics whether this is a statutory policy or a voluntary policy. Even semantics give one an insight into what is going on. I think it is important to remind the right hon. Gentleman of the passage that I quoted earlier from his speech in August 1966. I believe that the quotation demonstrates clearly what is taking place. The right hon. Gentleman said: …although I am sure that my right hon. Friend is sincere in wishing the Measure to be carried through voluntarily, the element of compulsion is already present and is applied in circumstances and with results which to me are highly objectionable. The most serious feature of the Bill is the broken bargains".— [Official Report, 10th August 1966, Vol. 733, c. 1773.] To use the phrase that the right hon. Gentleman has himself used in some of our debates, that is what is happening. As the right hon. Gentleman says, this legislation is necessary to enable the voluntary policy, so described, to be effective. The fact that someone with as great a reputation in this area as the Secretary of State should have pledged himself to indulge in such semantics is rather an unhappy epitaph, if that is not too strong a word, on the right hon. Gentleman's career thus far.

Mr. Powell

A provisional epitaph.

Sir G. Howe

I am obliged. Some quite important points are illustrated. There is underlined the understandable reluctance on the part of the right hon. Gentleman—and he is not alone in this—to get drawn into the statutory incomes morass. However, his boots are already in the morass and it is welling up around them. The question is whether he will be able to extricate himself without leaving a limb or more behind.

The second point that is made clear—this becomes more and more clear as we continue to breed, great complexity. That is the extent to which this kind of policy breeds, and will continue to breed, great complexity. That is another reason for the right hon. Gentleman having tried to resist such a policy. None the less, it is coming and it will come.

If we look at the annex to the draft amendments to the Price Code, which will be debated on another occasion, we find there set out seven different propositions as regards the information that will be required to be given by employers for all settlements affecting more than 100 employees so as to secure clearance for a consequent price increase from the Prime Commission. The details will include details and explanation of any individual pay increases which exceed the pay limit of£6 a week, including remuneration as defined in the provision we have just been discussing. It is clear that complications there will be. It is because of this that so many questions that have arisen during our debates have remained unanswered.

The most important aspect of what the Secretary of State and the Government are now committed to are the constitutional nonsenses and improprieties that are inevitably to follow. We have seen them following already from the method that has been chosen. I make the illustration very quickly by reference to what has been said in debate over the past 10 days about pensions. On 24th July the Secretary of State, then brimful with his respect for parliamentary proprieties, said: I believe that it is right that we should give the most detailed investigation to what Governments propose. My views on that subject have not altered one scrap because I have moved from one side of the House to the other or from the back benches temporarily to the Government Front Bench.…Indeed, I think that it is the patriotic duty of all hon. Members to conduct investigation into Bills of this nature."—[Official Report, 24th July 1975; Vol. 896, cs. 861–867.] A minute or two later he made a remark which he reproved me for taking him seriously: … of course it is the case that the fact that I say something from the Dispatch Box does not make it the law of the land. I understand that perfectly well. It might be an improvement if it were, but it so happens that it is not the case… That was a jocular observation which was thrown into the earlier stage of our proceedings. But, lo!see what has happened. We have now had three or four descriptions of the effect of the policy on pensions. We had one on 23rd July—in column 688—and another on 24th July, set out in col. 876. We had two short presentations of what the policy would mean for pensions and the extent to which existing schemes could be improved and to which there could be improvements in future schemes. On each occasion the Secretary of State and the Chancellor of the Exchequer read out passages—no doubt somewhat hurriedly prepared by officials in St. James's Square in the short time available—and in that way those concerned began to discover what the policy was.

But this evening, as a result of pressures and the debates which have taken place, the Secretary of State has made substantial changes. A number of my hon. Friends have been pressing the Secretary of State and he has given 50 per cent. or 80 per cent. or what they have been asking for. The Secretary of State has sought to set out, with a lack of precision, the yardsticks by reference to which he will, if necessary, change the law in individual cases. He has told the House to what extent he will interpret the limits imposed by the policy set out in the White Paper if it falls to him to decide how far pay or pension improvements provided for conflict with that policy. Those are the lines on which he will exercise his power to re-write contracts already made and to make contracts to be entered into.

We appreciate that he does not make law by utterances from the Dispatch Box. He is doing something worse. He is defining the scope and nature of his dispensing power—the premises and principles—by reference to which he will set aside existing legal obligations. This is the reintroduction into our constitutional system of concepts that many of us thought had disappeared in the eighteenth century. I can think of only one example in the present century of an exercise of legislative power in such an area by the mere exercise of the prerogative. Oddly enough, it was connected with the establishment of the Criminal Injuries Compensation Board. That was an act of a prerogative board and it has been held to be subject to the supervision of the courts. Therefore, the Secretary of State is moving into dangerous constitutional territory.

