COUNTER-INFLATION (CONTINUATION OFENACTMENTS)

HC Deb 27 July 1977 vol 936 cc776-815

Question again proposed.

Mr. Ron Thomas

Thank you, Mr. Speaker.

I want to make two brief points. I am not happy with the 12-month rule because it will penalise mainly the low paid workers. Other workers can take advantage of job evaluation schemes, payment-by-results schemes, measured day-work schemes and all the rest of it, which enable certain groups of workers to push up their earnings, and rightly so, day to day and week to week. The view that there is to be only one increase and that they will have to wait 12 months for any increase will hit the lower paid.

I have no faith in the White Paper figure of 10 per cent. in meeting the kind of inflation levels that we must expect in the next 12 months. Workers have to think about net pay increases because in the vast majority of cases 34 per cent. of it will go in tax.

I have no faith in the other order dealing with the limitation of dividends. There is ample evidence that any form of limitation of dividends is likely to be defeated by scrip issues in order to get round the controls over dividends. Companies are now making massive profits, and by manipulating the system they are salting away money for the future. That will add further to the profits of company shareholders and will assist the wealthy people of this country.

10.7 p.m.

Mr. Graham Page (Crosby)

I wish to refer to the Limits on Remuneration Order 1977. I wish to remind the Secretary of State that he spent four years as a very distinguished Chairman of the Select Committee on Statutory Instruments. He will recollect that the first thing he looked for in a Statutory Instrument was the power of the Minister to make such an order.

We find in the sixth paragraph of the order the following passage: Now, therefore, the Secretary of State, in exercise of the powers conferred on him by section 1(2) of the 1975 Act and of all other powers enabling him in that behalf, hereby makes the following Order". The 1975 Act to which reference is made is the Remuneration, Charges and Grants Act 1975. Therefore, we turn to Section 1(2) of that Act to see what power the Secretary of State has to make this order. That provision reads: if Her Majesty at any time causes a document to be laid before Parliament which sets out limits in addition to or in substitution for those so imposed". If we refer back to subsection (1), which relates to the first White Paper, we see that he has power to make the order. It implies that that will happen if there is a document setting out limits and, secondly, that that should be in addition to or in substitution for the previous limits.

We are assured that the White Paper, Cmnd 6882, sets out limits within the meaning of the parent Act, the Act of 1975. We refer to that document to find out what those limits are. The White Paper sets out the statement of the General Council of the TUC, which was as follows: The General Council attach the utmost importance to the continued observance by negotiators of the guidelines of the £2.50/5%/ £4 policy adopted by Congress". This means that it is a continuation. All that the new White Paper does is to continue the policy set out in the previous White Paper, Cmnd 6507.

Is it an addition to or a substitution for last year's limits? I doubt it. It calls on those negotiators to keep to last year's limits. It goes on to say that it shall include a requirement of a 12-month interval between settlements. Are we to take it that that limitation in time—12 months—is a limitation of pay within the meaning of the Remuneration, Charges and Grants Act?

In the first White Paper the figures and percentages were set out. They were written down so that those who had to obey the limits could find out what they were. The same applied to the second White Paper. It is, of course, of vital importance that anyone who will be bound by the order should know the limits by which he will be bound. Employers will not have to pay any salaries or wages above the limits, no matter what they may agree with their employees. If local authorities go above the limits, they will be refused certain assistance from the central Government. Employers who pay above the limits will not be able to increase their prices to include that pay. It is therefore, of vital importance to employers, manufacturers and local authorities to know exactly what the limits will be.

If the limits are those set out in the annex, they have not changed in comparison with the previous year and the Secretary of State has no power to make the order. If they are changed—and it has been suggested that they are changed by some phrases in the order—those phrases are so vague that it will be quite impossible for those who will be bound by the limits to know what the limits will be.

On that basis, the Government would be wise to take the order back and produce another draft, and, perhaps, another White Paper setting out exactly what they intend the pay policy and the limits to be. Otherwise, things will be extremely difficult and there will be an invitation to litigation. It was only a few days ago that an order had to be withdrawn because of the failure of a Secretary of State to observe the parent statute under which he was making the draft order. The same should be done in this case. The Secretary of State should consider withdrawing the draft order and bringing one in which is clearly within the powers given to him by the 1975 Act.

10.15 p.m.

Mr. Arthur Lewis (Newham, North-West)

A few moments ago the number of years that I have been in the House was mentioned by the Chair, and my mind ran back over the years during which I have listened to such speeches from members of Governments of both political parties. Each year they have come forward with an answer and solved the problem—until the next year, when it was discovered that they had not.

I wondered tonight during the speech of the hon. Member for Gloucester (Mrs. Oppenheim) whether the hon. Lady and I had been in some other place over the years, because I had a feeling that I have seen or heard her as a supporter of what my constituents used to call "the Heathen Government". That Government had policies such as the hon. Lady advocated. That Government did the same things as this Government, and that Government also failed. There was rampant inflation and trouble with the trade unions. I was therefore amazed to hear the hon. Lady come forward with such arguments, because she did not do so when the Government were in power.

I have been against such policies all the way through, because they do not and will not work. There are so many ways round such policies. They can be found through arrangement with or connivance by hon. Members. The lawyers were here earlier tonight, but they have all gone home now to work on their briefs. They will draw their fees and take whatever fees they like. They earn hundreds of pounds. There is no question of a 10 per cent. limit for them. We can pick up a newspaper any day and read of this case or that, with thousands of pounds being spent upon lawyers. I am referring to lawyers on both sides of the House and not to those of one party or another. Of course, they are all in favour of the limit—be it 10, 15 or 20 per cent.—until it hits them.

Each week the Sunday Express has contributions from three Members of this House. All of them are in favour of attacking the lower-paid worker having control over his own wages. They get more for one article in the Sunday Express proclaiming the need for a wages policy than the miner gets for a week's work. My tight hon. Friend the Member for Huyton (Sir H. Wilson) is not present. He had an article in the News of the World clamouring for wage control. I gamble that he got £300 for it.

When I interjected in the speech of my right hon. Friend the Secretary of State for Employment about Ministers getting round the pay policy, he admitted that Ministers get houses, flats and the rest—at least, many of them do. Let us pick one out. The Chancellor of the Exchequer gets such privileges. All Ministers get the use of cars.

What of the civil servants who invent these policies that Governments bring in? In the Whitehall offices are top civil servants getting £15,000 to £20,000 a year. They are all in favour of this policy. Buses outside their office doors go to Victoria or Charing Cross, but they do not use them. They are provided with cars and chauffeurs because they dare not get on a bus. That is another way they can get round the pay policy.

What about our friends on the TUC General Council? I ask a lot of Questions and encounter a lot of ways of dodging answers. How many members of the TUC General Council have sinecures and part-time jobs on Government boards? What are they getting by way of wages for doing so? About 150 jobs are shared among them. But they will not give details. That is another way of getting round the incomes policy, of which many of the members of the General Council are in favour.

There is a lovely radio programme called "Any Questions" on Friday nights. Members of Parliament usually take part. They get more for taking part than a miner gets for his full week's work.

Mrs. Elaine Kellett-Bowman (Lancaster)

Five pounds.

Mr. Lewis

The hon. Lady is probably quoting the cost of the dinner.

There has been complaint today about another place holding up legislation. I have tried to get figures about Members of another place. They will not give them. The Treasury does not want to disclose what is happening. Almost all the Members of another place who proclaim their support for the prices and—mainly—wages policy get £16.50 a day tax-free, which in most cases is worth £200 to £300 a day to them on a gross, taxable basis. The hon. Member for Colne Valley (Mr. Wainwright) smiles. Let him look at the answer that the Treasury has given me. I know that the Treasury is mostly wrong, but on this occasion it is right.

Many of those in another place are on £15,000 or £20,000 a year. If we pay a person with that sort of income a tax-free allowance of £16.50 a day, that is worth £200 or £300 a week. That applies to those in another place whatever party they represent. We find that Lord X is the part-time chairman of this board, that board or the other board, but it is impossible to find out what he is receiving. Mostly they arc not paid wages or salaries. That is why I asked for a definition of remuneration.

My lion. Friend the Member for Bolsover (Mr. Skinner) is a great supporter of the miners. I advise my hon. Friend not to tell the miners to ask for £135 a week but to tell them to ask for £16.50 a day tax-free. Let them ask to have their cars supplied tax-free. Let them ask to have their houses supplied tax-free. Let them ask to have their furniture tax-free and the upkeep of their homes looked after. That would be much better.

Mr. Dennis Skinner (Bolsover)

I wondered whether my hon. Friend would return to the civil servants. I know that it has been difficult lately to try to establish how many top civil servants are on £135 a week, which is the claim that the miners have made.

Mr. Lewis

Oh, no, my hon. Friend cannot ask for that information.

