COUNTER-INFLATION POLICY

HC Deb 13 December 1978 vol 960 cc673-810

Mr. Speaker

We now come to the main business for the day. I should inform the House that I have selected the amendment in the name of the right hon. Lady the Leader of the Opposition.

Mr. Ron Thomas (Bristol, North-West)

On a point of order, Mr. Speaker. May I draw your attention to the fact that there is on the Order Paper an amendment that has been signed by 30 Labour Back-Bench Members and that would have been signed by more had the opportunity presented itself to them? May I put it to you that your predecessor on a previous occasion called two amendments because he felt that the subject under discussion was of a serious nature? May I suggest that today's debate is on an equally serious matter?

Members of the Parliamentary Labour Party have repeatedly tabled amendments of this sort, commanding anything up to 50, 60 or 70 signatures. On the occasion when your predecessor created a precedent, he selected an amendment that had been signed by only about one-sixth of that number. May I urge you and appeal to you, Mr. Speaker, to consider calling the amendment that stands in the names of myself and certain of my hon. Friends?

Several Hon. Members rose—

Mr. Speaker

Order. We can quickly settle this matter. When my predecessor selected a second amendment, the rules applying to him were not as they apply to me. A different motion was on the Order Paper. The House expects me to see that the rules are observed. The hon. Member for Bristol, North-West (Mr. Thomas) and his hon. Friends are not alone in having an amendment on the Order Paper. The Scottish National Party, the Liberal Party and Government supporters also have tabled amendments. My selection has been announced and it must stand. I am not going to take long points of order about my selection. That would be quite exceptional and I do not propose to allow it. I am willing to take one.

Mr. Bob Cryer (Keighley)

On a point of order, Mr. Speaker. I am a little confused about the situation and I shall be grateful for your guidance. If I may refresh your memory, on 29th April 1976 there was a motion on the Order Paper, presumably in the name of the Leader of the House, to which an amendment signed by only two hon. Members was tabled. It was duly moved and subsequently debated and voted on. What causes me concern is that the rules regarding amendments do not seem to be clear. On the one hand we have 50, 60, 70 or even 100 Members tabling an amendment that is not called and yet on another occasion —as recently as April 1976—only two Members of the Opposition tabling an amendment that was called and debated. That seems to suggest an inconsistency.

I wonder whether you could clarify the position so that Back Benchers can have an opportunity of expressing an opinion that is not entirely in accord with the Government motion and that is certainly opposed to the hypocritical motion of the Opposition.

Mr. Speaker

The position is quite clear. The rules of the House enable me to call one amendment only—the one that can be voted upon at the end of the evening. The House has given me this instruction and until the rule is changed we must abide by it.

Several Hon. Members rose—

Mr. Speaker

Order. I do not propose to take any more points of order about my selection of amendments.

Mr. Kevin McNamara (Kingston upon Hull, Central)

On a point of order, Mr. Speaker—

Mr. Speaker

Is it on an entirely different subject?

Mr. McNamara

Yes, otherwise I would not seek to raise it, bearing in mind what you have just said, Mr. Speaker.

Mr. Speaker

Of course not.

Mr. McNamara

As you have decided, Mr. Speaker, not to call my amendment to the amendment, for reasons that I understand, though which I did not think were covered by the Standing Order, could you say whether you have had intimated to you that in the event of the right hon. Lady's amendment being defeated it is the Government's intention to move their substantive motion?

Mr. Speaker

No. I have not had such notice.

Mrs. Audrey Wise (Coventry, South-West)

On a point of order, Mr. Speaker—

Mr. Speaker

Is it on the selection?

Mrs. Wise

It is a point of order on general procedure.

Mr. Speaker

The hon. Lady will resume her seat. She knows very well that I have said that the selection cannot be challenged. I have given my ruling to the House and I am not—

Mr. Eric S. Heifer (Liverpool, Walton)

On a point of order, Mr. Speaker—

Mr. Speaker

Order. The hon. Gentleman knows better than to rise whilst I am addressing the House.

Mr. Heifer

So do you.

