HC Deb 28 April 1977 vol 930 cc1476-9
13. Mr. Adley

asked the Chancellor of the Exchequer when he intends to open formal negotiations with the TUC on phase 3 of his counter-inflation incomes policy; and if he will make a statement.

15. Mr. Arnold

asked the Chancellor of the Exchequer what progress he has made towards securing a third year of pay restraint.

Mr. Joel Barnett

Discussions about pay policy after July 1977 have already begun. Both the Government and the TUC remain convinced of the need to avoid a wages explosion when the current round comes to an end.

Mr. Adley

Does not the Chief Secretary agree that the present social contract is causing alarm and despondency to skilled workers and is proving fertile ground for industrial trouble makers? If he accepts that, does he agree that, unless phase 3 manages to solve both these problems, it will turn out to be nothing more than a public relations exercise between the Government and the TUC?

Mr. Barnett

Of course there are problems with skilled workers and differentials generally. This has not grown up just over the last two years, although it has been made more difficult because we have had to concentrate on bringing down the rate of inflation generally. The problems of differentials have grown up over successive incomes policies over many years. I agree with the hon. Gentleman to the extent that the next phase of incomes policy will almost certainly have to take account of, and be much more flexible to allow for dealing with, the problems of differentials.

Mr. Arnold

Is it not the case that policies stringent enough to achieve the Treasury's own forecasts will have to be negotiated at a time when price inflation is running at the very high level of 16 per cent. and over? Is not Mr. Jones correct, therefore, in saying that it will be impossible to lay down centrally any kind of strict means for dealing with the matter if we are to overcome the problem of differentials to which the Minister has just referred?

Mr. Barnett

I have noted the hon. Gentleman's reference to centralism. I assume that he took that straight out of the recent pronouncement by the right hon. Lady the Leader of the Opposition about leaving everything to be negotiated at local level. I am not sure that I would necessarily go along with that proposition. Certainly there are problems here, although the remarks often quoted as coming from Jack Jones do not take account of what he actually said. He stressed the need to continue the attack on inflation and warned against a wages scramble.

Mr. Ioan Evans

In future discussions with the TUC, will my right hon. Friend look at the TUC's economic review for 1977 and accept some of the TUC's proposals to expand the economy, and will he make the reduction of unemployment the Government's main priority?

Mr. Barnett

My hon. Friend can be assured that we look at the proposals that the TUC expresses in its economic review, but I am sure that he will recognise that it will not help anybody in this country if we expand the economy by expanding home consumption. The way to expand the economy is to improve our industrial performance and expand it in exports and import substitution. That is the way to improve our position, to increase demand and reduce unemployment.

Sir G. Howe

Can the Chief Secretary help the country to understand exactly what stage has been reached in the dialogue that is taking place? Do the Government stick to the view expressed by the Chancellor that the conditional tax cuts will not be made final until a satisfactory agreement on new pay policy has been reached? Do the Government also stick to the Chancellor's other view that he expects such an agreement to be reached well before the Finance Bill leaves the House? Will the right hon. Gentleman answer those two questions about the Government's intentions?

Mr. Barnett

The right hon. and learned Gentleman knows how happy I am always to answer his questions or anybody else's. I assure him that, as my right hon. Friend the Chancellor said, the 2p reduction in the basic rate of tax is conditional upon achieving a satisfactory deal with the TUC on pay policy. It is our intention to ensure that that reduction in tax will be put forward to the House—I imagine that the Report stage will be the most appropriate time—on the Floor of the House.

Mr. Prentice

Will my right hon. Friend bear in mind that many of us would like to see the Government and the TUC get a move on? Does not the result of the votes at the USDAW conference, the Scottish TUC conference and the Welsh TUC conference reflect the fact that the majority of working people in this country are sick and tired of inflation and want to see a genuine phase 3 with specific limits written into it? Will the Government take encouragement from those conferences and not be too discouraged by Mr. Gormley's pessimistic pronouncements and Mr. Jones's ambiguous pronouncements? May we see specific proposals at a fairly early date?

Mr. Barnett

I assure my right hon. Friend that I take encouragement from wherever I can find it. As regards getting a move on with the negotiations, I am sure that my right hon. Friend will recognise that there are great problems here. There would be no point in settling a deal with the leaders of the TUC which was not generally acceptable to its members. It therefore entails some lengthy negotiations. I do not believe that it would necessarily be helpful to rush them.

Mr. Donald Stewart

Does the right hon. Gentleman agree with the dictum of his right hon. Friend the Member for Huyton (Sir H. Wilson) that a policy of wage restraint can work for one year and, at a pinch, two? Does he accept that, since prices have been allowed to soar beyond wage increases, there is no justification for conning the trade unions into a phase 3?

Mr. Barnett

I do not accept that we should not seek to obtain a phase 3. I recognise that the problems of getting a phase 3 will be difficult. It has been difficult in the past to achieve that kind of situation. I do not seek to blame the trade unions or their members for all the problems that we face in this country. It would be foolish so to do. Equally, I am sure that they recognise that they will not increase their living standards by a wages scramble. That is why we are having negotiations with the TUC. There is an excellent relationship between us, and I am sure in my own mind that, given the appropriate amount of time, we shall come to a satisfactory agreement.