Mrs. Kellett-Bowmanrose—

Mr. Lewis

Let me deal first with the point raised by my hon. Friend the Member for Bolsover. As the miners are always under attack, I shall reply to him first. I shall return to the hon. Member for Lancaster (Mrs. Kellett-Bowman).

There are hundreds of civil servants getting more than £135 a week. They are career people and we know about them, but we are not allowed to know how many Members of another place, who are non elected but are there for life, have thousands of pounds tax-free in addition to their £16.50 a day tax-free. Many of them have not one job but three or four jobs, being engaged in them for only a few hours a week.

Mrs. Kellett-Bowman

Will the hon. Gentleman enlighten the House as to the value after tax of Mr. Gormley's new job—namely, a directorship in Canada in a company which mainly supports oil and is in direct competition with his own commodity of coal?

Mr. Lewis

In effect, I have mentioned Mr. Gormley as he is a member of the TUC General Council. I have said that I am against this sort of thing on principle irrespective of who is involved. Mr. Tom Jackson is another example. The announcement has been made today that Post Office profits are running at over £1 million a day. I am not talking about the profit when adjusted. Either it has its budgeting wrong or it has been overcharging. Probably it has its budget wrong and has been overcharging. However, Tom Jackson has three or four jobs. He is very much in favour of a wages policy.

It is not only Tom Jackson or Joe Gormley. It is not only the Labour peers and the Tory peers. We must also include the Liberal peers. It is the Government who are at fault. Perhaps we are at fault because we allow it to happen. We take no action. We do not say or do anything about it.

Mr. Victor Goodhew (St. Albans)

Having complained on many occasions about not being sent abroad on visits, the hon. Gentleman will remember that he visited the Far East at the time of the Indonesian confrontation. He will remember that he visited Borneo as a member of the party in which I was involved. When we arrived, he was anxious because he was asked to ride in a minibus instead of a staff car. I remember very well the hon. Gentleman complaining to the commander-in-chief, the air marshal, that he was expected to ride in a minibus when there were staff cars around. It was not until the Commander-in-Chief of the Far East Forces pointed out to him that we were at war with Indonesia and that the staff cars were for staff officers that he finally accepted a ride in a minibus.

Mr. Lewis

I absolutely and completely deny every word of that. [HON. MEMBERS: "Oh."] I shall now tell the truth. This was some 20 years ago. The fact was that I was told that I could not travel in the Rover, I think it was, but had to go in the Humber. I asked "Why?" The reason was that I was being escorted by a colonel, and a colonel never travelled in a car other than a Humber. The Rover was for the captain. I then said that I would rather travel in a minibus. In any case—

Mr. Speaker

Order. I decided to allow the hon. Gentleman to clear his name. Will he now come back to counter-inflation?

Mr. Lewis

I was about to deal with the so-called control of prices, which is part of this matter. [Interruption.] I am told that it is not. We shall wait and see.

The question of dividend control was mentioned by my right hon. Friend the Secretary of State for Employment and by the hon. Member for Gloucester. I believe I am right in saying that the British Sugar Corporation is partly owned by the Government. The corporation has recently declared a 100 per cent. scrip issue—a 100 per cent. increase in dividends. That has become a regular habit. Many public companies are now following the Government's excellent example of getting round dividend control by making scrip issues and, with Treasury permission, giving a 100 per cent. increase in dividends.

My hon. Friend the Minister of State said that this had nothing to do with prices.

Mr. John Fraserrose—

Mr. Lewis

Of course it has something to do with prices. If a worker finds that the costs of goods are increasing day by day, why should he have to put up with a 10 per cent. increase? Of course this has something to do with prices. It has everything to do with prices.

Yesterday I read that all the big banks had doubled or trebled their profits. What did I find this morning in the Press? The big banks are now to put up their charges. Having on one day declared increased profits, on the very next day—they did not even wait until the end of the week—they announce that they are to put up their charges. What has happened? The Government still sit there and do nothing.

I asked a Question about beer prices. I should point out that beer prices have gone up every three months. The official representative of the brewers objected to being told that it was being done to circumvent the Government's so-called investigation. He said "No, we are not doing it for that reason. We always put up our prices every three months."

I asked the Minister a question about that matter and got the answer that he could do nothing about it. Apparently he does not have the power. Why the hell does he not take power? Why does he sit there and do nothing? The Government soon come here and take power to deal with workers' wages. I am very much against all this. We are worsening the standard of living of the lower paid. The poor are getting poorer. We should get back to the stage of allowing the trade unions to carry out their normal job of negotiating the hours, wages and working conditions of their members. If the Government are to do that, for God's sake let them stop the profiteering that is going on almost every day of the week.

Finally, I turn to directors' fees. My hon. Friend the Minister of State must have a very thick file in his office on this matter. The company reports show that each year directors' fees are doubling and trebling.

Mr. Booth

We are investigating them.

Mr. Lewis

Of course the Government are investigating them, but still they go up. My hon. Friend could investigate the workers' wages on that basis. They would not mind the investigation as long as their wages doubled and trebled. Let the Government get back to the job they were elected to do. Let them look after the interests of the ordinary people, and then we might win some of the by-elections.

10.31 p.m.

Mr. Timothy Raison (Aylesbury)

I hope that the House will forgive me if I do not examine every line, comma and semi-colon of the order in the way that the hon. Member for Newham, North-West (Mr. Lewis) clearly has done.

I wish to comment on the Limits on Remuneration Order. In the exchanges which my right hon. Friend the Member for Crosby (Mr. Page) and I had with the Minister earlier, two facts were clearly established. The first is that it is appallingly unsatisfactory to bring delegated legislation before the House in the way chosen by the Government this year, last year and the year before last. The idea of having a White Paper which is then in some way embodied in a statute or an order is totally and utterly unsatisfactory.

The second point to emerge, and which the House should understand, is that although we talk about this as being a non-statutory incomes policy it is in fact statutory. It is embodied in the statute we are discussing, and in one respect it is a fairly Draconian power. The fact that Section 4 of the 1975 Act, as the Secretary of State told us, is now being updated by the order means that if a local authority should agree to pay a second increase within the 12 months covered by the rule it would be liable to have its rate support grant docked. In other words, if it conceded a pay claim of that kind it would lose its money from the central Government. I do not know from what source it would replace it. Presumably the local authority would turn to the ratepayers. It would find itself in grave trouble. That seems a powerful, although limited, sanction.

I wish to refer to the last page of the White Paper which contains Annex A. Once again, a TUC statement is being incorporated into the law of the land in a statute on which the whole of the incomes policy rests. It is appalling that the law is defined by the throw-away sentence This statement alone constitutes the pay limits in this White Paper for the purposes of Section 1 of the Remuneration, Charges and Grants Act 1975. That is, of course, the statutory embodiment of the social contract. That is the device by which we have been ruled since March 1974. People sometimes think that the social contract came into being in 1975 when the Government's statutory incomes policy came into being. But it came into being from the moment the Labour Government came to power, and it was part of the deal when we had that test period of misgovernment which ran from March 1974 for a year or more when everything was allowed to rip.

There is some doubt about whether the social contract still exists. The House may remember that in answer to questions the Prime Minister told the House explicitly on 7th July this year that he did not think that it was intact. By 14th July the Prime Minister decided that it was intact after all, and he gave a parliamentary answer to that effect. I do not know why there was a change of heart, but I have a feeling that the reason was that someone reminded the Prime Minister of the letter of intent to the IMF in which the Government promised to operate the social contract. Perhaps he was worried about saying that the social contract no longer existed, because that would have been a breach of the agreement with the IMF. In The Times of 25th July, the hon. Member for Liverpool, Walton (Mr. Heller) tells us: the social contract is still alive and well". I find this order profoundly offensive. I do not object to the notion of the 12-month rule. If we are to have rules, that is probably a sensible one to have. Indeed, whether one has a statutory incomes policy or not a reasonable time between settlements is desirable.

I object to the way in which the TUC is allowed to issue a unilateral statement which is then translated into the law of the land. I object that we have had no chance to amend it. We have been given the statement on a take-it-or-leave-it basis. The TUC sat down and issued a statement and the Government embodied it into the law. That is a disgraceful way for legislation to be operated.

We have not been allowed to debate this in draft form. It has been rammed down our throats. Normally, if there is a major piece of legislation in the form of an order we have a chance to debate it in draft. Tonight, however, the Secretary of State is asking us to pass the order. It is not a debate on the draft. That means that the Government cannot go away and make changes in response to hon. Members. There is no possibility of that. We have been presented with the TUC's statement. Even if the Government wanted to change their minds, they could do nothing because the statement comes from the TUC.

I do not blame the TUC. It is entitled to lay down its terms. There is nothing discreditable about that. But it is entirely discreditable that we should fall into this practice year after year and be unable to have a meaningful debate. This shows that the Government are bound hand and foot to an outside body.

