SOCIAL CONTRACT (Hansard, 1 May 1975)

§ Q1. Mr. Dykes
asked the Prime Minister what plans he has to meet the TUC to discuss the working of the social contract.

§ Q10. Mr. Michael Latham
asked the Prime Minister whether he has now fixed a date for a further meeting with the TUC.

§ The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short)
I have been asked to reply.
I refer the hon. Members to the reply which my right hon. Friend gave to my hon. Friend the Member for Fife, Central (Mr. Hamilton) on 24th April.

§ Mr. Dykes
In view of what the Chancellor has just said, what maximum rate of wage increases does the right hon. Gentleman think the economy can bear over the 12 months between this May Day and the next May Day?

§ Mr. Short
Broadly speaking, wage increases now must not exceed increases 718 in prices. If we succeed in that, we shall get out of our difficulties. If not, we shall be in greater difficulties. I have made that clear over and over again, as has the TUC in its recent economic survey.

§ Mr. Latham
When will the TUC be given specific details of the extra unemployment which will arise from next year's public expenditure cuts in the Budget?

§ Mr. Short
My colleagues and I, including the Prime Minister and the Chancellor of the Exchequer, had some very fruitful discussions with the TUC recently and we discussed the effect of the Budget.

§ Mr. Ioan Evans
Does my right hon. Friend agree that the TUC is doing its utmost to see that the social contract is working? Has he yet received any representations from the Opposition about their attitude to the social contract? Do they agree with it? If not, may we understand where they stand?

§ Mr. Short
On the first point, I certainly agree. I think that we should bear in mind that we have had a year's transitional period from a statutory incomes policy which virtually brought the country to its knees. We always recognised that the transitional period would be extremely difficult. We have recognised that all along. But, equally, we should recognise that from now on price increases in this country, which are our own responsibility, will be due almost entirely to labour costs.

§ Mr. Prior
The right hon. Gentleman said that the social contract dictates that increases in pay should not exceed increases in prices. Does he take into account the increase in taxation? If so, that presumably means that if the social contract is kept there will be a reduction in the real standard of living next year. Is that the position of Her Majesty's Government?

§ Mr. Short
It is exactly the position. The Chancellor made it abundantly clear ant said it in terms in his Budget speech. We have made it clear in our discussions with the TUC that if wage increases are to be claimed for increases due to the Budget—

§ Mr. Prior
Taxation increases.

§ Mr. Short
Of course taxation increases. The right hon. Gentleman was not listening to my reply to the last supplementary question. Certainly that is the case. If wage claims are to be made for those increases, we shall not get out of our difficulties this year.

Mr. Tom Ellis
Will my right hon. Friend initiate an appraisal of the working of the social contract with a view to clarifying and strengthening its proposals, making it more precise and broadening its base, and particularly to making it a tripartite form of agreement? Will he also set up an authoritative monitoring body to which people can turn to see the relativities of prices, costs, wages, and so on?

§ Mr. Short
On the last point, if we do what my hon. Friend suggested we shall come very near to a statutory policy again, and we have no intention of returning to a statutory policy.
On the first point, the need is not to change the TUC guidelines, but to secure wider adherence to them. The TUC is doing all in its power, as are individual unions, to ensure that that is done.

§ Mr. Tapsell
Do the right hon. Gentleman and the Government not yet understand that the key to the conquest of inflation is not the relationship of rising wages to rising prices, but the relationship of rising wages to rising production and productivity?

§ Mr. Short
That is an extremely important factor in the whole thing. We have said that over and over again. All I am saying—and the recent report of the Price Commission confirms this—is that now that the oil price increases have worked through—at any rate, the last one will do so in the near future—inflation in this country will be our own affair. We refuse to believe that this nation cannot face that fact and face the responsibility of dealing with it without returning to an arid statutory policy. This nation can do that, and it must.