I make no apology for returning to this matter. I do not make the point in any outraged legalistic sense. It will affect the rights and obligations of people of all kinds. They will not know exactly where they will stand but will have to depend on the increasingly irrational discretion of the Secretary of State. The right hon. Gentleman may now see the small tip of the iceberg of the problems which will confront him. As day succeeds day and week succeeds week, he will find that he is answering about 500 questions a day on matters coming into his Department for his interpretation. He will meet his "Vicar of Trumpington", as I did.

I shall confine myself to the application of price control. In case after case, which the right hon. Gentleman cannot now foresee, he will be required to make increasingly variable changes in policy by reference to which he is seeking to set aside the law.

These are the matters which concern us on constitutional grounds. They are not idle worries. We are also concerned at the way in which, despite what the Secretary of State has said, the policy and the authority underlying it depends in truth upon his brandishing a Bill, as yet unpublished, in the background. He may not himself have been bold enough to hold up a document here. If he had been we should have immediately required it to be laid on the Table. But paragraph 25 of the White Paper echoes the words of the Prime Minister: If however they find that the policy needs to be enforced by applying a legal power of compulsion they will not hesitate to do this. If that is not an assertion of the existence of the big stick, a brandishing of that stick in the background, I do not know what is, and that is another unattractive aspect of the policy, as The Times pointed out in the leader I quoted earlier this evening.

This has been a rather unusual example of a pre-legislation committee operating in relation to legislation which he have never seen. We have seen significant changes taking place in the shape of this legislation—perhaps it is all the more effective in that it should be taking place in relation to an invisible Bill—but it is not a very happy constitutional precedent.

Because of those factors, because of the incoherence with which the Government, for understandable reasons, have approached the application of this statutory policy, certain things will happen. It has been presented as a "no exceptions policy". Think of the proud courage with which the Prime Minister stood at that Dispatch Box, on the day when he made this great announcement to fortify his reputation and that of his Government around the Arab world, and the simplicity with which he said "no exceptions", but look now at the erosions and the variations that are taking place. The definition of it is so imprecise that it will turn out to be a policy full of exceptions. We have only identified a few of them up to now.

Up and down the country, in every kind of business, people who already find it difficult to discover the limits of their obligations by reference to the Price Code—a precisely drawn document—will have no clue whatsoever as to what prospective presentation and interpretation of the law is lurking in the mind of the Secretary of State and in the minds of the growing army of civil servants who will he advising him. To some the£6 a week pay limit will seem wildly extravagant. To others it will seem not nearly enough.

The anomalies will multiply. Each of the 500 inquiries coming to the Secretary of State lays the foundation for a Parliamentary Question. This is the reality of parliamentary accountability. in which he takes so much pride. It cannot be sustained. It will be the non-accountability of executive and administrative decisions and advice by a growing army of civil servants, and the inconsistencies will multiply.

Heaven knows, we welcome the Secretary of State's statement that he did not expect this to last for ever. Whether the Government's policy to attack inflation works will not essentially depend upon the answer to the question whether this is a statutory or a voluntary policy. Certainly this policy will make some impact on the size of pay settlements in the public sector. It will therefore begin to reduce the volume of public expenditure and may in that sense be making an impact on the future rate of inflation.

But the real test whether the policy to defeat inflation is working well depends on the other elements in the policy, on the extent to which the policy for the control of money is being maintained and on the extent to which public expenditure is being contained, and on the will of the Government to withstand excessive pay settlements by reference to those standards in the areas under its own control.

These are the key issues. It will be enormously difficult. We still have not begun to state with sufficient clarity just how hard this passage will have to be or how long it will have to be sustained. Twelve months hence, with the figures down to 16 or 17 per cent, we shall still be miles beyond what is tolerable in a free society, two or three times ahead of our competitors and then will come the time when the wills of Government and of Parliament have to be sustained through all the tribulations, with reductions in living standards and high and rising unemployment, in the words of the Secretary of State, when the details and complications which spring from this aspect of the policy will be more embarrassing. Then will come the test of the will of the Government to proceed.

4.6 a.m.

Mr. Heffer

It is very late and it is almost an imposition for anyone to speak on this Question, but it would be wrong to let Third Reading go by—especially for hon. Members who have sat through the entire proceedings and have hardly moved from their seats except to have a drink and return—without saying something about the Bill and the philosophy which lies behind it. The whole atmosphere of this discussion has been somewhat unreal because we have been discussing a statutory policy but many hon. Members have pretended that it is a voluntary policy.

It is a statutory policy and it is not exactly the type of statutory policy which we have had before, in the sense that the legislation is not so detailed. There is no National Board for Prices and Incomes, and no method of notification, but in spite of the fact that the trimmings are not there, we cannot get away from the fact that this is a statutory policy.