There is a long tradition in our politics that the Government do not conduct deals with the outside world and then confront the House with a fait accompli. There was a famous speech by Mr. Aneurin Bevan, the hero of some hon. Members, which he made when speaking about a strikes incitement order. He said: I have protested, on more than one occasion, about the Government going behind the back of Parliament, and reaching understandings with outside bodies, and then presenting Parliament with a fait accompli."—[Official Report, 28th April, 1944; Vol. 399, c. 1061.] I believe that he was right in that principle. He was right to say that the Government should not come to the House and tell it that it must accept an agreement which had been fixed outside. It is insulting to the House that year after year we should be presented with this fait accompli.

I find the order offensive. If the Government by some mischance remain in power and try to continue in this way, they will do grave damage to Parliament.

10.40 p.m.

Mr. John Mendelson (Penistone)

It is quite normal form that some Opposition Members should attack the technical conduct of my right hon. Friend the Secretary of State for Employment, now that he is a Minister, while singing praises about his glorious and wonderful past as such a competent Chairman of the Select Committee on Statutory Instruments. Opposition Members are always ready to praise members of the present Government for their past. Equally, it is not surprising that the hon. Member for Aylesbury (Mr. Raison) should now seek to glorify that great Socialist leader Aneurin Bevan. Remembering the way in which Conservatives used to treat him when he was alive, I believe that they ought to employ a certain amount of modesty when they make such references merely to suit their purposes.

The Secretary of State is representing the policy of the Government that is under discussion. Everyone knows in his heart of hearts that my right hon. Friend is as competent in running his Department as he has been in any other function that he has fulfilled in Parliament and in this country. That ought to be put on record before we proceed to any further discussion.

Hon. Members who laugh at the present conduct of my right hon. Friend would be hard put to it to do half as well if they ever had responsibility of any kind comparable with the responsibility carried by my right hon. Friend. I notice some hon. Members who normally speak from the Opposition Front Bench hiding in the nooks and crannies and sniggering at my remarks. I express a particular statement of no confidence in their ability to do better than my right hon. Friend.

My right hon. Friend's personal conduct is not what is at issue tonight. He is an excellent Secretary of State for Employment who cares about the principles of his job. Those who are shouting all the time for further cuts in public expenditure and who want a policy that would lead in no time to a far higher level of unemployment have no right to have the face to talk about the Secretary of State in the terms which the hon. Member for Gloucester (Mrs. Oppenheim) used when she opened the debate for the Opposition. It is the kind of folly and flippancy to which we are accustomed whenever she conducts a debate for the Opposition.

At all times the hon. Lady has a very difficult task whenever she is on her feet speaking. The task is to hide carefully from the electorate her party's policies and her personal policy, which is against the consumer. In order to do that, the hon. Lady carefully burns the midnight oil preparing a lot of twaddle and nonsense so that the electorate should not know and see the kind of anti-consumer policy that she always represents. [Interruption.] I know that the Opposition will not like hearing a few of these home truths, but they will have to listen to them all the same. It makes no difference where Opposition Members sit. I shall reach their ears just the same.

The hon. Lady did not answer the question. She tried to escape in a quotation from her right hon. Friend the Leader of the Opposition, who no more answered the essential question when it was put to her. The quotation will not help the hon. Lady. If the Opposition criticise the emptiness of the order—as they put it—they have to answer the question of whether they want a statutory incomes policy. Let us have an answer to that question. [Hon. Members: "Ask the Liberals."] Hon. Members must keep their shirts on. I am talking about the Opposition. We are dealing with the spokesman of the official Opposition, and I am asking a precise question which ought to be answered by her. Is the Conservative Party in favour of a statutory incomes policy? If there is no answer to that question, Conservative Members have no right to make any criticism about vagueness or lack of detail in the order.

Several Hon. Membersrose—

Hon. Members

Give way.

Mr. Mendelson

In my time—after we have dealt with some of the nonsense put forward by the hon. Lady.

Let us come to the hon. Lady's second point. She bitterly criticised the Government for not having a policy on wage limits for a third phase. She said that there is no phase 3. Has she just made a great discovery? Was not an announcement made by the Chancellor in his original statement? Is it not quite clear that there has been a decision by the trade union movement that the General Council of the TUC is not prepared to commit itself to a precise figure on wage limitation? Has not that been agreed between the parties which agreed phases 1 and 2? That self-evident truth should not have been presented by the hon. Lady as a great discovery. The hon. Lady has presented it because she wants to hide the present poverty of policy of the Conservative Party. It has no policy of any kind.

This is a suitable moment to rest my voice and to give way to the hon. Member for Christchurch and Lymington (Mr. Adley).

Mr. Robert Adley (Christchurch and Lymington)

A moment ago the hon. Gentleman was eulogising his right hon. Friend as an outstanding Secretary of State for Employment. He used the phrase "his heart is in the right place". Does the hon. Gentleman prefer a Secretary of State whose heart is in the right place and who presides over 1½ million unemployed or a Secretary of State whose heart is slightly out of the right place but who presides over 500,000 unemployed?

Mr. Mendelson

I did not use that phrase, but I endorse it. I was addressing myself to the intellectual qualities of my right hon. Friend. If the hon. Gentleman wants to add that my right hon. Friend also has his heart in the right place, I fully endorse that. There is nothing between us on that.

I now turn to more serious matters. Having dealt with the propagandist nonsense that we always get from the hon. Lady the Member for Gloucester in order to hide the poverty of her position, I turn to what really ought to be the subject of discussion—that is, the background to our present economic position against which this debate takes place.

I said earlier, and I repeat, that my right hon. Friend obviously represents the Cabinet's policy and not his personal policy. It is Government policy to which I wish to address myself. The monetarist nonsense—this is the real truth of our economic position—which has spread from the Opposition Benches into the offices of the Chancellor and the belief that a policy of the circulation of currency is the most decisive factor in determining the level of inflation are dealt with by one of the cardinal points of the Government's present economic strategy. Those things are unproved and untrue.

Secondly, while no one would deny that the level of wages plays a certain part in determining the level of prices and, therefore, the level of inflation, it is complete nonsense—which the last two years have proved—to think that this is the decisive factor. The Opposition have claimed that for years, and they have always been proved wrong.

The trouble with the Treasury at present is that there are too many pre-Keynesians and post-Keynesians—and not enough Keynesians—who do not understand the capitalist economic system. I recommend that there should be an early recruitment of a few more Keynesians into the offices of the Chancellor.

The position is—this will cause a sensation among the Tories—as was rightly pointed out by the Liberal Party spokesman during the economic debate in a profoundly interesting speech—[HON. MEMBERS: "Oh."] Yes, it was. Only the blind fury of hon. Members on the Tory Benches makes them incapable of recognising a good performance by politicians whom they do not like. They are completely lacking in any ability to listen objectively to a contribution to debate.

In that debate, the hon. Member for Cornwall, North (Mr. Pardoe) pointed out quite correctly that we had now had this policy under monetarist influence for two years and that the result had not been to prove that wages were the decisive factor in the level of inflation. In fact, one of the main reasons for the present malaise in the trade union movement, as the Secretary of State knows, is that rank-and-file workers, when asked by their trade union leaders to discuss a possible phase 3, say "Nothing doing. We have had wage restraint for two years. Have we seen the result that you promised us?"

Mr. Adley

No.

Mr. Mendelson

The hon. Gentleman shouts "No". He shouts the simple truth that everyone else knows. But what the Opposition do not admit is that, to the extent that their advice has been followed and wages have been kept back, our economy has gone down and down and the level of unemployment has increased.

Mr. Adley

It was ignored.

Mr. Mendelson

The hon. Gentleman shouts because he feels uncomfortable when he hears the truth. Like a little child, he shouts when it hurts. It will hurt a little more.

The real reason for the present level of unemployment has been seen and realised by quite a number of economists who work either in the City of London or at Common Market headquarters. Recently, it has been expressed publicly by a Common Market commission of economists; it was published in an EEC Commission report 12 days ago. It says categorically that what has been at fault in the British economy during the past 14 or 18 months is that deflation has been carried too far, that wage and salary levels have been too low and that not enough money has been distributed in wages and salaries, with the result that not enough has been bought, that there has not been enough purchasing power about, and that that is why the level of unemployment has increased. [Interruption.]

The lesson for the Government is that the only way in which the level of un- employment can be reduced is by increasing wages and salaries and thereby allowing people to have more purchasing power—[Interruption.] Right hon. and hon. Members on the Opposition Benches who are more silent than the others understand the position much better than some of the cheap propagandists who keep interrupting me.

I turn to the provisions in the White Paper and the order, and I point to the kind of tactics which should follow their implementation in the present situation that I have described—and it is the true situation, although the truth is not to the liking of the Opposition. The tactics should lead in the direction of seeing to it that good sense prevails in the negotiations—not tying ourselves to artificial, paper limits but seeing that, in the traditional manner, there is good sense in the negotiations.

