PAY POLICY (Hansard, 7 December 1978)

§ Mr. Robert Kilroy-Silk (Ormskirk)
It is instructive that there are far more Members on the Government Benches for this important debate on sanctions than there are on the Opposition Benches. Tonight we have witnessed the Tory Opposition in high dudgeon, in fact, in hysteria about this policy, yet not one hon. Member from the Conservative Party is here to continue the debate as we wanted to earlier and as we intend to do now.
The Tories ran away from their own debate just as they ran away from a substantive motion. This is an extremely important issue for every constituency in the country and, indeed, for every worker in the country and it needs to be debated fully and openly in the House.
I have been a critic of the sanctions policy for a long time. In fact, it was I who first inveigled the Government into admitting the existence of the so-called black list. I have never accepted sanctions as an appropriate part of the Government's economic strategy and I believe that Parliament would never have given the Government discretionary powers under the Industry Act or the Export Credit Guarantee provisions had it known how they would be used.

§ Mr. Norman Buchan (Renfrewshire, West)
On a point of order, Mr. Deputy Speaker. Is it not a fact that not only is 1710 there no Member from the Conservative Opposition present; there is no one from the minority Opposition parties, either, to discuss this important issue?

§ Mr. Deputy Speaker (Sir Myer Galpern)
Order. It is not for me to comment on who is present. This is an additional Adjournment debate.

§ Mr. Kilroy-Silk
My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) is correct. Given the amount of hysteria that has been generated here tonight I do not think that the Opposition are taking this matter seriously enough. Not one of them has been prepared to wait until the comparatively early hour of 9.45 p.m. in the hope of catching your eye, Mr. Deputy Speaker.
I do not believe that Parliament would have given discretionary powers to the Government had it known that they were likely to be used in a way that was unintended and unexpected. Had it known that the Government would use the powers in this arbitrary and unjust fashion, discriminating not against the companies but against the workers of those companies in reality, it would never have approved them.
It is strange that although the Government have made a great deal of their industrial strategy to create and protect jobs and their economic strategy to bring down inflation, and have also introduced a whole variety of temporary employment measures to assist and sustain employment in areas such as Merseyside. they should use discretionary powers in an arbitrary and unjust manner to jeopardise the jobs already in existence.
It is clearly possible that it temporary employment subsidy is withdrawn from a firm, if a firm is refused export credit guarantees or a variety of Government assistance under the Industry Act, it will have a serious impact on employment within that company. That would have been the case with Otis Elevator Company in Kirkby in my constituency, which last year settled above the 10 per cent. pay guideline—at 10ç5 per cent.—at the same time applying for temporary employment subsidy for 250 workmen. Had the Government carried out their threat to withhold temporary employment subsidy from Otis Elevator it would have led to the loss of 200 jobs in an area of excessively high unemployment. We have 1711 enough serious unemployment as it is. especially in Merseyside and Kirkby.
Only today I heard that Kirkby's workers' co-operative is likely to be wound up, with the loss not of 260 jobs but of all 700 jobs, because the prospective private enterprise company which might have taken it over backed out of the operation. We cannot afford to lose those jobs. We cannot afford to lose the many hundreds and thousands of jobs that we have lost in the past few months in Kirkby and Merseyside, and then have a further threat to other jobs in the region as the result of the application of the Government's discretionary sanctions.

§ Mr. Ron Thomas (Bristol, North-West)
Does my hon. Friend agree that, apart from the policy of sanctions against certain firms being indefensible, there are only a limited number of firms against which they can be applied? They cannot be applied against British Oxygen, because doing so would bring the whole of British industry to a standstill. Does my hon. Friend also agree that there are hundreds of provincial NUJ members on very low rates of pay who are on strike, and it would be indefensible if the Government attempted to use sanctions against newspapers?

§ Mr. Kilroy-Silk
I entirely agree with my hon. Friend. It would be totally indefensible and immoral if the Government were to use sanctions against farm workers. Everyone accepts that farm workers are at poverty level and on a minimum wage. They are asking for an increase well beyond the 5 per cent. If they get that increase, will the Government take discretionary action against farmers? If they do, the farmers, being subsidised, will no longer be able to continue in production. That would be indefensible.
My hon. Friend takes me on to one of the most unjust elements of the sanctions policy. It hits the weak; it hits those in the public sector, who will be discriminated against more effectively and thoroughly than those in the private sector. The only policy that the Government have for upholding their non-statutory pay policy—it is not an incomes policy—is the imposition of sanctions. Even in the private sector, in the main, with the exception of firms like Ford, 1712 sanctions can be applied only to the weak private sector companies, the companies which need Government assistance. whether through loans and subsidies under the Industry Act or through temporary employment subsidy, in order to maintain employment.
It is the weaker companies and the weaker workers in the companies within the private sector who are susceptible to the imposition of Government sanctions. Workers in companies which are strong, viable and profitable, and which do not rely upon Government orders, contracts or assistance, escape unscathed. That, clearly, is both unfair and intolerable. There can be no defence for a policy which in practice discriminates against the weak and allows the strong to get away with it. It is an efficient punishment not of the companies but of the workers in those companies.