Mr. Speaker

I did not hear the hon. Gentleman. I must tell the hon. Lady that the House has important business before it. I have made my selection and it stands. I am not taking points of order about the selection. I will take a point of order about anything else, but not about selection of the amendment.

Mrs. Wise

I am not seeking to challenge your selection or to question it in any way, Mr. Speaker. I am asking for your guidance on a statement by the Leader of the House yesterday in response to a question of mine, in which he said that if more than one of the motions on the Order Paper were called for debate a Government motion would have to be tabled to make that possible. The guidance that I seek, Mr. Speaker, is whether there is any way in which Back Benchers can activate or encourage any practice that will make it possible for you to have the freedom to select in such a way as to allow not simply Back Benchers on the Government side of the House—it might be that I am in disagreement with some of my hon. Friends on this point—but minority parties to express a clear point of view if they wish.

My question relates to this very point. If I am told that it is possible for a procedural motion to be tabled, it does not seem adequate that there is no way in which we can call the Government to account in the exercise of their prerogative on this point.

I believe that it is important for the respect in which this House is held that it can be seen that Members can vote in a way that reflects their point of view, whether as Back Benchers or Members from the minority parties, who are elected to reflect legitimate strands of opinion. I am puzzled, Mr. Speaker, and I have been waiting for a considerable time for guidance on the way in which we can make it possible for this to be done.

Mr. Speaker

The hon. Lady's question was dealt with in a report of the Select Committee on Procedure, which has yet to be discussed by the House.

Mrs. Wise

Further to that point of order, Mr. Speaker—

Mr. Speaker

Order. Point of order, Mr. Frank Allaun.

Mr. Frank Allaun (Salford, East)

On a point of order, Mr. Speaker. I wish to inform you that I was told yesterday that the correct person to approach on this matter was the Clerk to the Journal Office. I did that and have it in writing that if at 3.30 p.m. the Government move a motion on the Ten o'clock rule, it is possible for you to take alternative amendments. Therefore, Mr. Speaker, whether you are to blame or not, it is possible.

Mr. Speaker

In fairness to all hon. Members, such a motion must be on the Order Paper. There are five amendments on the Order Paper and I have looked at them all. I have selected the one in the name of the official Opposition.

Mrs. Wise

On a point of order, Mr. Speaker. As you have referred to a particular report which apparently deals with this point, may I ask whether there is any action that Back Benchers can take to ensure that that report is debated?

Mr. Speaker

Order. The hon. Lady has the normal channels open to her to pursue that matter elsewhere. There is no point in pursuing it at the moment.

4.19 p.m.

The Secretary of State for Prices and Consumer Protection (Mr. Roy Hatters-ley)

I beg to move,

That this House welcomes the achievement of the Government and the country in reducing the rate of inflation and supports the Government's objective of bringing it down further as a means of reducing unemployment, increasing industrial activity and improving real living standards.

Today's debate has two distinct but related causes. The first is the Opposition's wish to debate one narrow aspect of counter-inflation policy; the second is the Government's willing acceptance of the opportunity to reaffirm the absolute priority that we give to the policy as a whole. Our immediate intention is to hold the inflation rate at or about its present level. Our eventual aim is to reduce the figure to the level enjoyed by our most successful competitors, for unless we achieve our objectives none of our other policies—economic growth, lower unemployment, higher investment and improved services financed by public expenditure—can fully succeed.

The control of inflation is essential for both social and economic progress and no one should doubt our determination, despite the difficulties that clearly lie ahead, to build on the success of the past three years and to keep inflation firmly under control.

The people of this country, if not the Opposition, realise how great that achievement has been. Three years ago the annual rate of increase in the retail price index stood at more than 26 per cent. Today it is less than 8 per cent. I know that the Opposition affect the belief that our inflation began at the moment the poll closed on 28th February 1974, but the facts prove something rather different.

Mr. F. A. Burden (Gillingham)

What about the Chancellor of the Exchequer's claim that inflation was at 8.4 per cent?