The hon. Member for Aylesbury declared himself to be outraged that the TUC's opinion and the statement of the General Council should be referred to in State papers. He questioned whether it was tolerable that a Government should make arrangements with bodies outside. He presented this as if it were a new discovery.

Over the past 35 years, all Governments have entered into arrangements and agreements with business associations, cartels, employers' organisations and so on and have presented policies to Select Committees here. Have not we, across the Floor, served together on various Standing Committees dealing with legislation, when hon. Members on both sides have asked why the Government agree so much with bodies outside and then present the result of their negotiations in legislative form?

It is outrageous nonsense to present the situation as though this Government had for the first time made arrangements with outside bodies. It is complete nonsense.

Mr. Raison

When have any previous Government included in their legislation a statement dictated by an outside body, a statement that the House has had no chance to amend or discuss?

Mr. Mendelson

What the hon. Gentleman criticises is that there are deals, as he would put it, or arrangements made with bodies outside the House. I have clearly demonstrated that that practice has been going on for many years. It is monstrous nonsense to charge this Government with having done it for the first time. This is only a particularly open way of referring to the most important partner in arrangements on wages and salaries. I would much rather the Government did it openly in including the statement in a declaration of policy than did it secretly, then turning up in a Committee room and telling hon. Members "You must accept it."

I return to the question of the tactics which should follow in the application of the order and the interpretation and application of the White Paper. There should be a return to the traditional manner of wage bargaining. Whether Conservative hon. Members like it or not, the trade union movement and working people will determine that there is such a return. It is not up to the Opposition to decide it. In the seat where the former Prime Minister, the right hon. Member for Sidcup (Mr. Heath), normally sits, it should be much more easily realised than anywhere else that that is a simple truth.

The Government are rightly anxious that there should be an understanding that in the system of traditional wage bargaining there are bound to be problems, because not all sections are equally powerful, and the General Council has made a correct appeal to those who are powerful in industrial life to think of those in the lower income groups, the less well-organised sections, and many people in between. That applies not only to wage earners but to many salaried people in many positions.

The decisive guideline for my right hon. Friend—and I conclude on this—[HON. MEMBERS: "Hear, hear."] That is the easiest joke in the world. If the Opposition are very provocative, I shall have to continue for some time.

I do not believe that the technical reply that we shall have from my hon. Friend the Minister of State on prices and dividends and the answer to the propagandist questions of the hon. Member for Gloucester are the crux of the debate. The crux is in the Cabinet. The Government should without delay announce the cancellation of the IMF loan and the beginning of a policy of creating public works and new employment. [Interruption.] The hon. Member for Gloucester can laugh as much as she likes. She knows nothing about these matters. I am not speaking to please my right hon. Friends but am putting forward a policy. Let the Opposition not be so flippant. Let them study the situation carefully.

There are growing voices advocating that policy. The financial correspondent of The Guardian pointed out only a few days ago that, in view of the favourable balance of payments, the strength of sterling, which has strengthened further in the past two days, and the reserves being higher than they have been for 40 years, it is possible now to cancel the IMF loan and to start a new policy of reviving the economy and keeping sterling strong at the same time.

Unless the Government pursue that policy without delay, none of the technical points in the orders will make a ha'p'orth of difference. The Government must make a change in the cardinal economic strategy, completely in opposition to the foolish advice they receive from the Conservatives, who have learnt nothing and forgotten nothing. The Opposition are economic Bourbons, who laugh and snigger but are as ignorant as they were at the time when Jarrow was destroyed. The Government must ignore their advice and break out from the monetarist policy and start a new policy of economic expansion.

11.0 p.m.

Mr. Giles Shaw (Pudsey)

I shall not take up the remarks of the hon. Member for Penistone (Mr. Mendelson) but will return to the order. I want to make some observations about its relationship with the Price Commission Act. No doubt the Minister will be able to give us some guidance.

First, however, I must endorse the way my hon. Friend the Member for Aylesbury (Mr. Raison) dissected the paucity of the White Paper "The Attack on Inflation after 31st July 1977", Command 6882. It is extraordinary and different, despite the way the Secretary of State sought to reconcile it with previous policies. It is fundamentally different in the fact that its contents in no way have the same force as the previous document. It is something quite separate. However, much the Chancellor may set out guidelines as to how he would like the economic management to be run, the only matter relating to the order is that contained in Annex A.

My hon. Friend the Member for Aylesbury was right to say that it was peculiar and deeply regrettable, as we see it, that that is the nexus of economic policy. It is not a social contract but a mere figleaf of what the social contract was. It is this tiny part of the White Paper which is important. When we come to the autumn, it will be interesting to see what colour the figleaf turns. When Arthur Scargill in the shape of Jack Frost causes the leaf to fall, I wonder what will happen. Nothing will be revealed except the pawnbroker's sign.

The White Paper and the consultative document on prices embody a period of consultation which expires on 18th July or thereabouts. Obviously, it was drafted when pay policy was in a different phase. In paragraph 21 it contains guidance on sanctions. The Chancellor's statement on 22nd July announcing the demise of phase 3 came after the consultations finished. What now is the state of consultation on the preceding document? Has the Chancellor to consult on how far in the new situation there will be involvement in pay for those operating pricing policy? What is the Minister's view of what happens in that period on the basis of that document?

We come to the Price Commission Act itself. The Secretary of State for Prices and Consumer Protection, whom we are pleased to see here, knows well the anxieties which have been expressed that there was insufficient guidance for those operating the prices policy. In Standing Committee on the Price Commission Bill, he referred to this aspect when he said: By that, I am implying that the sort of margin control that we envisaged for 1st August onwards would be impossible were there not another wage round. It would be a burden on industry which it could not reasonably be expected to bear. The hon. Gentleman understands why I say that it is dangerous to speculate on these matters, and he will understand the danger of what I have just said. The danger is mitigated by the fact that I hope and believe that we shall have another wage round. By that, I mean a wage round which can be defined sufficiently precisely to be matched against margin control. But the two things must go hand in hand. A free-for-all in one, if that is not too crude a phrase, would require a relaxation in the other."—[Official Report, Standing Committee B, 24th May 1977; col. 564.] In other words, it would require relaxation of wages or margin control.

What, therefore, is the position now? How will the Price Commission operate? A free-for-all in wages would require a relaxation of margin controls. How will that operate? In the light of the Chancellor's statement and the document, how will investigation into prices and the interpretation of pay awards operate? No guidance is published. How can those who no longer have an allowable cost regime and no longer have guidance on prices or about how pay settlements should be made protect themselves from investigation into pricing? May we have a categoric assurance that only when there are two wage settlements in 12 months can an investigation into the prices policy from a wages standpoint be conducted? That is the only provision which the order makes, and it is the only way in which it relates to the Price Commission Act.

I am sure that it would benefit not only the House but those who have the difficult task of reconciling Government policies and of making commercial decisions if we could be told what will happen now that the Price Commission Act, with its power of investigation, is on the statute book. The pay policy is so transparent as to be impossible to interpret. If the Minister would apply his mind to that matter, we should be grateful

11.5 p.m.

Mr. J. W. Rooker (Birmingham, Perry Barr)

I understand that this debate still has two and a half hours to run. Although I do not want to take up all that time, I wish to make a few remarks on one of the orders. My hon. Friend the Member for Penistone (Mr. Mendelson) has once again shown that the debate on economic policy is taking place not between the two sides of the House, but between the Back Bench Members on the Government side and the Government Front Bench.

The orders are extremely important, particularly the order concerned with the limits on remuneration. In some ways it is a fraudulent document. I was informed that the only reason why we needed to pass Section 17 of the Price Commission Act—in other words, to re-legislate the relevant section of the Remuneration, Charges and Grants Act—was to allow the Government the power to pass legislation to protect employers from breaches of contract on pay. Therefore, employees who had contracts which provided that their pay must increase by a certain amount each year, which could be over and above any pay limits, would be able to take their employers to court if they did not observe the limits in their contracts. We passed the Act for that reason. The order is a necessary trigger mechanism to operate Section 4 of the Act.

The legislation does not apply to the overwhelming majority of workers in manufacturing industry, because they do not have contracts of employment which provide for regular increases in wages. I was informed that it applies only to such people as doctors and consultants and people in the upper reaches of the Civil Service whose yearly increments would take them over and above any of the pay limits of the two preceding years.

We have heard in the debate that there are no pay limits. Therefore, why do we need the order? The only need for it would be if an employer or the Government—because the Government could be the employer—tried to hide behind Section 4 of the Act in order not to pay wages which were contractually due. The legislation does not apply to workers in the building industry or the motor industry or in any other part of manufacturing industry. It applies to doctors, highly-paid civil servants and perhaps members of the Armed Forces—people whose contractual obligations require the payment of substantial pay increases which could be well over 10 per cent.