§ Mr. Stanley Bidwell (Ealing, Southall)
Does my hon. Friend agree that the proposed sanctions against Ford are farcical, because Ford has a lot of leeway to make up in fulfilling its orders? How far can the sanctions be effective? It is local authorities which normally order motor vehicles.
The Government's decision may be a blessing in disguise for Ford and may enable the company to fulfil its obligations in the international market. We have here all the ramifications of a multinational company's operations. The Granada, Ford's biggest and most successful car, is produced in Germany, with much Turkish labour; the Cortina is produced in Belgium; and the Ford small cars are produced in Dagenham and are in great demand in this country. Does my hon. Friend agree that the whole idea of threatening sanctions takes on a farcical character?

§ Mr. Ron Thomas
On a point of order, Mr. Deputy Speaker. I should like an assurance that the closed circuit television screens and the alarm systems in the House are working properly. I am disturbed that there are no Tories in the Chamber.

§ Mr. Reginald Eyre (Birmingham, Hall Green)
What does the hon. Gentleman mean by saying that there are no Tories here?

§ Mr. Thomas
It may be that the television screens or the alarm bells are not working and that that is why the Tories have decided not to turn up for this very important debate on sanctions.

§ Mr. Deputy Speaker
The only matter that concerns me is when our clock reaches half-past Ten.

§ Mr. Kilroy-Silk
My hon. Friend the Member for Ealing, Southall (Mr. Bidwell) is right. There is a farcical facet to the whole concept of sanctions and to the way in which they have been imposed. It is possible that sanctions imposed on a company could lead to discrimination against the workers and might result in redundancies. That might have no relation to the fact that the workers in that company were extremely efficient, productive and hard working.

§ Mr. Ivor Stanbrook (Orpington)
Will the hon. Gentleman give way?

§ Mr. Kilroy-Silk
No. I must get on. Many of my hon. Friends who have been here throughout the day wish to speak. The hon. Gentleman has only just walked in.
There is another aspect to Government policy. Until relatively recently it was shrouded in the mists of secrecy. We did not know what companies were being subjected to sanctions. I learnt only from newspapers that a company called High-Speed Turnings, in Kirkby, was being subjected to sanctions. We do not know to what sanctions these firms were or are being subjected, or for what reasons, or for what length of time. We also do not know what impact those sanctions were having on the companies concerned.
All my hon. Friends in the Chamber who represent constituencies in which there is a great direct industrial interest want and need to know what impact the Government's policy is having on our constituents and the employment prospects in our constituencies.

§ Mr. Stanbrook
Will the hon. Gentleman give way?

§ Mr. Deputy Speaker
Order. We do not want to spend the half hour that remains of our valuable time dealing with points of order and refusals to give way. The hon. Member for Orpington (Mr. Stanbrook) knows that he must 1714 resume his seat if another hon. Member does not give way.

§ Mr. Stanbrook
On a point of order, Mr. Deputy Speaker. Is it not the custom of the House for hon. Members to give way to interventions, whether from one side of the House or the other?

§ Mr. Deputy Speaker
That is related directly to the temperament of the individual addressing the House and the time of day at which he is addressing it.

§ Mr. Kilroy-Silk
I must make clear to the hon. Member for Orpington (Mr. Stanbrook) that I am not in the mood to give way to interventions from Conservative Members. We can do without flippant interventions. This is a serious subject.
I should make it clear that, although I am highly critical of the Government's use of sanctions in this context, I am not opposed to the use of sanctions as a matter of general policy. I should like to see the greater use of sanctions for more positive and constructive things. I should like to see sanctions imposed against companies that do not employ their proper quota of disabled workers. There are many such cases, particularly in Government Departments.
The same applies to those companies which practise some form, open or subtle, of racial or sexual discrimination, or involve themselves in some way in exploiting their workers, either through low pay or inadequate working conditions.
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Motion made, and Question proposed, That this House do now adjourn.—[Mr. John Evans.]