Mr. Hattersley

The new Government were faced with a fourfold increase in the price of imported oil. That burden was clearly not the responsibility of the previous Government, but the rest of the legacy and the other liabilities that we inherited were their responsibility and theirs alone. The money supply was out of control and growing at an average rate of 6 per cent. each quarter throughout 1972 and 1973. Nationalised industries had been encouraged—indeed, on some occasions required—to run massive deficits until the moment arrived when the postponement of their proper financing could be put off no longer. Threshold agreements — inflation institutionalised and built into collective agreements—were anticipated in industry after industry.

All those factors—known to and, indeed, caused by our predecessors—made 1974 a year of inevitable and massive inflation increase. The outgoing Government must have known what was about to happen. It is inconceivable that the economic forecasts that they received during their dying months of office could have included anything other than the explicit warning of a price explosion that was bound to occur and was about to occur.

The record of inflation in this country over the past four and a half years can be described in two simple sentences. They caused it. We cured it. We cured it largely by adopting a policy that the Opposition specifically rejected, namely, a partnership with the trade union movement. When I talk of our achievements, as I propose to do, I refer to the achievements of the Government and the people of this country working in close co-operation. We propose to maintain that co-operation.

On Wednesday, the economic committee of the TUC will meet my right hon. Friends the Chancellor of the Exchequer, the Secretaries of State for Industry and Employment and myself to discuss the nature and extent of co-operation during the rest of the current pay round. The support of the trade unions, which sustained us during the first three phases of incomes policy, must be maintained.

During phases 1 and 2 of our policy, we received the firm, formal endorsement of the TUC. During phase 3, the policy enjoyed the support of trade union membership throughout the country. Without the co-operation that our policy achieved, success would not have been possible, and I gladly accept and acknowledge the debt that we owe to those men and women who made the central contribution to our recovery.

However, although the contribution of wages policy was central, we must not fall into the error of talking or acting as though it were the only ingredient of our counter-inflation policy. It is not wage increases alone that make prices rise. We shall not cure inflation by policies that bear only on wages.

Mr. Dennis Skinner (Bolsover)

That is what we are doing.

Mr. Hattersley

The Government have never acted in that way. Since the containment of inflation is our first priority, all our policies have been geared to that principal obligation. We have rejected the arguments in favour of a continual managed depreciation in the exchange rate because we believe that low import prices are in the interests of the overall performance of British industry. We have kept the money supply and the public sector borrowing requirement under prudent control. The nationalised industries, having contributed to that end by eliminating the deficits the Tory Government forced upon them, now offer a period of relative price stability. Attempts to increase indirect taxation as a way of financing cuts in direct taxes have been resisted because of their price effects.

In Brussels, we have fought to ensure that increases in CAP prices were kept to a minimum. Last year's annual price review produced the smallest increases in prices—2¼ per cent. overall—that the Community has ever known and we shall continue to press for a radical revision of the CAP and for an end to the indefensible practice of increasing the prices of commodities already in surplus.

We have received precious little support for our policies from the Opposition. Of course they repeat the same dreary platitude that appears in their amendment. They want a lower inflation rate, but when it comes to the policies that turn that pious hope into reality they flinch away. They are in favour of strict control of the PSBR, but they demand extra spending, notably on defence and law and order. They believe in responsible collective bargaining and think that the figure of 5 per cent. is "about right ", but they would have paid the Armed Forces 32 per cent. from April and the police 40 per cent. from September.

The Opposition talk about the rising cost of food, although this year's increase in the food index has been the lowest since 1970, but they voted to devalue the green pound, to the clear disadvantage of the consumer. They fought, literally night and day, to prevent the creation of the new Price Commission, with its specific powers of investigation and price freeze.

I know that the Price Commission is the bête noire of the Tory Party and its friends in the national newspapers. I have almost given up hope of its work and role being discussed by them in anything approaching rational language. The hon. Member for Gloucester (Mrs. Oppenheim), who leads for the Opposition in these matters, described the Commission as establishing what amounts to a reign of terror ". I see her nodding in continued agreement. She said: the mere threat of a Price Commission inquisition is enough to send a shiver down the spine of most companies ". I suspect that some of my hon. Friends wish that her description approximated to the truth. I certainly believe that if changes are needed in the powers of the Commission they are changes designed to strengthen, rather than to reduce, its effectiveness. But what is clear—irrespective of different views on the safeguard clauses, which certainly limit its work—is the specific and substantial contribution the Price Commission has made to our policy.