I should like to know how the Government see this aspect of the order working on Section 4. I have not gleaned any information on this matter from any hon. Member. What will happen in October, November or at any time up to next July if there is a pay claim by a group of workers who have a contractual right to a substantial increase?

It is only Section 4 of the 1975 Act that will protect employers. The order refers to page 2 of Section 1 of the 1975 Act, but that is necessary to trigger off Section 4. If an employer is to tell his employees that they cannot have a pay increase which they are owed legally according to their contracts of employment, we shall need to pass the order.

I want some examples of the employees so covered, otherwise there is no sense in the order. What will happen, for example, to the doctors and to the consultants and the higher reaches of the medical profession? In this area contractual obligations are involved in incremental pay increases. Another case is that of the teachers, not the ordinary teachers in the classroom but the headmasters on £10,000 or £11,000 a year, and the chief education officers on £13,000 a year, whose incremental increase is far more substantial than the 10 per cent. limit.

It is these people at whom the order is directed. They are the only people who have a contractual right to very large increases. The employer—in most of these cases the Government—will want to tell those employees that they cannot take them to court and they cannot have their increases. The Government are hiding behind Section 4, and they can do it only if we pass the order tonight.

I want to have that on the record. 1 want to be able to go to the thousands of workers in my constituency who are not in these groups but who are in engineering and manufacturing industry and who have no contractual rights to any pay increase whatever. They have to get their increases by negotiation. I want to be able to tell them that the order will not affect them and that their employers cannot hide behind Section 4 triggered off by the order via Section 1. I want to tell them that their employers—whether they be British Leyland or GKN, both of whom have paid substantial increases to their directors over and above the pay policy—cannot hide behind Government policy now.

I am afraid that a red herring will be drawn across wage negotiations by the passing of the order. We are actually making legislation, albeit delegated legislation, and I want it confirmed on the record that it applies only to a highly selected bunch of people, as I was told by a Cabinet Minister a few weeks ago. I want to be told in the winding-up speech that this is the only reason why the order is before the House. I want an assurance that the order will in no way extend to millions of workers who have no right to regulate ratchet pay increases.

If we do not have this on the record, it will make a mockery of the whole system and give the lie to what the Chancellor claims he wishes to create—a quasi-statutory pay policy of 10 per cent. That fox has been well and truly shot. The only fox that is still on the rampage is Section 4 of the 1975 Act, which gives wide immunity to employers.

I hope that in his reply the Minister of State will address his remarks to this aspect of the matter. He has plenty of time in which to do so because no other hon. Member rose to his feet when I sought to catch Mr. Speaker's eye, and we have until 1.30 a.m. to deal with the orders.

11.15 p.m.

Mr. Cecil Parkinson (Hertfordshire, South)

The debate centres on three highly technical and complicated orders. I have formed the distinct impression that Labour Members have only a passing acquaintance with the orders and have not sought to deal with the points raised in them.

I should like to deal with the order dealing with prices. It is a fairly narrow, technical order, and the hon. Member for Penistone (Mr. Mendelson) was critical of my hon. Friend the Member for Gloucester (Mrs. Oppenheim) for choosing to refer to the previous assertions of the Secretary of State for Prices and Consumer Protection. We all know that the hon. Member for Penistone does not support the Government's policy he has been open about it and has offered his own well-argued approach to economic problems. But we also know that in speech after speech the Secretary of State for Prices and Consumer Protection has told the country and Parliament that the Government's policy was an entirely coordinated one on prices, wages and dividends and that if any aspect, especially the wages aspect, of that policy were to fail it would be impossible to defend the policy as a whole. That was the point to which attention was drawn by my hon. Friend the Member for Gloucester.

Furthermore, the Secretary of State for Prices and Consumer Protection told the House over and over again that there must be a phase 3 and that it must be tightly drawn, otherwise margin, price and dividend controls would not be defensible. But we do not have a phase 3. Therefore, my hon. Friends the Members for Gloucester and for Pudsey (Mr. Shaw) had every right to point to the fact that what was supposed to be a co-ordinated policy is now in bits and that the reputation of the Secretary of State for Prices and Consumer Protection is in tatters.

I shall not bore the House with quotations, but time and again the Secretary of State for Prices and Consumer Protection has argued the importance of a tight phase 3, and we do not have one. Therefore, the Government's policy of price, margin and dividend controls is no longer intellectually defensible in the present situation. I share that view. Government policy is falling apart at the seams, and it is most unfair to launch a personal attack on my hon. Friend the Member for Gloucester, who advanced a carefully prepared argument. The hon. Member for Penistone should instead concentrate his fire on his right hon. Friend the Secretary of State for Prices and Consumer Protection, who has been misleading the House and the country for several months.

The hon. Member for Penistone paid a sincere tribute to the Secretary of State for Employment—and certainly nobody on this side of the House would wish to criticise the right hon. Gentleman, who is widely respected in all parts of the House. But the hon. Member for Penis-tone then said that his right hon. Friend did not believe in the Government's policy. That explains why the Secretary of State for Employment was so unconvincing in introducing the three orders tonight. Many of us wondered why the right hon. Gentleman was so hesitant and could not answer the questions that were put to him. At any rate, the hon. Member for Penistone has now given us the clue—that his right hon. Friend does not believe in the orders.

The official Opposition find it offensive that Annex A to the White Paper should be the basis of the Government's incomes policy. One sentence in that annex states: This statement alone constitutes the pay limits in this White Paper for the purposes of Section 1 of the Remuneration, Charges and Grants Act 1975. That statement is the only thing that the Government have that can be described as an incomes policy. One might expect that such a statement would have been made by the Prime Minister, the Chancellor of the Exchequer or some other senior member of the Government. However, the statement is headed "TUC Statement of 22nd June". It is a statement by the General Council of the TUC. The only remuneration policy that the Government have is a statement by the TUC General Council.

It is not even the policy of the TUC as adopted by the TUC Congress. What will happen if the Congress rejects that policy? We in the House will be put in an absurd position by having approved as policy something that the TUC has thrown out. We shall have dignified, by way of passing an order, something that has no standing. This is simply a declaration of intent that the TUC General Council will try to get adopted as policy.

I wonder whether the hon. Member for Penistone really thinks that it enhances the dignity of the House for us publicly to approve, as a linchpin of the Government's economic policy, a statement by a body which cannot commit its members until they have voted, especially when those members will not vote on the matter for several months. We do not think that Parliament comes out of that particular incident with any stock of dignity at all. Does the hon. Member for Penistone think that it does? How can he defend that? The Secretary of State has, by implication, admitted that the Government do not have a wages policy, yet a non-policy on wages is being used as a pretext for continuing a policy of margin control, prices control and dividend restraint. The absurdity of that position is that the absence of a policy is being used as an excuse for getting Parliament to approve two other aspects of the Government's policy—although the Secretary of State has said repeatedly that Parliament should be asked to approve not two orders out of three but three out of three.

By passing this order we shall dignify a non-policy. Something that is not a policy has been incorporated in something called a White Paper. It will be approved by the House tonight without our really knowing what it is. Yesterday the hon. Member for Penistone gave us a great speech about the importance of maintaining the dignity of Parliament. Are we doing that tonight by approving something that does not exist and using that as an excuse for continuing to set forms of restraint?

I now turn to the order referring to dividend controls. Nobody, on either side of the House, has attempted to defend dividend controls on the basis of such controls making financial or economic sense. Not one hon. Member has attempted to do that. I have read one or two half-hearted attempts to suggest that if a company cannot pay dividends it might just retain profits and invest them, and that companies are being given an incentive to invest because if they need more money for investment they can put up dividends. However, nobody has attempted to justify the controls on such grounds tonight.

The present dividend controls are shot through with exemptions of various kinds. They include exemptions in the case of takeovers, for overseas companies and for companies with assets and activities that are mainly overseas. One can point to a whole range of slightly illogical exemptions. One of the unattractive features of dividend controls is that they give enormous discretion to bureaucrats to decide which company shall be allowed to keep profits and which shall not. There is an enormous and potentially unhealthy discretion for bureaucrats.

What is the argument that is used over and over again? It is not that dividend controls are fair or make economic sense. It is that they are part of the trade-off for wage restraint. No one put it better than the hon. Member for Bristol, North-West (Mr. Thomas). The objections to dividend restraints as argued by Labour Members are totally out of date; they are bigoted and do not make sense.

In 1963, 69 per cent, of all the shares quoted in this country were held by individuals. By 1973 that figure was down to 50 per cent., and in 1977 it is down to 34 per cent. Institutional shareholdings were 21 per cent. in 1963 and 35.6 per cent. in 1973, and they are 52 per cent. in 1977. Charities, which include trade unions, the churches and universities, hold 5 per cent. of the balance.