§ Mr. Kilroy-Silk
The sanctions policy is the use of other means of implementing the Government's so-called incomes policy. We do not have an incomes policy. What we have is a pay policy which is unfair, unjust, and riddled with anomalies—anomalies which mean that it is always the same people who are subjected to pay restraint and the imposition of sanctions of one kind or another. Equally, it is always the same people, whether stockbrokers, lawyers, estate agents or the self-employed, who escape 1715 entirely from the imposition of the pay policy. That is true now, it was true last year and the year before, and it has been true under every Administration's implementation of so-called pay restraint policies since 1947. It is always my constituents and those of my hon. Friend who are asked to put their noses to the grindstone and make sacrifices.

§ Mr. Andrew F. Bennett (Stockport, North)
Does my hon. Friend agree that most professional people often charge fees that are percentages of prices, which means that they have a direct interest in increasing inflation? Estate agency is one example, because whenever house prices rise, estate agents increase their commission.

§ Mr. Kilroy-Silk
I agree. Not only do they increase their commission in that way, not only are such people enabled to determine and announce their own pay increases; they are also—this happens throughout management in industry, commerce and the service industries—able to escape the implications and consequences of any pay policy by giving themselves all kinds of non-monetary perks. It is clearly indefensible that a pay policy riddled with such anomalies and injustices —a pay policy such as that which we now have—should be implemented by the Government.
I am very much in favour of an incomes policy, but it must be a Socialist incomes policy—one that takes account of incomes and wealth, and in which the resources of society are distributed fairly and equitably according to rational criteria. We do not have such a policy. Without the implementation of such a policy, I cannot in any circumstances give my support to other policies which, in reality, amount to no more than a restraint upon the income of the working class.

§ Mr. George Rodgers (Chorley)
Does my hon. Friend agree that an incomes policy would, perhaps, be a little more tolerable if it also embraced profits and prices and contained an element of control over investment?

§ Mr. Kilroy-Silk
That is precisely the point that I was making. I am deeply in favour of an incomes policy, so long as it takes account of all forms of income, earned and unearned, and other wealth. As a prerequisite for the implementation 1716 of that policy we must have a Socialist society that is seen to be fair and just as between all sections of the community. That is clearly and demonstrably not the case at the moment, and it has not been the case in the past.
It is totally unreasonable continually to ask the same people to be making the same sacrifices when they see the obscene wealth displayed in other parts of the country by certain individuals and while we have such enormous disparities of income and wealth in our society. While such conditions exist there cannot be any justification for, or defence of, any kind of pay restraint.

§ Mr. Eyre
rose—

§ Mr. Kilroy-Silk
I hope that the importance of this debate has been, first, to show that we on the Labour Benches have lived up to our responsibilities to our constituents and have aired this subject in the absence of the official Opposition and all of their cohorts in the minority parties. We on these Benches, at least, want this issue out in the open and debated. We are making our position clear to the Government. We do not support their pay policy. We do not support the imposition of penal sanctions upon workers to effect that policy.
I hope that the Government will take note of the debate that we on the Government Benches have conducted tonight and when they come back next week will have had second thoughts, and will have forgotten all about the imposition of penal sanctions.

§ Mr. Ivor Stanbrook (Orpington)
All those terrible things that the hon. Member for Ormskirk (Mr. Kilroy-Silk) has just mentioned were committed by a Labour Government—a Government whom the. hon. Gentleman has hitherto supported. One hopes that he will have the courage of his convictions and henceforth will vote against his Government because, clearly, they are guilty of doing something which is not worthy of the support of anyone who sincerely believes in the objectives of the Labour Government as I understand them. The Government's policies are contrary to the will of the Labour movement as a whole. It amazes us to find the Government pursuing policies that are at variance with 1717 the views of a large proportion of their movement.
This is the time when one would expect members of the Labour Party, and especially members of the Parliamentary Labour Party, to stand up and make their voices heard at every possible opportunity to vote against the policies of their Government.

§ Mr. Martin Flannery (Sheffield, Hillsborough)
The hon. Gentleman says that he and his party are opposed to sanctions. Does he remember the most horrific and terrible sanctions ever imposed? It was called the Industrial Relations Act, under which the entire trade union movement was subjected to the power of the courts, with a new chairman specially put there to penalise the unions. Was not that the most terrible sanction of all? How can the hon. Gentleman pretend to be against sanctions when he applauded that monstrous sanction that his party imposed?