That is clearly shown in Clause 3 on the question of the operation of the Prices Code, under which, we are informed, not only will sanctions be applied to firms which put up their prices, but if they make an application, it will be used as a way of keeping increased wages down, quite different from the original suggestion for using sanctions on prices. This sanction is a form of statutory policy.

There is the question of the power to reduce the grants to local authorities, a power to be used to keep workers' wages within the limits of the£6. If one examines that closely, as we did in Committee, we can see a great danger which could occur because the White Paper lays down clearly that staff requirements will be looked at very closely indeed. Apart from cash limits, that is another way to increase unemployment.

I am afraid that we have the worst of both worlds. We are in a crisis. Of that there is no doubt. Within the capitalist society in which we live, we have one, two or three methods to deal with a crisis. There can be firm, clear statutory incomes policy which does not deal with the crisis, but which is a way of tackling it partially. Unemployment can be allowed to reach tremendously high levels in the hope that that will keep wages down.

Here we are getting the worst of both worlds. We are getting a partial statutory incomes policy which is nevertheless a statutory incomes policy and at the same time an increase in unemployment which is being used as a method of holding back workers' incomes. That is not in line with the Labour Party's programme at the last two elections. It is contrary to our manifesto.

Some people may not worry about our manifesto. Some may say that we should not look too closely at the words in the manifesto. I have heard it said that it would be better if political parties did not have manifestos because then they would not have commitments to adhere to and so they could not get into trouble for not honouring their commitments. I am a naive politician, however, and I believe that if we promise something we should try to keep it. Here we are moving away from our commitment.

The argument that the Government have kept in line with the Trades Union Congress is a powerful one. I prefer the Government to be talking to and trying to work out an agreement with the TUC. However, I do not think that the situation is quite as my right hon. and hon. Friends have put it to us. I believe that in the background there is the implication—"If you do not come up with a so-called voluntary agreement we shall come up with the reserve powers Bill. That will then be a full prices and incomes policy of the type we have known previously." My right hon. Friend denies this.

However, if the TUC has said "We agree that no one should get more than£6" why do we need any statutory powers? We do not need powers to deal with those who might go beyond the TUC's guidelines. Or is there an understanding that union leaders do not always speak for their membership? We know the pressures will build as prices continue to rise. Prices cannot but rise, because there is nothing in the Bill designed to stop them from rising. The White Paper says that if we stop prices from rising beyond a certain point it will lead to widespread bankruptcies. If prices cannot be stopped from rising, ordinary working people will suffer a reduction in their standard of living and will demand increases in wages to meet the rising cost of living. That is likely to lead to powers beyond these powers.

The Bill has hardly been changed as a result of our deliberations. What has emerged is that it is a statutory policy, that it goes against the basic philosophies on which the Labour Party fought the election, that it is a U-turn.

The two clauses in the Bill with which I agree and which I think should have gone further are those dealing with food and rent subsidies, which are very important; for, as prices will rise anyway, it is important that workingclass people should be assisted to keep one of their basic payments—namely, rent—to the minimum. They are the only parts of the Bill to which I can give any support. I am not in favour of the rest of it.

Whatever our differences, it was said the other day, rightly, that my right hon. Friend the Secretary of State for Employment pays a great deal of attention to this House. He sits through our debates and listens attentively to the discussions. I know that without the efforts of my right hon. Friend in government we should have had a different Bill. We should all be very grateful to him for putting up the fight. But if there are attempts to move in the direction in which I know some people want to go, I hope that we shall not have any rationalisation of the situation and that a firm stand will be made. We can go so far, but we cannot go further in this direction. I think that we have gone too far, anyway.

I do not like the Bill. It is unnecessary. We should have dealt with the problems in an entirely different way. Already the Prime Minister is having to explain what he meant about import controls. He can explain as much as he likes, but sooner or later he will have to introduce import controls. The Government will have to do most of the things set out in the amendment which my hon. Friends and I tabled unless they capitulate entirely to the concepts of the capitalist system. If they do that, they will not be able to pretend to be even social democratic, never mind democratic Socialist. We must change the policy now and get back to dealing with our problems in a fundamental Socialist way instead of consistently retreating in the face of the enemies of the Labour movement, which is what we have done on this occasion.

4.18 a.m.

Mr. Powell

I agree with the hon. Member for Liverpool, Walton (Mr. Heffer) that those of us who have opposed year in and year out prices and incomes policies, voluntary and involuntary, have not only the right but the duty to lay our curse on this version.

It is a rule of order that on Third Reading one is allowed to refer only to what is in the Bill, but paradoxically that does not prevent me from pointing out a very important fact about this Bill, namely, that it imposes no legal obligations on the subject. It will render nothing unlawful which was lawful before its passage. It will not be a breach of the law to ask for or pay£10,£20 or£40 more a week. It will be no more unlawful to pay an increase of£12 after the passage of the Bill than it was before.