There is, therefore, a major shift towards institutional shareholding. Most of the institutions which hold the shares are pension funds. Pension funds now have nearly 11 million subscribers, while life assurance and insurance companies have no fewer than 14 million household subscribers.

It is, therefore, total nonsense to say that dividend income is going to the rich. The overwhelming proportion is going to institutions, and those institutions are holding the shares on behalf of 11 million pensioners and 14 million households. The dividends from those shareholdings go to millions of ordinary people indirectly through the institutions.

Mr. Arthur Lewis

I am genuinely asking the hon. Gentleman for information. He has quoted no figures for beneficial and family trusts. I have today had a company return in which a director discloses that his own shareholding is 1,750,000, while his family beneficial trust has 5 million shares. How many people are in that situation?

Mr. Parkinson

I understand that all the non-institutional holdings are treated as individual shareholdings. Most trust shares, for example, are held by trustees. I declare an interest. I am a trustee myself of one or two settlements from my time as a chartered accountant. Those shares are registered in my name as a trustee. They are part of a personal holding. The point is that the overwhelming proportion of dividends goes now to the pension funds and the institutions. [Interruption.] If Labour Members opposite do not wish to accept my statement, I will tell them that my remarks are based on the report of the Diamond Commission, which is freely and readily available.

The Diamond Commission points out that of individual shareholders, of whom there are 2.1 million, 50 per cent. in 1972–73 had a total statutory income from all sources of less than £2,000 a year—that is, with their pensions and their interest on savings—while 25 per cent. had a total statutory income of under £1,000. In other words, these people are amongst the poorest section of the community. Forty per cent. of all personal shareholders are widows and elderly single ladies.

The truth is that dividend restraint is achieving those ends. It is affecting the pensions of those who are retired. It is affecting the expectations of the millions who will retire and who will depend on pension funds for their future security. It bears most heavily on the shareholders with the lowest incomes. That is a fact. I should be happy to establish that, but Labour Members must take my assurance that it is stated by the Diamond Commission that that is the case. Dividend restraint bears most heavily, as it must, on those with the smallest incomes. They are those who get the most benefit because they get virtually all the dividend, very little of it going in tax. It is extremely unfair.

It is quite untrue to say that dividend restraint has not been effective. If hon. Members examine the figures, they will see that it has been extremely effective. Dividends have increased since 1963 by 12 per cent. at a time when earnings were increasing by over 91 per cent. What dividend restraint has succeeded in doing is inexplicably bizarre. At a time when we need investment and investors, it has succeeded in driving investors away from the equity markets. I can give Labour Members a good example. The National Union of Railwaymen prefers to buy Picassos and to go to the Mentmore sale and buy expensive antiques at a time when the Government are lecturing us about the need for new investment. The NUR and others prefer to invest in antiques, for example, because investment in equities is appalling. One of the principal reasons is dividend restraint.

One of the bizarre results of dividend restraint is that it is best to invest in companies which are trading overseas instead of investing in companies that are trading here. Surely that cannot in any way be sensible. Thirdly, it is driving pension funds away from investment in equities. I talked to the manager of a major fund today. He is the manager of a nationalised industry pension fund. He said that he would like to invest in equities but that if he did so it could only be at the expense of his members. He explained that the fund had been driven back into the property market, there now being no rent control in that sector.

That is the pension fund manager of a major nationalised industry. He is saying "We cannot afford to invest in equities. We cannot afford to invest the savings of the workers in equities. We must put them in property." That is at a time when the country needs investment.

By any standards, dividend restraint has produced the wrong results. It has done damage to very needy sections of the community. It is destroying the future pension prospects of millions of working people, the sort of people about whom Labour Members are fond of lecturing us. The people suffering most from dividend restraint are the very people that they talk about time after time.

Mr. Skinner

Is the hon. Gentleman aware that the dividend control that he is blaspheming about was set up by the Counter-Inflation Act 1973 and that, as a member of the Tory Party that was in Government at the time, he voted for it?

Mr. Parkinson

I am giving the hon. Gentleman a chance of joining me in the Lobby and proving that from time to time one makes mistakes. If he had been in the Chamber at the beginning of my remarks, he would know that I said that dividend restraint, wage restraint and price restraint as a package might be defensible but that dividend restraint and price restraint in the absence of wage restraint are indefensible. I was explaining that dividend restraint was damaging the interests of some of the most needy and poor in this country.

Mr. John MacGregor (Norfolk, South)

My hon. Friend has built up a most formidable case, but does he agree that the position is even worse in that dividend restraint prevents investments in equities, industry and companies and that the Government, by giving preferential tax treatment to Government savings, are encouraging people to put their savings—this applies especially to those who pay high rates of tax—into Government savings and not into equities because of the heavy tax that is imposed? At least, the ending of dividend restraint would remove some of that.

Mr. Parkinson

My hon. Friend is absolutely right. One of the most bizarre features is that in the last two years the Stock Exchange—much belaboured by Labour Members—has raised £16,000 million for the Government in the gilt market and only £2.7 million in equities, because the Government have been paying and offering rates of return that the equity market could not match. Yet at the same time Labour Members are calling for more and more investment.

I am determined to finish this speech, despite a number of interruptions. The prices order is technical. It is a simple list of exemptions and it is not worth voting on. The wages order is a non-order. One would not know what one was voting for or against. It is a non-piece of legislation. Therefore, there is no point in taking a strong view about that. I have tried to show that dividend control is unfair and damaging to the interests of millions of pensioners and people with low incomes and to British industry. For those reasons, I urge my right hon. and hon. Friends to vote against the order on dividend restraint when the time comes.

11.37 p.m.

The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser)

We now have the answer to a question that we have been putting to the Opposition for some time. We now know that they have no policy on incomes or on prices but that they have a well-developed policy on dividends.

The hon. Member for Hertfordshire, South (Mr. Parkinson) said that the purchase of shares adds to investment. The purchase of shares does not add to investment. It enables money from one source to be put into the hands of somebody else who is selling the shares.

The only real investment is subscribing for new capital issued on the market. There are criteria on dividend control that allow a company to increase its dividends to raise new capital for investment. That is what my hon. Friend the Member for Newham, North-West (Mr. Lewis) complained about. Indeed, he complained that the British Sugar Corporation was permitted by the Treasury to increase its rate of dividend to raise money for new investment. The Labour Party is in favour of new investment because it is in favour of creating jobs. There is no conflict between dividend control as it is operated and the provision of proper investment.

Mr. Arthur Lewis

I referred to the British Sugar Corporation because, as my hon. Friend knows, rationalisation is going on at the moment. The position vis-à-vis Tate and Lyle and the British Sugar Corporation is such that my hon. Friend's words do not apply to the British Sugar Corporation.

Mr. Fraser

I should have thought that my hon. Friend would be in favour of greater investment if it created jobs.

Mr. Arthur Lewis

Yes.

Mr. Fraser

The hon. Member for Hertfordshire, South referred to the effect of dividend control on the incomes of those who invest in pension funds and rely on the dividends as part of their income. Any form of dividend control involves a degree of hardship, just as income control has involved a degree of hardship for workers who have settled within the pay limits over the past two years. It is for that reason that from the end of the year beginning on 1st August 1977 there will be no further dividend control. However, the hon. Gentleman exaggerated the position when he said that the Diamond Report suggested that the control bears unfavourably on the poorest in our community. The evidence does not bear that out.

Sir John Eden (Bournemouth, West)

Will the hon. Gentleman give way?

Mr. Fraser

No. The right hon. Gentleman has not been present for most of the debate.

Mr. Parkinson

Perhaps I may quote from paragraph 19 of the second Diamond Report: Under a system of progressive taxation, any general increase in dividend payments would accrue in greater measure, relative to total dividend receipts, to shareholders in the lower income ranges than to those in the higher. Lord Diamond is saying exactly what I said—that dividend restraint affects the poorer more than it affects the rich.

Mr. Fraser

I said that it bears unfairly on the poorest.

Sir J. Eden

I may have misheard the Minister, and for that reason I should be grateful if he would make clear what he said. I thought I heard him say that there would be no further dividend restraint after 1977. If he said that, will he repeat it so that we may all hear it?

Mr. Fraser

Perhaps I phrased the point badly. I thought I said that there would be no further dividend restraint at the end of the year beginning 1st August 1977; in other words, not after 1st August 1978. That was what I thought I said.

I turn now to the points raised by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) about the operation of the 12-month rule. As for immunity against actions, if application is made to enforce a contractual settlement within 12 months of the phase 2 settlement the employer possesses immunity against meeting the claim. My hon. Friend said that those whom he represented did not make contractual claims and had no contractual rights for the future. He said that they negotiated. In that case the answer is that if they negotiate a claim which breaks the 12-month rule, other than a self-financing productivity deal, if they have a settlement within 12 months of the stage 2 settlement there is no defence against a contractual obligation under the 1975 Act because that obligation is only created by the Act. The employer is caught by the pay sanction which would operate through the margin controls.