§ Mr. Stanbrook
I do not think that that was the most terrible sanction of all, because if there is one great evil against which we in this country have to fight and contend with all the time it is irresponsible trade unionism. Say what one may about the Industrial Relations Act, it was an attempt to cure that evil. That evil was so well recognised that even the Labour Government of 1966 to 1970 attempted to cure it in their own way by producing their White Paper"In Place of Strife ".
It so happens that the ideas that formed the basis of that document received support in the country as a whole but were opposed by the trade union movement, and especially by the irresponsible section of it. Unfortunately for the country, the Labour Government were unsuccessful in their attempt to cure that evil, and when the Conservative Government tried to cure it by their methods they, too, were unsuccessful.

§ Mr. Eyre
I remind my hon. Friend that during that period of the Labour Government between 1966 and 1970, when proposals were brought forward by the right hon. Member for Blackburn (Mrs. Castle) to deal with the trade unions, they included penalties such as sending trade unionists to prison. The penalties then 1718 proposed were far more severe than any that were introduced by the Conservative Government.

§ Mr. Stanbrook
I am much obliged to my hon. Friend. That is true. In some ways the proposals of the Labour Government were more draconian than those of the Conservative Government, so it cannot be said that this evil of irresponsible trade unions is not well recognised, even by members of the hon. Gentleman's own party. One of the greatest tragedies was that the Conservative Government's attempt to deal with the problem did not receive the support that it should have done from the then Labour Opposition.

§ Mr. George Rodgers
What will a Conservative Government do if ever they are elected to office? Will they introduce the kind of legislation of which the hon. Member speaks so proudly?

§ Mr. Stanbrook
I cannot speak for the actions of my Front Bench should it be in a position to make immediate proposals. I say only that the evil remains and must be dealt with. I hope that a future Conservative Government will deal with it, though perhaps not in the same way as the Conservative Government of 1970 to 1974. Perhaps they will adopt a more acceptable approach, with more consultation, and perhaps, best of all, based upon the proposals laid before Parliament by the Labour Government of 1966 to 1970.
In some ways there was a great deal to be said for those proposals. It was a great shame that the Conservative Government did not take them up and introduce them, putting them through the House with the commendation of the right hon. Member for Blackburn and the right hon. Member for Huyton (Sir H. Wilson) who were, after all, the godparents of those proposals.
They were defeated by a section of the Labour Party, and now they are passing from the scene. One hopes, however, that the Labour Party will see reason as time passes and will not be taken over by its Left wing, and that it will never have control of the government of this country again. Until the country recognises this evil with acceptable and effective proposals which will deal with the monster of irresponsible trade unionism, it will never solve any of its problems.
1719 I revert, however, to the main subject of the debate, which concerns the sanctions policy of the Government against firms which do not comply with the Government's incomes policy. This is perhaps a subject of tremendous fundamental importance. The power granted to Ministers to act within the discretion allowed to them by Parliament is conferred by statute. Every statute giving a Minister power of this kind is devoted to a particular purpose. When a Minister exercises his discretion outside the objectives of the relevant statute, I believe that he is acting unlawfully.
It cannot be said, can it, in this country which, thank God, is still free, that a Minister is entitled to act beyond the purposes, spirit and intention of Acts which give him the power to act within his discretion? It must be wrong, if an Act gives him power to grant or to withhold assistance for the purposes of export credits or industrial training, for him to act out of motives dissimilar to those contained in the legislation or outside the comprehension of Parliament when it enacted that legislation.

§ Mr. Bidwell
If the trade union movement was the irresponsible creature that the hon. Member has sought to depict in his historic narrative, which is entirely faulty, there would be justification for the Government's policies. However, the hon. Member's narrative is totally wrong. The element of trade unionism which can be described as irresponsible is minuscule in proportion to the overall size of the movement in which a great number of workers, especially in skilled occupations, engage in responsible negotiations. I speak as a sponsored member of the Transport and General Workers Union which is involved in the current difficulties over Ford.
The trade unionists there engaged in responsible negotiations against a background of the stupendous profits made by that company. That is why those men are getting up tight against the Government's attitude which does not accord with the realities of industrial life. If the hon. Member's portrayal of wild and wanton trade unionists were correct, there might be some need for the Government's actions. However, as the hon. Member is wrong, the Government's action is also wrong.