Reference was made earlier to the rule of law. One of the essential aspects of the rule of law is that the citizen is free to do what the law does not forbid and is not required to do what the law does not command.

After the Bill receives the Royal Assent there will be no new prohibitions, no new commands, which bear upon the subject. Therefore, all groups of citizens have the right, in the fullest sense of the term, not merely legal but moral, to pay what they think in the light of their own circumstances, as best they understand them, it is right to pay for labour and to ask what they think fit to ask. Indeed, I would go a little further and say that those who desire to uphold the rule of law have the duty to be specially vigilant that they disregard what is not law and what is merely laid up in White Papers and ministerial speeches and to go about their business obeying the law and nothing else, as they would have done before.

There will, of course, be a vast multitude out of doors who suppose that now they are forbidden to receive an increase exceeding£6 per week. I am sorry to say that there will be many who will encourage them in that misunderstanding, who will deliberately accept that notion for themselves, and will see that others live and act under that misapprehension. But it will be a misapprehension. No new legal obligation will be enacted by this legislation. No new duty will be placed upon the subject. But it will not stop with this measure.

I wish that I thought that the breakdown of this legislation would come about because citizens would read it and, seeing that it had nothing to say to them, would ignore and treat it as waste paper. I wish that we were living in such a society. That would be a society rejoicing in and sustaining the rule of law.

The breakdown will come about for different reasons. The breakdown will come about from inherent causes, because, with inflation proceeding at the rate at which it will continue to proceed during the currency of this legislation, it will be unsustainable. It will be impossible, even with the most compliant, servile attitude on the part of the public, to comply not with the Bill—that does not impose any requirement—but with the limits imposed by the policy set out in the White Paper.

There have already been foreshadowed not merely the considerations of Government reaction which the citizen is entitled to take into account in going about his business freely—namely, that he may not get a Government contract if he behaves in one lawful way rather than another—but, not surprisingly, the prospect that the law will be changed so that certain actions which are now lawful will be made unlawful in the endeavour to force compliance with the policy in the Command Paper and to confront the fact of ongoing inflation by the brute force of law.

That is where the process, which we have already several times explored, will begin to evolve. Once again Amundsen is going out into the polar regions on a journey, an exploration, from which few return to tell the tale, politically speaking. There is an inherent reason for this.

There is one particularly sad sentence among many sad sentences in the White Paper. It is at the beginning of paragraph 3, and says: The problem is not just one for the next year. The Government intend to maintain policies which, over a number of years, will control domestic inflation and prevent any resurgence of the present rates of price increase. All prices and incomes policies are founded on the assumption that inflation is caused wholly or in part by the desire of persons fixing prices or wages to raise them unduly. From that it follows that once we adopt a prices and incomes policy, we can never stop. We might just as well imagine we can have a law against burglary or murder for a year and then stop.

Upon the assumption on which prices and incomes policies are based, the cause of inflation springs eternal in the human heart. Not next year, five years ahead or a century ahead, if that is the cause of inflation, will it be possible to lay aside a prices and incomes policy. Men will still wish to get more for their goods and their labour. If inflation can be controlled only by telling them exactly how much each of them can ask for their goods or labour, consistent with there being 10 per cent. inflation or no per cent. inflation, a prices and incomes policy is for eternity. As it proceeds on its journey into eternity there opens up that parting of the ways which the hon. Member for Liverpool, Walton, in one of the best speeches he has made in this House, described so graphically earlier in today's sitting.

There opens up the prospect of ever-increasing and more detailed compulsion and the only alternative to it, of scrapping the whole thing. The tension between those two becomes more intolerable with each succeeding phase.

Fortunately, if I may venture a self-quote that is already 11 or 12 years' old, all prices and incomes policies are non-sense, silly nonsense and, what is more and worse, dangerous nonsense, because they are founded on a demonstrably false causation of inflation. Happy indeed for the human species that this is so. Otherwise we would have the alternative of living under continuing inflation—which is, by definition, impossible since inflation is the increasing, progressive diminution in the value of money and that involves an infinite regression—or under an increasingly horrible and oppressive tyranny; for when we set out on this course, we court all the evils of the attempt by the State, directly or indirectly, to prescribe the life, choices, even aspirations of the members of society.