Mr. Leon Brittan (Cleveland and Whitby)

If the Minister is saying that it is right that dividend limitation should exist until the summer of next year, why is it wrong that it should continue after that date?

Mr. Fraser

There is an interrelation between prices restraint, wages restraint and dividend restraint. The three hang together.

The hon. Member for Pudsey (Mr. Shaw) asked me two questions. The first concerned the completion of negotiations on the Price Code. The answer to that is that the negotiations are complete and that the results of the negotiations will be published soon, possibly before the end of the week.

The hon. Member for Pudsey also asked me about the relationship between a breach of the 12-month rule and investigations under the Price Commission Act. There will be no investigations under the Act as a result of a breach of the 12-month rule. The pay sanction will operate by way of deduction from the margin which will be allowed under the Price Code document. I hope that that distinction is clear.

Mr. Giles Shaw

Since the consultation period has finished there is now no opportunity for Parliament to discuss the matter until the order is laid in the autumn. What is the position for firms operating from 1st August which are not clear about how the Commission will operate? Is the Minister saying that there is no relationship between the 12-month period and the cause of investigation?

Mr. Fraser

Yes. If the Price Commission were to choose to investigate on that ground, it would be in breach of the long-debated criteria contained in Section 2 of the Price Commission Act. There is an interrelationship between the 12-month rule and the deduction of margins. If the Price Commission chose a breach of the 12-month rule as the basis for investigation, it would run foul of Section 2.

The hon. Member for Aylesbury (Mr. Raison), rather like a man in search of the Holy Grail, is in search of obscurity. The pay limit is set out clearly. It is simple to understand. It involves maintaining for 12 months the rate of pay which was settled during phase 2. Employers would be in no difficulty about understanding what that limit was for a period of 12 months from the phase 2 settlement, because the records of that settlement would be within their knowledge. It is necessary to refer to the previous White Paper on pay only in order to set and define the starting point for the 12-month rule. The interpretation of this part of the White Paper is absolutely clear.

Mr. Graham Page

This is not in addition to or in substitution for the previous White Paper limit and, therefore, the Minister has no power to make the order.

Mr. Fraser

I shall not try to cross swords with the right hon. Member for Crosby (Mr. Page). These matters have been before the Scrutiny Committee, and I must ask the House to accept that the vires are proper.

The Opposition object to our incorporating in a White Paper and subsequently in legislation a statement issued by the TUC and agreed by the Government. We do not live in a perfect world. We have three choices. We have the choice of having a statutory incomes policy which was rejected by the Opposition. Our second choice is to have no policy at all for an orderly return to free collective bargaining. I gather from many remarks from the Opposition that that is what they want—no policy at all for an orderly return to free collective bargaining.

We also have the choice of proceeding on the realistic basis of consent and understanding with the representatives of millions of workers. To proceed on that basis of consent is the most realistic and most sensible way in which to go about these matters, and it is a way, incidentally, which has been agreed and adopted over the past two years. It is a way that has worked and has been without breach. [HON. MEMBERS: "What?"] Yes, it has worked. There has not been a breach of the pay limits established with the TUC over the past two stages. But, as we and the TUC have always made clear, we wanted eventually an orderly return to free collective bargaining. That is what we propose to have during the forthcoming pay round.

These orders support and reinforce our counter-inflation policy. It is true that in the past the operation of this policy has been difficult, for both prices policy and incomes policy. But we shall have several things in our favour when this new policy starts its course on 1st August. We have better omens and better prospects of success than we have had for many years. In the past we have been hammered and buffeted by many forces which are beyond our control. We have no control over the price of oil charged by Saudi Arabia or other parts of the world. We were buffeted by that price increase, which was a surcharge on the British people, and the cost of it has now been absorbed.

Mr. Nicholas Ridley (Cirencester and Tewkesbury) rose—

Hon. Members

Give way.

Mr. Fraser

We have been buffeted.

Hon. Members

Give way.

Mr. Speaker

Order. It is quite clear that the Minister is not giving way.

Mr. Fraser

We have been buffeted, too—

Mr. Nigel Lawson (Blaby)

Windy.

Mr. Fraser

—by forces beyond our control, such as a devaluation and a fall in the value of sterling, and by the drought last year. [Interruption.] Yes. They are two items that have affected gravely that most sensitive area of prices—food prices. [Interruption.]

Mr. Speaker

Order. The House must let the Minister complete his statement, and I want to hear what he is saying.

Mr. Fraser

The consequences of those effects on food prices have now, however, largely disappeared, so we are entering a period of greater stability—a period of stability of sterling, of falling wholesale prices, of input prices one-quarter below output prices, and of falling interest rates which in the past have put a burden on both industry and private consumers. We contemplate the benefits of the last two years of pay policy.

Mr. Brittan

Rising unemployment.

Mr. Fraser

We now stand at a point where the prize of fighting inflation is within our grasp—

Mr. Brittan

One and a half million unemployed.

Mr. Fraser

—and in the last year of that fight we must not throw it away.

Nothing that I have heard tonight from the Opposition, including particularly the giggling and the lightheartedness with which some hon. Members approach these matters a few minutes before the debate is to end, leads me to believe that they want to see success. Why it that? They have invested pretty heavily in failure and they are now sick with the bitter taste of the success of the present Government. [Interruption.]

Mr. Brittanrose—

Mr. Fraser

They know that the signs are in our favour.

Mr. Brittan

Will the Minister give way?

Mr. Fraser

No. That is why they want to oppose not all but some of these orders tonight.

Question put:—

The House divided: Ayes 209, Noes 165.

