Social Contract

HC Deb 01 May 1975 vol 891 cc702-4

3. Mr. Lane

asked the Chancellor of the Exchequer when he next expects to discuss inflation and the social contract with the Trades Union Congress.

Mr. Healey

I have frequent meetings with representatives of the TUC at which inflation and the social contract are among the subjects for discussion.

Mr. Lane

Should not the right hon. Gentleman have marked May Day by starting a renegotiation of the social contract on a broader, tougher and more realistic basis? Does he agree that, as my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) urged, for the time being the majority of us, whether we are organised or un-organised workers, must accept salary and wage increases below the rise in the cost of living if the lower-paid and other disadvantaged groups are to be protected against inflation and if the rate of inflation is to be brought down?

Mr. Healey

I made it clear that I believe that it is necessary to discuss how the guidelines can be more strictly adhered to. There may be a case for reconsidering some elements in the guidelines, but I do not think that it would be sensible to seek to change the guidelines towards the end of an existing wage round. That would rightly be regarded as extremely unfair to those who have not yet had a chance to make their settlements.

Mr. Ron Thomas

When he talks to the TUC, will my right hon. Friend discuss the clear indication that his Budget proposals were an attempt to solve inflation by creating more unemployment? Will he discuss with the TUC what is likely to happen in the whole consumer durable industry, where unit costs will go up and overseas competitors, who already have a large chunk of the British market, will capture an even larger chunk?

Mr. Healey

I had the opportunity of discussing my Budget with the TUC at a meeting the Monday after I made my Budget speech, and I was reassured to discover that all members of the TUC present agreed that the social contract remained the only basis of a policy against inflation. Moreover, many members of the TUC have pointed out, as I have, that wage settlements in excess of the guidelines voluntarily laid down by the TUC were certain to lead to an increase in unemployment, and to paralyse the Government's policy to deal with such an increase by reflationary measures, such as were taken, for example, in Germany, where the average level of wage increases has been under 10 per cent. over the past 12 months. I hope that I can count on my hon. Friend's support in seeking to persuade all members of trade unions engaged in negotiations to observe these voluntary guidelines.

On the completely separate question of consumer durables, my judgment is that the foreign competitors who have been putting up heavy competition with British industry in many consumer durables will find the increase in tax on some of those durables a much more serious obstacle than the British industries will.

Mr. David Howell

We think that when the right hon. Gentleman said last week that he would have to rely primarily on cuts in public expenditure to combat excessive wage claims he was on the road to realism. Is this the approach he will use, if his colleagues allow him in dealing with, say, the railwaymen?

Mr. Healey

I wish that the hon. Gentleman had read what I said rather more carefully. I said that I should be compelled to rely primarily on reductions in public expenditure if groups of workers attempted to recoup the tax increases made necessary by excessive settlements in the past by even more excessive settlements in the future. I hope that he was not assuming that they would do so, or encouraging them to do so.

On the question of cuts in public expenditure, I should find the attitude of the Opposition Front Bench a good deal more intelligible, and even sympathetic, if they were able to give any indication where they would make the cuts, and which elements in the £3,000 million annual increase in public expenditure, on which they fought find lost the last election, they would choose for priorities.