§ Mr. Stanbrook
The hon. Gentleman has missed the fact that I have passed from the topic of his remarks to the subject of this debate, namely, sanctions. The Labour Government are caught in a trap of their own making. They were faced by a monster in the form of irresponsible trade unionism. In attempting to appease that monster, they gave it the industrial and political power that it wanted. That Government put through this House legislation which would not have been enacted if that Government had represented the people and had fairly expressed the wishes of the people in regard to trade unions.
The Labour Government have since created a situation in which the trade unions have a stranglehold over our economy. The result is that, whereas originally the trade unions were prepared to co-operate in return for these concessions, now they are not. Perhaps there was a vestige of the original trade union purpose of benefiting their members, but the trade union movement seems now to realise that an incomes policy such as that devised by the Labour Government is good neither for the country nor for trade unionists.
The trade unions not only have a political and economic stranglehold on the country; they determine the life of the Labour Government. The sooner the execution takes place, the better. The whole nation is awaiting the opportunity to get rid of the Labour Government who have so dishonoured their early promises.
I wish now to deal with the economic sanctions that the Labour Government seek to impose. I believe that the action that they have taken is unlawful. Their policy is riddled with inconsistencies. We are all waiting for the sanctions to be imposed on the TUC for its breaches of incomes policy. If the Government are determined to impose sanctions on Ford, they must in all justice impose similar sanctions on the TUC. The TUC receives at least £1 million from the Government in respect of training. Why should that figure not be cut off completely? It is a discretionary power in the hands of the Minister, who can decide whether or not to grant that money. Surely it is well established that action against the TUC should follow action taken against any individual company.
1721 This is a fundamental problem. Magna Carta, 763 years ago, first established that no man should be punished except for a breach of the law. If we apply that principle to current circumstances, we wonder what kind of breach of the law Ford has committed. There is no statute that says that Ford may not pay more than 5 per cent. Indeed, if the Labour Government were more honest they would have enacted such a statute, but they have not had the courage to do so. At least the Government headed by my right hon. Friend the Member for Sidcup (Mr. Heath) displayed that courage.

§ Mr. Eddie Loyden (Liverpool, Garston)
Does the hon. Gentleman agree that just over 100 years ago the men of Dorset, the Tolpuddle martyrs, when attempting to organise trade unions in order to deal with the vicious attacks on them by their employers, were condemned and sent to penal colonies? Perhaps the hon. Gentleman is thinking of returning to that stage in our history. He displayed in his speech a violent hostility to the trade union movement. Perhaps he will try to define the difference between irresponsible and responsible trade unionists.
It appears that what the Conservative Party wants is a trade union movement that is weak and ineffective. It would call that a responsible trade union movement. The British trade union movement was built up out of sheer necessity and the conditions of the time in which it emerged, but the attitudes of those times have been inherited by the Conservative Party in our politics today. When he talks about the trade union movement, the hon. Gentleman should remember that in the recent past that movement has acted in a most responsible manner in assisting this country out of its economic difficulties. The trade unionists feel, and I feel with them, that it is about time they began to get some of the rewards for the sacrifices which they have made in the past.
The hon. Gentleman has referred to sanctions. I wish to make clear that there is a sharp distinction between Labour Members' approach to sanctions and the approach of the Conservative Opposition. I cannot for a moment understand how a party that could contrive the Industrial Relations Act could say with any degree 1722 of honesty that it was opposed to sanctions, yet that is what we hear from it.
Will the hon. Gentleman tell us what sort of policies would be introduced by a Conservative Government, if there should ever be one, to deal with the so-called irresponsible trade union movement? The House might learn something from this debate if he told us exactly what the position would be if—God forbid—the Opposition were ever to form the Government of the day.

§ Mr. Stanbrook
I thank the hon. Gentleman for that most helpful intervention, but it is he who is living in the past. All those who talk in terms of the trade union movement as he does are still living in the past—he referred to the Tolpuddle martyrs—because it was the Conservative Party that established the trade unions on a legal footing and probably gave them more assistance in their formative stages than did any other party in this country.
It is the Conservative Party that accepts that an institution whose membership is composed of individual workers is entitled to operate within the law in the interests of those members, and that institution is, indeed, given a special privileged position in our law. That is the position, and it certainly was the position up to the second world war.
All those victories of the past having been won, one would have expected trade unions to continue in that function. Unfortunately, for historical reasons, they own the Labour Party. They created it, and they still pay for it. The result is that they think that they can call its tune. A further result has been that this Government, in their desire to preserve such power as they had, were prepared to condone tyranny and, indeed, to appease it by granting political power.