I think the Secretary of State underestimated the full degree of the importance of the agreement between the arguments of the hon. Member for Walton and the arguments of many hon. Members on this side. There is no reason for the hon. Member for Liverpool, Garston (Mr. Loyden) or the Secretary of State to take amiss the concurrence between the hon. Member for Walton and some of the rest of us. On the contrary, the fact that there has been this concurrence over the party political gulf and the fact that it was elicited by debate in this House is one of the few happy phenomena that have accompanied the passage of this Bill. The reasons which the hon. Member was giving were reasons which I believe are common to all the elements of a free society, whether it is a democratic socialist society or a free capitalist society, so long as it is one which any of us in any part of the House recognises as a free society, that is, a society in which there are—and I am seeking to represent the hon. Member's argument accurately—dispersed sources of initiative and decision, whether they be individuals, trade unions or Departments of Government, but at any rate where power is diffused and where the shape of society is formed. where history is being built up, by diffused power and not by concentrated, monolithic power.

It is that instinct which has saved us in this country from the various species of tyranny to which other nations have fallen prey. Yet there was one thing missing—and here there is indeed the ingredient of unresolved discord between the two sides of the House—from the hon. Member's analysis. It was that in order for there to be dispersed sources of power, initiative, decision and choice in a society, there must be a common medium in which they all work. That common medium must be an impersonal medium, a kind of arthmetical language which they all talk as they go about their work of influencing one and other and jostling together for a place in the formation of society. That, I have to tell the hon. Member, is the much despised mechanism of price, of the market, representing the outcome of the pull of the various forces, human and non-human, of supply and demand, and of choice and aspiration.

When Labour Members contend that they are contending for the freedom of the trade unions, for the indispensable function of the trade unions in a modern industrial society, I think that they are contending for one, though only one, of the elements which are essential to the maintenance of a free society. In doing that, they should not despise the necessity of another element, which is the tolerable working of a machinery whereby all these elements can read off in a sort of common formula the results that they are aiming to obtain and the outcome of their interaction, one upon another.

I have been led away from the sad present, the barely approaching cold dawn of this first stage of a new drama of human folly, to contemplate how we may one day emerge from it, perhaps wiser, to conduct our affairs with institutions which have better proved themselves than pay and prices boards, and with those common factors of mutual understanding upon which a free society depends for its survival. Meanwhile this policy will not work. It will come to a bad end. Bad luck to it.

4.35 a.m.

Mr. Biffen

Between four and five o'clock in the morning there are few who would wish to perform the rôle of Prince Ruperts of debates, and I cannot think that this is a topic which immediately gives rise to that kind of parliamentary approach. None the less, this is something of a parliamentary occasion in the sense that the right hon. Member for Down, South (Mr. Powell) has delivered a sustained and devastating intellectual indictment of this policy, none the less compelling because it is a repetition of arguments that we have heard on almost numberless previous occasions over the past decade or so.

The House might well reflect why it is here in late July inserting into an already crowded parliamentary timetable the most desperate provisions to secure assent for this measure. It can only be so because we are conducting a war against inflation. The Prime Minister by going off to the Ministry of Defence to hold his Press conference on the White Paper was, I suppose, hoping to underline the whole martial spirit within which this policy and legislation was being conducted. This is often the case.

Although many of my hon. Friends may have been constrained to feel that they were at a period of Dunkirk, I suspect that it is more likely to prove to be a Munich. When we come to measure and examine our behaviour and our responses to this legislation, there will be a growing anxiety and bad conscience that the folly of the Bill was not marked more fiercely and that its passage was not contested more strongly and more demonstrably.

I want to talk briefly about three aspects of this legislation only. In every instance they underline the inadequacy and irrelevance of this legislation to the very issue of inflation. First, Clauses 3 and 5 dwell upon extended price controls and further subsidy. I cannot accept that my hon. Friends believe that in a war against inflation these are appropriate, proven or successful weapons. The newspapers available this morning tell us that the electricity industry sustained a loss of£257 million, on its latest annual accounts in the cause of subsidy. In all parts of the House there is anxiety and, I believe, a fair degree of unanimity that the finances of this major sector of our industrial economy cannot proceed on so hopeless and distorted a basis.

There is nothing in the Bill in relation to either Clauses 3 or 5 which encourages me to think that it does anything to assist in the war against inflation. The situation is rather the reverse. I believe that it will prove damaging and that it will divert attention and energies from the source of inflation so that we can enjoy the precarious pleasures of trying to deal with the symptoms.

Similarly, everything that is contained in Clause 1 underlines the pitfalls of statutes and legislation in respect of this subject. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) made a most close critique of the consequences of Clause 1. He spoke charmingly, with the confessions of someone who had been confronted with all the intractable difficulties which arise with the employment of statute.

I should like to comment on two aspects of the clause and the policy and aspirations which it embodies, which it seems will lead us all into great difficulties before much time has passed. I come first to the£6 flat rate concept. The idea that this was some simplistic short-term affair and discipline which was available for the prosecution of this policy is most misconceived. What it will do will be further to narrow differentials over a wide range of not merely executive salaries but the earnings of many people—what I suppose, in a slightly patronising language, one calls "skilled working class". The impact of the£6 flat rate will store up tremendous resentment and bitterness on the whole question of differentials. This will be exacerbated by the very factor that the inflation of the recent two or three years has lifted those earning these sums of money into new tax rates and therefore, on that account alone, there is increasing determination to produce some restoration of post-tax differentials.

