PAY POLICY (DISCUSSIONS)

HC Deb 05 May 1976 vol 910 cc1304-20

The Chancellor of the Exchequer (Mr. Denis Healey)

With your permission, Mr. Speaker, I should like to report to the House on the outcome of the discussions between the Government and the Trade Union Congress on pay and on the wider operation of the social contract during the year from the beginning of next August. The House will already have heard about the conclusion reached by the General Council of the TUC at its meeting this morning.

In my Budget speech I said that, in order to end next year with an inflation rate at least in line with our foreign competitors, we should aim at a further halving of our inflation rate by December 1977, and that this would require that, in the next pay round, the nation's money wage bill should rise by under half as much as it is likely to rise in this pay round. I went on to say that the tax reliefs I was describing were based on the assumption that the pay limit in the next round would be in the area of 3 per cent. but that much would depend on the way in which the new policy was structured.

Early this morning, the Government reached agreement with TUC representatives on recommendations they would make to the TUC General Council to implement the Government's counter-inflation policy in the 12 months beginning 1st August 1976. The General Council has now endorsed these recommendations by a very large and representative majority and will commend them to a special conference called for 16th June.

On pay, the Government's discussions with the TUC concentrated on two main questions. They were the structure of a new pay limit for the year from 1st August 1976; and the level of the limit and its impact on the nation's pay bill. On structure, the discussions produced an increasingly strict and tight form of limit, reducing progressively the risk of extra earnings increases through exceptions or leakage. On the level of the limit, both sides were concerned to reach a conclusion which met the Government's counter-inflation requirements; which protected the low paid, but at the same time gave more room for differentials than the £6 limit; and which, above all, would command the support of the trade union movement at all levels because there is no basis on which any incomes policy is likely to succeed in practice other than the understanding and support of those on the shop floor.

The result was a pay limit which, if approved by the TUC special conference, can be expected to add, on average, about 4½per cent. to wages and salaries. This increase of about 4½per cent. is well under half the increase represented by the £6 limit. That limit was equivalent to about 101 per cent. and the effect of equal pay and certain transitional provisions was to add upwards of 1 per cent. to that.

The new limit permits a maximum weekly increase of £4 and a minimum of £2.50, with a 5 per cent. limit on increases for those in the middle band of earnings. The effect of the low upper limit is to reduce the impact of the new agreement on the pay bill to about 4½per cent.

I attach the highest importance to the clear and straightforward structure of this new pay limit. It was widely expected that there would be more exceptions and complexities in this second year of the policy and I myself assumed that this would be so at the time of the Budget. In fact, the structure of the new limit is in some respects even simpler than it has been for the £6.

We do not on this occasion have to provide for large equal pay increases or for transitional exceptions outside the pay limit, which, in the current year, have added appreciably to the pay bill. Next, there is no question of consolidating pay increases under the £6 policy into basic rates: this alone could have added as much as 2 per cent. to the total pay bill.

No special exceptions are proposed for productivity bargains. There is no loophole for rectifying what people may see as anomalies.

The calculation of pay increases during the year from 1st August is quite unambiguous and avoids the uncertainties of the pay bill for a group. The increase will take the form of a supplement to the pay of the individual, calculated week by week or month by month as 5 per cent. of his total earnings, subject to a floor of £2.50 and a ceiling of £4, which will apply to incomes at all levels above £80 a week.

Apart from the changed form of the limit, the rules for the £6 limit will continue to apply, subject to a minor exception to permit the negotiation of occupational pension schemes up to the level required by law to permit contracting out of the State scheme, which the Government announced last July.

This 4½per cent. level of pay increase is likely to be below that in practically all the Western developed countries this year. Even the Germans, with their excellent record, are seeing a rate of increase of about 5½per cent.

The Government regard these proposals, like the £6 proposals before them, as a thoroughly responsible and states-manlike response by the TUC to the needs of the counter-inflation programme

. The recent discussions have not been confined to pay alone. The TUC has naturally stressed the vital importance of keeping the rise in prices to the minimum during the period of the new pay policy. Price controls must not be swept aside while an incomes policy is in operation. The Government therefore believe that price controls on both profits and costs must continue at this time, but that the price control regime must be so modified as to encourage investment and jobs in our economy.

My right hon. Friend will be discussing current price controls and the essential changes that we believe must be made to ensure economic growth with the CBI, the TUC and all other interested parties. As soon as these discussions have been concluded, a further statement will be made to the House and a consultative document will be issued in the normal way.