Several Hon. Members
rose—

§ Mr. Stanbrook
I give way to my hon. Friend.

§ Mr. Eyre
Before my hon. Friend continues to reply in such good terms to the intervention of the hon. Member for Liverpool, Garston (Mr. Loyden), may I underline the significance of the demonstration of rebellion on the Government Back Benches which we witnessed this 1723 evening, when more than 30 hon. Members assembled to support the hon. Member for Ormskirk (Mr. Kilroy-Silk), who initiated this Adjournment debate?
In view of the extreme terms of criticism which have been applied to Government policy tonight, is it not clear that the hon. Members who assembled this evening could not possibly support the Government on future occasions in any matter relating to sanctions or incomes policy? I ask my hon. Friend to recognise the great political significance of the protest and demonstration which have taken place in the Chamber tonight.

§ Mr. Stanbrook
I am grateful to my hon. Friend for pointing that out. We have a rather curious situation here, in which a large section of the Labour Party, so it appears, is opposed to the current policies of the Government whom it is supporting in power. I noted that some hon. Members now present voted against the defence Estimates this afternoon, which also seems rather significant. I have always thought that defence in this country was almost sacrosanct in political terms, it being recognised that the first duty of any nation is to defend itself adequately. It is clear that in the priorities adopted by some hon. Members the defence of our country comes a long way down the scale.
It is obvious that the Opposition are determined to maintain the defence of the realm against its enemies internally and externally, but that Government Members do not regard defence as a high priority on public expenditure. On the contrary, they are willing to support a tyranny that has been created, fostered and strengthened in the country by their party. One therefore wonders whose interests such hon. Members have at heart, since they support such tyrannies and are, at the same time, willing to vote against the defence of our country.
If there were a touchstone it would be that of defence Estimates. Government Members either believe that we should have adequate men and that they should have adequate arms and equipment—

§ Mr. Tom Litterick (Birmingham, Selly Oak)
On a point of order, Mr. Deputy Speaker. The hon. Member is not referring to the subject that is before the House.

§ Mr. Deputy Speaker
The motion is for the Adjournment of the House. Nothing else is under consideration. 1 remind the hon. Member that the Minister has sat patiently throughout the whole of this thrilling debate and is anxious to have a few minutes in which he can reply. I hope that the hon. Member will bear that in mind.

§ Mr. Stanbrook
It had crossed my mind that the Minister, with whom personally I have no quarrel, was going to make his contribution, like so many of his hon. Friends, by an intervention to my speech. He appears not to wish to do that. I wish to advance the constitutional progress of the House so I shall sit down if the Minister wishes to intervene.

§ The Under-Secretary of State for the Environment (Mr. Kenneth Marks)
I have listened with interest to the arguments. I could not understand whether hon. Members realised that the monster that they are facing is not the monster of trade unionism, as envisaged by the hon. Member for Orpington (Mr. Stanbrook), or even the small monster of Toryism—or the nil monster of Toryism —that we have seen from the Opposition Front Bench. Crucial to what is happening now and to the prospects for the future is the rate of inflation. Nobody disputes that. The TUC does not dispute it.
Our success in getting the inflation rate down from 27 per cent. in 1975 to 8 per cent. today is there for all to see. We have come through the worst recession experienced in the West in recent times. Output is rising. Investment has risen and is still rising. We can keep output growing. Living standards rose by 7 per cent. in the second quarter of the year and, certainly, it improved further in the third quarter. Unemployment has fallen by 100,000 in the year.
But we cannot be complacent. Our unit wages costs in manufacturing have been rising faster than in any other major industrial country. If that continues we shall see inflation roar away again. Progressively we shall lose out to foreign competition. Inflation exports jobs and depresses home demand overall. Faced with inflation people save more but think twice about investing in industry.
1725 The present policy is designed to keep inflation within single figures, and if possible to reduce it further. Our policy is not a negative policy or restraint. Under our policy there is scope for genuine self-financing productivity beyond the 5 per cent. limit. We shall achieve sustained improvement in real incomes, as opposed to confetti money, only by sustained improvement in productivity deals.
There is scope, particularly in large bargaining groups, to deal with differentials. Other pay anomalies can be sorted out on the"kitty"principle. There are special provisions to allow higher rises for the lower-paid. The opinion polls have 1726 shown that the majority of voters are solidly behind our approach to incomes policy.
It is our duty to do what we can to persuade employers in the public and private sectors to reach settlements that are within the guidelines. We shall take such action which is within our legal discretion—