The whole policy is compounded even more by the small, mean, petty and ultimately counter-productive proposition that there shall be no increase whatsoever permitted for those earning above£8,500 a year. The sums of money are negligible, but the impact on morale is something that the House should not overlook.

The other thing of which I am convinced is that this will have ramifications for the prosecution of other policies which I do not believe the Treasury Bench have even yet begun properly to assess. I notice that the Bill is supported by "Mrs. Secretary Williams". There are certain Common Market implications which the House would do well to consider for a moment. The implication I have particularly in mind is the cost of complying with the EEC regulations on lorry drivers' hours and the introduction of the tachograph. There is already in existence a Community regulation. Anyone with some knowledge of the real world knows that there can be no possibility of the members of the Transport and General Workers' Union or, indeed, non-unionised lorry drivers accepting tachographs except in return for some monetary compensation. I do not want to use the term "bought out", but any introduction of tachographs, as required under the regulation, is a matter for negotiation at union level. There is not a hope of that regulation being complied with as long as that industry is under the constraint of the£6 flat rate limit.

I do not know whether I am in order in referring to the right hon. Lady as "Mrs. Secretary Williams", from the style of the Bill, but whether or not she realises it, she is lending her hand to a piece of legislation which will have as an inevitable consequence our continued non-compliance with what is already a Community regulation. That flows inextricably and incontrovertibly from Clause 1.

I turn finally to that area for hope which was entertained by my right hon. and learned Friend—that perhaps the application of this policy will have some impact upon public sector expenditure because of its consequences for the wages and salary content of public sector spending.

My right hon. and learned Friend has indicated that we would strongly support the Government in any attempt to secure a more effective control over public spending. I believe that that aspiration will be as acceptable to social democrats and Tribunites as it is on this side of the House, because it can be of no advantage to those engaged in government if we are in a situation in which the control of public spending has become an art which is beyond our capacity.

I want to utter this word of caution—that we may become obsessed about the extent to which wages account for the totality of public spending. I inquired of the Chancellor of the Exchequer what was the approximate percentage of total current expenditure, not touching capital expenditure, by central Government, local government and the nationalised industries which was accounted for by wages and salaries. The answer was 20 per cent. for central Government, 55 per cent. for local authorities and about 40 per cent. for public corporations. Those figures, although formidable, demonstrate that there should be limits set to what we hope we can obtain from this technique. I am sure that there are other public expenditure containment policies which would have to be pursued in addition to the exercise of cash limit controls over the wage and salary component of public sector current expenditure. I should like to enter that mild note of caution.

So the Bill passes on its way to another place, unloved. I do not believe that a single person in the Chamber would want to speak with full-throated endorsement. It is not merely the hour of the morning that is restraining them, but their sense of parliamentary decency. Nobody has any affection for Clause 1.

Mr. Canavan

What about Clause 4?

Mr. Biffen

The recumbent schoolmaster from Stirlingshire has entertained us from time to time during the evening. I hope that he will, with his heart, conscience and voice, and eventually with his feet, record long and sustained opposition to this policy. He will have plenty of opportunity as the months and years roll by.

As is often the case, late in July we pass panic law, and the almost inevitable consequence of panic law is that it is bad law. I only hope that when we look back on our own somewhat miserable period of vacillation and bewilderment, as we have observed this piece of legislation, the nemesis will not be quite as dramatic as I fear.

4.48 a.m.

Mr. Bob Cryer (Keighley)

I shall be very brief, because I know that the House is up late, but I think that I have the right to make a few comments, as I am one of the back benchers whose loyalty to the Government has been considerably strained over the past few days.

The Government cannot but expect a degree of criticism, because back benchers are not invited to share in the decision making that produces this sort of Bill. Therefore, it seems to me that we have a perfect right and duty to shape the legislation more closely towards the manifesto on which we all stood at the election. It was with that in mind that we put down a number of amendments in Committee. We are all custodians of the manifesto, and that mandate is not held exclusively by people who have been appointed by the baronial system, which is a substitute for democracy in this parliamentary system.

We have frequently expressed concern about low-paid people. Here we are discussing quaint legislation containing a recommendation for a£6 pay limit. How will it affect those low-paid people? That question has not been answered, although I have raised the matter before.