In order to contain the effect of price increases on those with growing families I propose not to proceed with next September's 5p increase in school meal charges. This will cost £35 million in the current year. It is something to which the TUC representatives attached great importance in our talks.

The TUC has, of course, been equally concerned with jobs and training. As recent surveys have shown, demand from exports and investment is now expected to increase rapidly and the prospects for employment are much brighter in consequence.

Since the last TUC Annual Congress I have brought forward four separate sets of selective measures, in September, December and February and again in my recent Budget, to improve the prospects for employment, both directly, as through the introduction and improvement of the temporary employment subsidy, and indirectly, for example, through the additional expenditure on industry schemes and to extend facilities for industrial training. The full effect of these measures has not yet come through, but we estimate that more than 100,000 people already have jobs or training places as a result of them. I now propose to allocate an additional £15 million for training and job creation by the Manpower Services Commission.

The total additional expenditure of £50 million will be charged against the contingency reserve and will not add to the expenditure totals announced in the Public Expenditure White Paper.

The Government are satisfied that the new agreement, if approved by the TUC special conference, will, as I have explained, meet the requirements of the counter-inflation policy. When that has happened, we therefore propose to recommend to Parliament the enactment in full of the conditional tax reliefs specified in the Budget.

Sir G. Howe

The Chancellor has made a long and important statement. The House will wish to have an opportunity for an early and separate debate on the matters disclosed in it, but there are a number of questions that I ought to ask today.

Is the right hon. Gentleman aware that the House will welcome the extent to which the figures now being discussed introduce a far greater sense of realism than prevailed during the disastrous era of the social contract, when the entire nation was taken for a ride? Can the right hon. Gentleman also give the House an absolutely candid assurance that he has entered into no kind of undisclosed or secret undertakings with the TUC that might restrict his freedom and his duty to the country to take whatever steps may be necessary still further to reduce public spending in the year that lies ahead?

Can the right hon. Gentleman tell us whether the figures he has outlined are matters for negotiation or are an entitlement? If people are to be entitled to the minimum of £2.50, is that consistent with the rest of the policy? Can he tell us whether those on incremental scales, particularly in the public sector, are to be covered by this limit, or are they to remain in a privileged position?

Mr. George Cunningham

Have the grace to say "Well done".

Sir G. Howe

Can the right hon. Gentleman tell the House whether the Pay Research Unit will remain in suspension or will resume its work?

The House will be surprised that the area of 3 per cent. is wide enough to include a figure of 4½per cent. It will also have been surprised to hear the right hon. Gentleman say that this agreement is more simple than the £6 limit. Can he give us an indication of the effect of these proposals on the level of demand in the economy, and an assurance that they will not add to the risks of reflationary pressures later in the year? [HON. MEMBERS: "Too long"] The leaders of the TUC have had days in which to consider these matters, and this House is entitled to have a few minutes at least to consider them today. [HON. MEMBERS: "Too long."]

Mr. Speaker

Order. The Chancellor was heard in silence. I know that the arguments are provocative, but the House must listen.

Sir G. Howe

Is the Chancellor aware that we also attach the highest importance to the relaxations proposed in price control which he himself described in his Budget Statement as crucial to the restoration of business confidence? Does he also appreciate that the most serious aspect of what he has outlined is the severity of the top limit of £4 a week—less than half the £7 cut-off under stage 3, which was so fiercely denounced by the Labour Party at the time? Does he appreciate that that can pose a very great danger to the whole policy and the whole economy? All those skilled workers and managers about whom he said so much earlier in the year, all those earning more than £80 a week, all those who have made the greatest sacrifice, are to be still further penalised.

Finally, but by no means least important, there is the position of Parliament itself. Why did the Chancellor choose to announce these matters to a Press conference this morning instead of in this House this afternoon? As the TUC and its constituent unions are to have many opportunities to consider these matters beyond those opportunities they have had already, will the right hon. Gentleman assure us that the Government will consider the views and representations of this House on these vital matters? Otherwise, he must recognise that he has done grave damage to the pattern of parliamentary democracy.

Mr. Healey

First, I think I should congratulate the right hon. and learned Member for Surrey, East (Sir G. Howe) on choking back his disappointment at our success to the extent that he found it possible, very reluctantly and under pressure, to congratulate the Government on their success in these negotiations. I look forward to the debate which he wishes to have possibly with more enthusiasm than he does.