Division No. 228]	AYES	[11.55 p.m.
Allaun, Frank	Cowans, Hairy	Golding, John
Anderson, Donald	Cox, Thomas (Tooting)	Gould, Bryan
Archer, Rt Hon Peter	Craigen, Jim (Maryhill)	Grant, George (Morpeth)
Armstrong, Ernest	Crawshaw, Richard	Grant, John (Islington C)
Ashton, Joe	Cronin, John	Grocott, Bruce
Atkins, Ronald (Preston N)	Crowther, Stan (Rotherham)	Hamilton, James (Bothwell)
Bagier, Gordon A. T.	Cunningham, G. (Islington S)	Hardy, Peter
Bain, Mrs Margaret	Cunningham, Dr J. (Whiteh)	Harrison, Rt Hon Walter
Barnett, Guy (Greenwich)	Davidson, Arthur	Hart, Rt Hon Judith
Barnett, Rt Hon Joel (Heywood)	Davies, Bryan (Enfield N)	Hattersley, Rt Hon Roy
Bates, Alf	Davies, Derail (Llanelli)	Hayman, Mrs Helene
Bean, R. E.	Davis, Clinton (Hackney C)	Heffer, Eric S.
Beith, A. J.	Deakins, Eric	Hooley, Frank
Benn, Rt Hon Anthony Wedgwood	Dean, Joseph (Leeds West)	Hooson, Emlyn
Bennett, Andrew (Stockport N)	Dempsey, James	Horam, John
Bishop, Rt Hon Edward	Dormand, J. D.	Hoyle, Doug (Nelson)
Blenkinsop, Arthur	Douglas-Mann, Bruce	Huckfield, Les
Booth, Rt Hon Albert	Duffy, A. E. P.	Hughes, Rt Hon C. (Anglesey)
Boothroyd, Miss Betty	Dunnett, Jack	Hughes, Mark (Durham)
Bradley, Tom	Dunwoody, Mrs Gwyneth	Hughes, Robert (Aberdeen N)
Brown, Hugh D. (Provan)	Eadle, Alex	Hunter, Adam
Brown, Robert C. (Newcastle W)	Ellis, John (Brigg & Scun)	Irving, Rt Hon S. (Dartford)
Brown, Ronald (Hackney S)	Ellis, Tom (Wrexham)	Jackson, Colin (Brighouse)
Buchan, Norman	Evans, Fred (Caerphilly)	Jackson, Miss Margaret (Lincoln)
Butler, Mrs Joyce (Wood Green)	Evans, loan (Aberdare)	Jeger, Mrs Lena
Callaghan, Jim (Middleton & P)	Evans, John (Newton)	Jenkins, Hugh (Putney)
Canavan, Dennis	Ewing, Harry (Stirling)	John, Brynmor
Carmichael, Neil	Faulds, Andrew	Johnson, James (Hull West)
Carter, Ray	Flannery, Martin	Jones, Barry (East Flint)
Castle, Rt Hon Barbara	Foot, Rt Hon Michael	Judd, Frank
Clemitson, Ivor	Forrester, John	Kaufman, Gerald
Cocks, Rt Hon Michael (Bristol S)	Fowler, Gerald (The Wrekin)	Kerr, Russell
Cohen, Stanley	Fraser, John (Lambeth, N'w'd)	Lamborn, Harry
Coleman, Donald	Freeson, Reginald	Lamond, James
Conlan, Bernard	Freud, Clement	Latham, Arthur (Paddington)
Cook, Robin F. (Edin C)	Garrett, John (Norwich S)	Leadbitter, Ted
Corbett, Robin	Ginsburg, David	Lestor, Miss Joan (Eton & Slough)
Lewis, Arthur (Newham N)	O Halloran, Michael	Spriggs, Leslie
Luard, Evan	Orme, Rt Hon Stanley	Stallard, A. W.
Lyon, Alexander (York)	Ovenden, John	Stewart, Rt Hon M. (Futham)
Lyons, Edward (Bradford W)	Owen, Rt Hon Dr David	Stoddart, David
McCartney, Hugh	Palmer, Arthur	Stott, Roger
McDonald, Dr Oonagh	Parry, Robert	Strang, Gavin
McElhone, Frank	Pavitt, Laurie	Taylor, Mrs Ann (Bolton W)
MacFarquhar, Roderick	Pendry, Tom	Thomas, Mike (Newcastle E)
McGuire, Michael (Ince)	Penhaligon, David	Thomas, Ron (Bristol NW)
MacKenzie, Rt Hon Gregor	Phipps, Dr Colin	Tinn, James
Maclennan, Robert	Prescott, John	Torney, Tom
McNamara, Kevin	Price, C. (Lewisham W)	Urwin, T. W.
Madden, Max	Rees, Rt Hon Merlyn (Leeds S)	Wainwright, Edwin (Dearne V)
Magee, Bryan	Richardson, Miss Jo	Wainwright, Richard (Colne V)
Mahon, Simon	Roberts, Gwilym (Cannock)	Walker, Harold (Doncaster)
Mallalieu, J. P. W.	Robinson, Geoffrey	Walker, Terry (Kingswood)
Marks, Kenneth	Roderick, Caerwyn	Ward, Michael
Marshall, Dr Edmund (Goole)	Rodgers. George (Chorley)	Watkins, David
Marshall, Jim (Leicester S)	Rooker, J. W.	Watkinson, John
Meacher, Michael	Roper, John	Wellbeloved, James
Mellish, Rt Hon Robert	Rose, Paul B.	White, Frank R. (Bury)
Mendelson, John	Ross, Stephen (Isle of Wight)	Willey. Rt Hon Frederick
Mikardo, Ian	Ross, Rt Hon W. (Kilmarnock)	Williams, Alan Lee (Hornch'ch)
Millan, Rt Hon Bruce	Ryman, John	Williams, Sir Thomas (Warrington)
Miller, Dr M. S. (E Kilbride)	Sandelson, Neville	Wilson, Rt Hon Sir Harold (Huyton)
Mitchell, Austin (Grimsby)	Sedgemore, Brian	Wise, Mrs Audrey
Molloy, William	Shaw, Arnold (Ilford South)	Woodall, Alec
Moonman, Eric	Sheldon, Rt Hon Robert	Woof, Robert
Morris, Charles R. (Openshaw)	Shore, Rt Hon Peter	Wrigglesworth, Ian
Morris, Rt Hon J. (Aberavon)	Silkin, Rt Hon John (Deptford)	Young, David (Bolton E)
Moyle, Roland	Skinner, Dennis
Newens, Stanley	Small, William	TELLERS FOR THE AYES:
Noble, Mike	Snape, Peter	Mr. Ted Graham and
Ogden, Eric	Spearing, Nigel	Mr, Joseph Harper
NOES
Adley, Robert	Godber, Rt Hon Joseph	Moate, Roger
Arnold, Tom	Goodhew, Victor	Moore, John (Croydon C)
Atkins, Rt Hon H. (Spelthorne)	Goodlad, Alastair	More, Jasper (Ludlow)
Awdry, Daniel	Gow, Ian (Eastbourne)	Morgan, Geraint
Baker, Kenneth	Gower, Sir Raymond (Barry)	Morgan-Giles, Rear-Admiral
Banks, Robert	Grant, Anthony (Harrow C)	Morris, Michael (Northampton S)
Bell, Ronald	Grylls, Michael	Morrison, Charles (Devizes)
Bennett, Dr Reginald (Fareham)	Hamilton, Michael (Salisbury)	Neave, Airey
Benyon, W.	Hampson, Dr Keith	Nelson, Anthony
Biggs-Davison, John	Hannam, John	Neubert, Michael
Blaker, Peter	Harvie Anderson, Rt Hon Miss	Newton, Tony
Boscawen, Hon Robert	Haselhurst, Alan	Normanton, Tom
Bottomley, Peter	Hastings, Stephen	Onslow, Cranley
Boyson, Dr Rhodes (Brent)	Hawkins, Paul	Oppenheim, Mrs Sally
Braine, Sir Bernard	Hayhoe, Barney	Osborn, John
Brittan, Leon	Hicks, Robert	Page, John (Harrow West)
Brooke, Peter	Hunt, David (Wirral)	Page, Rt Hon R. Graham (Crosby)
Brotherton, Michael	Hunt, John (Bromley)	Page, Richard (Workington)
Buck, Antony	Hurd, Douglas	Farkinson, Cecil
Butler, Adam (Bosworth)	James, David	Pattie, Geoffrey
Carlisle, Mark	Jessel, Toby	Pink, R. Bonner
Chalker, Mrs Lynda	Johnson Smith, G. (E Grinstead)	Prior, Rt Hon James
Churchill, W. S.	Kellett-Bowman, Mrs Elaine	Pym, Rt Hon Francis
Clark, Alan (Plymouth, Sutton)	Kimball, Marcus	Raison, Timothy
Clark, William (Croydon S)	King, Tom (Bridgwater)	Rathbone, Tim
Clarke, Kenneth (Rushcliffe)	Knox, David	Rees, Peter (Dover & Deal)
Clegg, Walter	Lamont, Norman	Renton, Tim (Mid-Sussex)
Cockcroft, John	Latham, Michael (Melton)	Rhys Williams, Sir Brandon
Cope, John	Lawson, Nigel	Ridley, Hon Nicholas
Costain, A. P.	Le Marchant, Spencer	Roberts, Michael (Cardiff NW)
Crouch, David	Lester, Jim (Beeston)	Roberts, Wyn (Conway)
Dean, Paul (N Somerset)	Lewis, Kenneth (Rutland)	Ross, William (Londonderry)
Drayson, Burnaby	Luce, Richard	Rossi, Hugh (Hornsey)
du Cann, Rt Hon Edward	McCrindle, Robert	Sainsbury, Tim
Durant, Tony	Macfarlane, Neil	Scott, Nicholas
Eden, Rt Hon Sir John	MacGregor, John	Shaw, Giles (Pudsey)
Edwards, Nicholas (Pembroke)	MacKay, Andrew (Stechford)	Shaw, Michael (Scarborough)
Elliott, Sir William	McNair-Wilson, M. (Newbury)	Shelton, William (Streatham)
Emery, Peter	Marshall, Michael (Arundel)	Shersby, Michael
Fairbairn, Nicholas	Marten, Neil	Sims, Roger
Fairgrieve, Russell	Mates, Michael	Sinclair, Sir George
Finsberg, Geoffrey	Mather, Carol	Skeet, T. H. H.
Fisher, Sir Nigel	Maxwell-Hyslop, Robin	Smith, Dudley (Warwick)
Fletcher-Cooke, Charles	Mayhew, Patrick	Smith, Timothy (Ashfield)
Fookes, Miss Janet	Meyer, Sir Anthony	Speed, Keith
Forman, Nigel	Miller, Hal (Bromsgrove)	Spicer, Jim (W Dorset)
Fox, Marcus	Mills, Peter	Spicer, Michael (S Worcester)
Gardiner, George (Reigate)	Mitchell, David (Basingstoke)	Stanbrook, Ivor

Stanley, John	van Straubenzee, W. R.	Weather ill, Bernard
Stewart, Ian (Hitchin)	Vaughan, Dr Gerald	Wells, John
Stradling Thomas, J.	Viggers, Peter	Whitelaw, Rt Hon William
Tapsell, Peter	Wakeham, John	Wiggin, Jerry
Tebbit, Norman	Walder, David (Clitheroe)	Winterton, Nicholas
Temple-Morris, Peter	Walker-Smith, Rt Hon Sir Derek	TELLERS FOR THE NOES:
Thomas, Rt Hon P. (Hendon S)	Wall, Patrick	Lord James Douglas-Hamilton and
Townsend, Cyril D.	Warren, Kenneth	Mr. Peter Morrison

Question accordingly agreed to.

Resolved, That the draft Counter-Inflation (Continuation of Enactments) Order 1977, which was laid before this House on 22nd July, be approved.