If school caretakers receive£6.50, and the rate support grant is cut under Clause 4, will that affect all the education offered by a local authority or just a section of it? What will happen to the manual worker employed in local government service earning£30 a week? That point was graphically illustrated in the low pay unit report, which said that under the autumn settlement a manual worker with a wife and two children would receive an increase of£6. During the ensuing months he will lose his family income supplement, he will pay an extra£2.10 in tax and pay 33p national insurance contributions. I shall not go through all the taxes he pays and the benefits he loses, but he will be slightly worse off. What position do the Government take on that person? Will there be exceptions for low paid people in that category? The Government have embraced the notion that a flat-rate increase has an egalitarian content. I have no doubt that the TUC will come to its senses on that matter in the next few months.

Some Government supporters sitting below the Gangway have heavy hearts as they watch this turnabout on policy. However, we are not dividing the House. That is an indication of our continuing loyalty to the Government. However, if they want us to sustain that loyalty they must look at a system which gives a tiny group of politically motivated people called the Cabinet the right to present us with decisions which we are then expected to accept and to criticise if we dare. If we dare to put down amendments in Committee we are accused of being disloyal.

We are the custodians of the manifesto. It is up to us, as well as the Cabinet and other appointees, to ensure that the manifesto is carried out. We urge the Government to look at matters other than wages as the cause of inflation. If the Government accept that there are other causes of inflation, we ask what they are doing about it. Why are the Government so besotted with legislation about wages that they keep us up for many long hours discussing a Bill which is uncertain in many of its antecedents and effects? Why do they exclude the rest of the capitalist system, which we say is the basic cause of this situation? We lurch from crisis to crisis as a result of the incipient difficulties involved in the capitalist system. What are we doing about the system which we are supposedly here to change but which we are propping up by means of this anachronistic and unusual legislation?

Will the Government ensure that back benchers are embraced into future decision making and bear in mind our severe criticisms?

Mr. Foot

The House has listened to many speeches from me. Those condemned to listen may not wish to hear my voice again. I sympathise with that feeling. However, in view of the five remarkable speeches we have just heard it would be improper if I did not make a short reply to them. I do not claim to be able to answer in a short space of time all the matters raised, although I hope to comment on some of them.

The right hon. Member for Down, South (Mr. Powell) criticised me for commenting upon the divergence of attitude between Opposition back benchers and Government back benchers in criticising the measure. I drew attention to it because it is necessary to underline the difference in approach of the right hon. Member and the hon. Member for Oswestry (Mr. Biffen) and that of some of my hon. Friends. There is a great gulf between them, which was illustrated when the right hon. Gentleman referred to his allegiance to the market economy. He traces his opposition to the Hill to his almost immaculate belief in the operations of the market economy. My hon. Friends cannot concur in that doctrine. The right hon. Gentleman is logical in tracing con-sequences from their logical cause. If the original cause of his opposition to the Bill derives from his faith in the market economy, my hon. Friends derive their opposition to the Bill from different sources.

That fact has to be emphasised. It would be emphasised even more if the right hon. Gentleman went further. He drew himself back from doing so in his Second Reading speech when he did not proceed to elaborate on the measures whereby he would deal with inflation. Those measures would involve catastrophic cuts in public expenditure. That is what the right hon. Gentleman and the hon. Member for Oswestry would prescribe. It is their duty when they speak on inflation to elaborate their measures. If they did so the gulf would become wider still and the truth would be apparent

I say that because the right hon. Gentleman insisted that we should all in this country, and particularly in the House, tell the truth about these matters. I agree with that, but to spell out the truth he has to spell out even more clearly than he has done the consequences of the economic measures he would prescribe for dealing with our problems.

The right hon. Gentleman also said that we should obey the law and nothing else. I do not accept that doctrine and I do not believe that the people of this country can be governed by it. I agree that people should obey the law, but they must also be prepared to accept and obey the common interests of the people as we seek to discover them. We shall not be able to overcome our economic problems on the basis of telling people to obey the law and nothing else. We have to discover something else to which the people of Britain will respond. That is why I am a Socialist. I believe that the elected representatives of the people have a right to appeal to the community, and to make an appeal which is more inspiring than the law and more capable of overcoming our economic problems.

If we have to obtain obedience to the law to overcome our economic problems, we shall not overcome them. That is why I believe in the voluntary method of seeking to overcome these problems. I believe in a voluntary form of incomes policy. A person cannot be a Socialist unless he believes in a form of incomes policy. The sharing of wealth is a Socialist conception. That may be partly decided by the law, by the imposition of wealth taxes and by other means to which my hon. Friend the Member for Keighley (Mr. Cryer) would subscribe, but beyond the legal measures for the division of the national wealth there must also be an appeal to the community as a whole to respond to measures that are necessary, particularly in times of great crisis. This country faces a great crisis that must be overcome.

My hon. Friend the Member for Liverpool, Walton (Mr. Heifer) described what is in our manifesto. I agree with him about the allegiance we should bear to it. It is the manifesto on which we were elected. It is because of that manifesto that we are here and able to speak here. The manifesto contains the measures that my hon. Friend described. However, in my opinion it is contrary to the manifesto on which we were elected that inflation should continue to run at 25 per cent. or more. If that is to continue, all the propositions in our manifesto will be swept aside in an inflationary flood. Therefore, we have to take measures to deal with that, too.