First, there are no undisclosed commitments in this agreement to the TUC or to anyone else. Secondly, as with the £6 limit, the limits set this time provide a limit for negotiation and not entitlement. Thirdly, as I have made clear, the rules are the same as they were for the £6 limit, including increments: for the same reason, the PRU will, of course, be in suspension for the duration of the new limits. Fourthly, the effect on demand of the total package, including tax reliefs, as I said in my Budget Statement, will be to add about one-third of 1 per cent. to the gross domestic product.

I was interested to hear the right hon. and learned Gentleman say that the new pay limits were far too severe, at least on that section of the population which is better off than the rest of the population. I remind him that among the tax reliefs is an increase of £500 in the first five of the higher rate thresholds.

Finally, we shall certainly take account of the views of the House of Commons. I hope that when we debate these mat- ters the Conservative Front Bench will make it clear, as it so lamentably failed to do in our last debate, whether it is in favour of an incomes policy or not.

Mr. Mellish

Is my right hon. Friend aware that the nation and the vast majority of this House will be grateful for what has been said? Does he not agree that the trade union movement has demonstrated once again that when the nation is in crisis it is prepared to show statesmanship and genuine patriotism?

My one question is about price control. I understand, as I am sure we all do, the problems involved, but what is so difficult for ordinary people outside to understand is that many of the increases come from those over whom the Government have a measure of control—for example, the railways and the Post Office [Interruption.] Nothing can be said by the Tory Party on this matter because it does not believe in subsidies in any form for State-owned industries and the rest, so hon. Members opposite can shut up. My right hon. Friend must make it abundantly clear to the public —[HON. MEMBERS: "Question.")—at least it is intelligent—[Interruption.]—

Mr. Speaker

Order. Of course it is, as I would expect, but we are not going to debate the matter today.

Mr. Mellish

I am simply asking my right hon. Friend to make it abundantly clear that the Government are not only aware of the problem of the rising costs of State-owned industry and the danger of this sabotaging what he is trying to do but will deal with the matter, since most people accept that we must get on top of the problem. May I end on this note.

Mr. Speaker

Order. If it is an interrogatory note.

Mr. Mellish

Is my right hon. Friend aware that our personal thanks for this agreement are due to him and my right hon. Friend the Leader of the House?

Mr. Maxwell-Hyslop

On a point of order, Mr. Speaker. If speeches are to be made in the guise of asking questions, will you allow interventions in the speeches?

Mr. Speaker

I hope that hon. Members will be fair to their colleagues. A great many hon. Members wish to ask questions. Unless they are reasonably brief, many of them will be disappointed.

Mr. Healey

First, let me thank my right hon. Friend the Member for Bermondsey (Mr. Mellish) for his congratulations.

On nationalised industry price increases, the whole House agrees that it is desirable that the nationalised industries should be able to pay their way. This is certainly the view of all the trade unions in the nationalised industries themselves. Where increases in nationalised industry prices have been necessary, they have been due largely either to increases in oil prices in the energy industries or to increases in wages. We must enable the nationalised industries to make a contribution to the national economy on the same basis as any other industry.

Mr. Pardoe

Is the right hon. Gentleman aware that some hon. Members on the Opposition side always hoped that agreement would be reached and are glad that it has been reached? Nevertheless, will the right hon. Gentleman state clearly that, however satisfactory 4½per cent. may be as a result of these negotiations, it is 4½per cent. more than the country can afford and that it will have to be either borrowed or printed? By how much does he expect this deal to affect the rate of inflation by the end of 1977, and by how much will it add to the total of public sector salaries and wages?

Mr. Healey

Let me first thank the hon. Gentleman for his words about the Government's success.

The hon. Gentleman asked me about the effect of the 4½per cent. on public sector salaries. It is not likely to have a significant effect beyond what was already included in the cash limits which, as he will know, assumed an increase of between 5 per cent. and 10 per cent. This is slightly below the lower end of that.

The effect of the deal on the rate of inflation, given the increase in output and productivity which is now under way—[HON. MEMBERS: "Where?"] Those hon. Members who ask where might well read the surveys by the Financial Times or the CBI. The wage increases here will add to the RPI by the end of next year only about 2 per cent. But there is likely to be a hardening of import and commodity prices over the coming year, and the recent depreciation in sterling will also increase our import prices.

Mr. Ford

Is my right hon. Friend aware that the nation as a whole will recognise the importance and ingenuity of the agreement that he has reached today and will congratulate all those involved on both the Government and the trade union sides? Is he aware, further, that we hope that the market will take note of the agreement, which could have been reached only in a free bargaining position? Will he accept that all his right hon. and hon. Friends will support him as necessary in the conclusion of the agreement? However, can he enlarge upon the position with regard to productivity bargaining? Does he understand that the lack of provision for productivity bargaining could lead to some damping down of investment?

Mr. Healey

I thank my hon. Friend. I am grateful for what he said about the markets taking note of this agreement. It is very important that all concerned with the performance of the British economy should also note the unprecedented large majority of the TUC General Council which supported this agreement. It was very much larger than that last year, and it includes some very large and important unions which last year found it impossible at a similar stage to support the £6 limit.

On productivity bargaining, my hon. Friend will realise that inevitably there will be some penalty to be paid through the exclusion of productivity bargaining. But to allow productivity bargaining to produce increases above the limits that we set would have been to open a breach in the firmness of the ring fence round the limits, which would have destroyed the very tightness of the policy which has made it possible to give the tax reliefs.

Sir John Hall

Does the right hon. Gentleman agree that the effect of the pay agreement on skilled workers and those in middle management may be more serious than he has led us to believe? When those in middle management and skilled workers suffer a real fall in their incomes for the second year in succession because of the operation of this pay code, allied to the fact that the proposed tax benefits will be very largely offset by increases in national insurance contributions, this can have a disincentive effect on middle management as a whole and be serious for the future of our industries. Cannot he give some encouragement to this class of people in the future?

Mr. Healey

I am conscious of the problems to which the hon. Gentleman referred. But I remind him that the raising of the threshold for the higher rate of tax will be of substantial benefit to those in middle management, as will the tax reliefs which I am now able to give in full. Moreover, on this occasion there is no cut-off point on salaries beyond which no increase will be paid. The £4 increase will be available at all levels.

Mr. Atkinson

Does my right hon. Friend agree that the fall in the value of sterling was brought about to pressurise the negotiators on this occasion? Does he think that there is any truth in the statements in the financial Press, and, if there is, does he not agree that it is totally wrong that currency dealings should be used for political purposes?

Mr. Healey

I have not read all the statements in the financial Press, but I have read a great many. With some, I agree. With others, I do not. I have not seen any of the nature suggested by my hon. Friend. He must realise that the pressure on sterling is exerted not by citizens of this country but by people 3,000, 6,000 and 12,000 miles away who look at the news in their newspapers—very often extremely tendentious and misrepresented—and take action accordingly.

Mr. Crawford

Since family incomes in Scotland are lower than those in England—[Hors. MEMBERS: "They are not."]—will not the right hon. Gentleman agree that the imposition of a blanket 4½per cent, is a disgraceful and positive discrimination against Scotland?

Mr. Healey

As one of the representatives of the distinguished city of Leeds in West Yorkshire. I assure the hon. Gentleman that the level of incomes in my part of the country is lower than that in Scotland.

Mr. Hordern

Does the right hon. Gentleman recollect that in his Budget speech he said that if there were any increase in the pay norm above 3 per cent. there would have to be corresponding reductions in the tax concessions? How can he justify the fact that there are to be no reductions in the tax concessions when the pay norm is to be 50 per cent. above the level which he set? What will be the effect on the public sector borrowing requirement?

Mr. Healey

The hon. Gentleman cannot have listened to my statement and my answers to subsequent questions. The reason why I am able to give these tax reliefs in full is that the new limit has been drawn so strictly that it is very much tighter even than the £6 limit itself. The hon. Gentleman will know that the general expectation was that the new limit was bound to be very much slacker than the £6 limit. This is not in fact the case.

To answer the hon. Gentleman's second question about the effect on the PSBR, I refer him to my statement. If he was unable to hear it earlier, he will be able to read it in Hansard tomorrow.

Sir G. de Freitas

Since these negotiations have received a great deal of publicity abroad, especially on the Continent, what steps can the Government take through our diplomatic missions to bring to the attention of people abroad the fact that they have been so very successful?

Mr. Healey

I was able to listen on "The World at One" radio programme today to a member of the European Commission giving unstinted praise to the nature of the agreement that we had reached and pointing out that our rate of wage increase in the coming year would be by far the lowest in Europe.

Mr. Lawson

Can the Chancellor confirm that he has agreed—will he please pay attention to the question—with the TUC representatives that as a result of this deal public expenditure will be higher and price and profits controls tighter than they would otherwise have been?

Mr. Healey

No. The hon. Gentleman, as so often, is rather wide of the mark. In respect of price control, the Prime Minister himself made clear yesterday, before agreement had been reached, that the situation would be as I have stated it today, namely, that profit and costs control will remain but that we shall seek to discuss the amendments, or changes, in the price regime which are necessary to promote more jobs and to stimulate investment.