That does not mean that I think that it is only wages that cause inflation. That does not mean that I disagree with what the TUC says in its document entitled "Development of the Social Contract" in which it is acknowledged that wages have made a contribution to inflation. That is also a matter with which we must deal. Indeed, the way that we have sought an answer to that problem is in conformity with our manifesto. The central feature of the manifesto, in my judgment, is that we shall keep unbreakable the association between the Government and the trade union movement. That is what I have sought to do and I believe it is in that spirit that we have had these discussions.

My hon. Friend the Member for Walton says that this is not really a voluntary agreement. I do not think that that is the case. It was a voluntary agreement in that there was no compulsion on Jack Jones, David Basnett or Len Murray, for example, to agree to the proposition. They did not have a pistol put to their heads. They could have said "No" if they had wanted to do so. They said "Yes" because they agreed with the proposition. They are upright men in the same way as are my hon. Friends. None of my hon. Friends has chosen to cast any aspersions upon them. They all owe allegiance to the same manifesto on which we were elected. The terms of the manifesto were designed after consultation with those men and their colleagues, and we are seeking to carry them out.

My hon. Friends say "If this is a voluntary agreement, why do you need a statute to sustain it?". I understand the reasons for my hon. Friends regarding with such care and suspicion any policies moving in this direction. I am not disputing their right and duty to do so. But when they ask "Why do you need Clause 1?", the simple fact is that we could not carry out the agreement that was reached with the TUC and the TUC General Council if it were not for the clause. If we did not have the clause it would be impossible for the£6 agreement to have any chance of success. That is because one employer after another would say "Here I have an obligation, a commitment, to pay more than that. If that obligation is not respected I cannot accord with the policy." That is why that part of the Bill was introduced.

As I have said previously, to enable us to carry through the agreement we have to have the agreement and support of the TUC. I believe that if the Labour Government were to cast aside the agreement made with the TUC and to speak of it in the terms that Conservatives use in deriding it, we would not be able to carry through our policy. I understand the philosophical reasons of Conservative Members for displaying derision. They believe in the market economy in excelsis. They condemn and curse the whole of this proposition. Of course, some of my hon. Friends do not agree with it, but they do not say that there must be a curse on anything that does not derive from the principles of the market economy. Indeed, they are as bitterly opposed to the market economy as I am —and that applies to all of us on this side of the House.

It would be not merely churlish but tragic if the House of Commons, dominated by a Labour majority, were to cast aside the agreement reached with the TUC in the terms in which it has been discussed by Opposition back benchers. At least those back benchers have told us clearly what they think about the propositions which are before the House and before the nation. Certainly my hon. Friends have not been backward in making their views explicit. That is the proper way for the House of Commons to proceed.

But as for the Opposition Front Bench, nobody can say that after all the nights and days of argument they have made their views explicit. They have made a few complaints here and there, put a few criticisms on this and that, and have made comments about constitutional improprieties which they allege we have committed in this, that or the other direction. But as for saying where they stand, what they think about the policy and whether they want it to succeed, we just do not know.

At least the right hon. Member for Down, South has the courage to say what he thinks. He said not merely that it will fail, but that he hopes it fails. But we do not know what the Tory Front Bench thinks. Perhaps we should have had hours longer to discover what their views are on this point—but that would be asking too much.

The right hon. and learned Member for Surrey, East (Sir G. Howe) spoke of the tribulations that we shall face in the country in the coming years and months. Surely the very worst tribulation of all is that of rising unemployment. It would be an even worse situation if it were to rise higher still, with all that will mean for the community. We must seek all the means at our disposal to overcome the problem. Whatever disputes there may be between us, there is no dispute between the Government and their back benchers on the proposition that it is only through a Labour Government, co-operating with the great mass of a trade union movement which expresses itself through the democratic institutions, that we can give the leadership to save this country.

We do not expect from the Conservative benches any enthusiastic support for such a policy. We can expect from the right hon. Member for Down, South passionate denunciation, but we expect nothing from the sleeping beauties on the Tory Front Bench. They will just wait and see what happens. If things go badly, they will denounce us. If they go well, they will say how enthusiastically they supported the policy in the first place. We can now see from their faces how enthusiastically they support the policy.

I see this as a policy for the whole country. It will not solve all the problems. We must of course take action in other respects such as those referred to by my hon. Friend the Member for Keighley. This debate will help to provide the pressures to secure those policies as well as to ensure that we do not dodge the issue of dealing in the coming months with the impossible rate of inflation.

Question put and agreed to.

Bill accordingly read the Third time and passed.