Mr. Canavan

In view of the fact that, at least on paper, the higher income groups will get a bit more than those on low incomes, would this not be the ideal time to introduce some form of national minimum wage, together with tighter controls on the perks, and other allowances, which allow overpaid business executives and tycoons to escape from any incomes restrictions?

Mr. Healey

I am grateful to my hon. Friend. In respect of a national minimum wage, he should recognise that on many occasions attempts to produce exceptionally favourable terms for the low paid have led to an increase in the pay of juveniles and part-time workers very much larger than increases in the pay of full-time adult males. That is one of the factors which have led to excessive juvenile unemployment. On the question of fringe benefits, I would refer my hon. Friend to my Budget speech and to the interchange I had with the Conservative Opposition during the Second Reading of the Finance Bill on Monday.

Mr. Maurice Macmillan

I would like to congratulate the Chancellor if only on making it clear why public expenditure debates in this House are so thinly attended. They are redundant because, apparently, he is settling the matter else-where. I would like to ask him three questions. Can he tell the House what proportion of the total labour force, including middle and junior management, which will get 5 per cent. is earning between £50 and £80 a week; what proportion is earning below £50 a week; and what proportion is earning above £80 a week? That is my first question.

My second question is, how does the Chancellor expect people to invest in expensive machinery if his proposals discourage rewarding the higher paid and the more skilled and also discourage any attempt to end overmanning? My third question—

Mr. Speaker

Order. The right hon. Gentleman should know that I had it in mind to allow but another five minutes on this, which will be 40 minutes we have spent on this subject. There is other business to follow. Perhaps he might consider the rest of the House.

Mr. Macmillan

I will gladly forgo my third question, Mr. Speaker.

Mr. Healey

May I thank the right hon. Gentleman for his somewhat opaque and obscure congratulations? His main question was in respect of the rough proportion of wage earners who fall into the categories which will get the floor cash payment, the percentage payment and ceiling payment. The numbers will shift throughout the year because as earnings rise, those who are caught by the ceiling will tend to increase as a proportion of the total labour force towards the end of the pay round. Broadly speaking, those who will receive the 5 per cent. are 40 per cent.; those who will receive the cash ceiling will be somewhat more than one quarter at the beginning of the year, rising to about one-third at the end of the pay run; those receiving the floor payment will move accordingly.

Mr. Jay

While warmly congratulating both the Government and the TUC on this very valuable agreement might I ask the Chancellor what authority will now give final rulings on whether an individual pay settlement is within the terms of this agreement?

Mr. Healey

The enforcement or monitoring machinery will be exactly the same under this round as under the current pay round, that is to say, in the public sector it will be the responsibility of the relevant public authority to monitor the agreement. I can assure my right hon. Friend that the Treasury, operating the new system of cash limits on public expenditure, will make sure that the agreements are honoured. In the private sector the main machinery of enforcement will be applications for price increases under the Price Code as it has been up to the present time.

Mr. Norman Lamont

Is it not the case that the vast majority of incremental scale payments are in the public sector? Can the Chancellor explain by what criterion the scale payments in the Civil Service and the public sector will once again be exempted from the burdens placed on the rest of the community?

Mr. Healey

We discussed this at very great length in the debates last year. I would not deny that the problem of incremental payments has been a problem for all pay policies although, as far as I am aware, all pay policies—including this one—which were supported at the time by members of the Conservative Front Bench allowed for incremental payments within the limits, on the principle that incremental payments arc permitted provided that they go to the group as a whole, in other words, as people move up the incremental scale, others are coming in at the bottom.

Mr. Cryer

Can my right hon. Friend enlarge slightly on the question of price control and say how he proposes to ensure that the resulting investment is actually channelled where it is needed—into the manufacturing industries? Can he say whether the TUC had any reservations about only £15 million to combat unemployment? Would he say—

Mr. Speaker

Order. Be fair.

Mr. Cryer

Would he say—

Mr. Speaker

Order. The Chancellor.

Mr. Healey

Currency speculation was not raised with me at all. On the question whether the TUC would like more money to combat unemployment, of course it would have liked it for hundreds of other worthy causes, too, but the TUC accepted, as do the Government, that in a period such as the present Government have to give priorities for public expenditure and, to observe them closely. I was asked about price control and investment relief. We have investment relief in price control at the present time and it is carefully monitored. My hon. Friend would agree with the TUC Economic Review, paragraph 193, which says that it is not desirable that price control should operate in a way which deprives companies of capital for investment or of working capital or capital for stock building. The discussions which my right hon. Friend the Secretary of State for Prices and Consumer Protection will be having with all concerned will be designed to ensure that price control does not operate in such a way as to reduce the number of jobs in the country.

Mr. Anthony Grant

Is this arrangement intended to apply to the miners of South Wales who, I understand, have already rejected it? If so, how does the Chancellor expect it to be observed?

Mr. Healey

The miners' union representatives supported these proposals strongly at the General Council this morning. I hope that the hon. Gentleman would welcome that fact. May I be a little more precise in answering the question put to me a moment ago? There is no way of enforcing an incomes policy. The Government will rely in the next phase, as it has in this phase, on the support of working people. I would point out that 7½million people have settled within the £6 limit and there has not been one breach to our knowledge. Support for the present agreement is more widespread, at this stage, than support for the last agreement. I am sure the hon. Gentleman will remember enough about the confrontation between his own party's Government and the NUM not to follow down that road.

Let me try to be more precise on the subject of proportions. I have already explained that overtime next year will tend to shift as activity increases. The proportion on the minimum is likely to be about 34 per cent., on the percentage about 43 per cent., and on the maximum about 23 per cent.—roughly in line with the figures I gave.

Mr. Cant

Will my right hon. Friend say whether he was able to respond to the massive realism of the TUC by giving any assurances about the trend of money supply in the next 15 months?

Mr. Healey

This was not a matter which the "massive realists" of the TUC made the centre of their preoccupations during our discussions. My hon. Friend no doubt noted the remarks on money supply contained in my Budget speech, and I have no doubt that he also will have noted with approval the money supply figures in the last month.

Sir P. Bryan

The right hon. Gentleman said that his limitations were tightly drawn. Will he say how many people are immune from those limitations, either through incremental arrangements or through the fact that their pay is tied to the cost of living?

Mr. Healey

I cannot answer that question without notice, but I shall be glad to look into it. One of the most worrying areas of immunity relates to professional people, such as lawyers, with their very high salaries, whom it has always proved difficult to control, as the right hon. and learned Member for Surrey, East (Sir G. Howe) will no doubt confirm.

Mr. Clemitson

Does my right hon. Friend agree that in regard to the question of low pay an important provision to be considered is Schedule 11 of the Employment Protection Act? Will he say whether any increases under that schedule will be exempt from the limits?

Mr. Healey

There are no exceptions to the rules I have stated, other than the matter of bringing occupational pension up to contracting-out level. However, if my hon. Friend tables a Question to my right hon. Friend the Secretary of State for Employment, no doubt he will be given further information.

Mr. Fairgrieve

Does the right hon. Gentleman agree that it might be more practicable for the Government to make some safe Labour seats available to certain leaders in the trade union movement so that they could state policy decisions directly to the House instead of through the mouths of the Government Front Bench?

Mr. Healey

Perhaps the hon. Gentleman will have a word with his right hon. Friend the Leader of the Opposition to see whether she can oblige in that regard.

Mr. Robert Hughes

Since limits, once negotiated, will not be consolidated in the basic overtime rates, and since the £6 limit is also not to be consolidated, is my right hon. Friend aware that he is storing up trouble for the future? Will he take the TUC and the Labour Party into his confidence in any future planning so that we do not again suffer the frenetic activity in the last few days of the wage round?

Mr. Healey

My hon. Friend must recognise that we have not yet completed the first round under the £6 arrangements. We have just negotiated an agreement to cover the second round, which will operate up to August 1977. Active as I am in these matters, and indeed anxious as I am to anticipate events, it is a little early to ask me this afternoon to begin negotiating the third round.

Mr. Hall-Davis

Is it not a fact that every section of the community will have to cut back on real spending in the next year? Therefore, is it not even more important that the Government should make at least proportionate cuts in their own spending, otherwise individuals will be denied the benefits of the sacrifices which they are being called upon to make?

Mr. Healey

The hon. Gentleman will be aware that this matter has been the "small change" of the discussions between Front Benches for at least a year. I should be more concerned about his attachment to the cause he appears to espouse if the Conservative Front Bench were to say that it was in favour of cutting rent subsidies and subsidies to commuters—and to make those statements before tomorrow's local elections rather than the day after them.

Several Hon. Members rose—

Mr. Speaker

Order. No doubt this matter will come up in the House again.