The Price Commission prevents unnecessary and unreasonable price increases. Very often, it discharges that duty by acting as an agent of improved competition, obliging companies that dominate their markets to charge prices no greater than the prices that they would be able to charge if they were subject to the fierce forces of free competition. A Conservative Party that preserved its traditional support for competition would applaud such a policy. In fact, its recent relationship with the Price Commission shows that the present Tory Party will support any dominant company which manages to keep its prices artificially high.

If I am thought to be less than generous in my description of the Opposition's attitude, I ask them to quote to me a single instance when they have supported a Price Commission recommendation that resulted in holding down the prices of tea, soda ash, dry batteries, coffee, television rentals, beer or plasterboard. I could go on with a long list of occasions on which the Commission has acted on behalf of the consumer and the Conservative Party has criticised it for doing so.

Let me pursue one specific example. A year ago the Price Commission described the four major tea blenders in this country as operating in a way that was "excessively gentlemanly ". In fact, what it meant was that they were operating a parallel pricing policy. When raw tea prices rose, retail prices went up. When raw tea prices fell, the retail price remained unchanged. Thanks to the investigation by the Price Commission and the immediate response of the Co-operative Wholesale Society, the ring was broken. For many months there were competitive reductions in the price of tea. A year ago medium-quality tea cost about 29p a quarter. The most recent survey puts the average price at under 23p a quarter.

What we should be told is whether the Opposition are glad or sorry that that sort of power and policy now exist. When they voted for 36 continuous hours in their unsuccessful attempt to emasculate the Price Commission, was this what they were anxious to avoid—lower prices and lower profits?

What the Price Commission does seems to me to be right on its merits, but it is also necessary for a practical reason, which the Opposition have been unwilling or unable to understand. If we are to obtain the co-operation of working people and their families in the continuation of counter-inflation policy, we have honestly to convince them that we are doing all that we reasonably can—all that is possible without jeopardising investment and employment—to prevent unnecessary price increases. I repeat that the co-operation of working people is vital. Wages policy is not the only ingredient of our counter-inflation strategy, but it is an essential element.

Mr. Skinner

Sanctions are a messy business.

Mr. Hattersley

There is ample proof of what I have just said in the record of our success during 1976. It was during that year that the corner was turned, the year in which the trade union movement —leadership and membership—accepted that earnings increases would fall below the expected rise in the inflation rate. That was a year of real sacrifice. Without it, I do not believe that the increasing prosperity of 1978 and 1979 would have been possible.

But we must not conclude from that phase of policy that every year of incomes policy is intended to have, or is, indeed, likely to have, the same result. In fact, quite the opposite is true. Incomes policy is now intended—through the effect it has upon inflation—to improve real living standards.

Incomes policy is not about continued sacrifice; it is about increased prosperity.

Mr. Nick Budgen (Wolverhampton, South-West)

And firmness and fairness.

Mr. Hattersley

Increased prosperity was a result that we achieved last year. Last year we said that earnings increases amounting to about 10 per cent. would produce an inflation rate substantially below that figure and that, as a result, in real terms we would all be better off. Certainly, even allowing for self-financing productivity deals, the earnings out-turn was slightly larger than we hoped. But it was near enough to our target to ensure that inflation was kept well within control. Total earnings rose by little more than 14 per cent. The retail price index increased by little more than half that figure. As a result, we are all better off. Indeed, as a nation we saw our living standards rise last year by over 7 per cent.

Had there been no incomes policy it is possible, indeed probable, that many millions of pay slips would have contained figures much larger than the ones that actually appeared last year. But what is printed on pay slips his less important than what the money in the pay packet will actually buy. Without an incomes policy the real value of most people's wages would have been eroded by inflation almost before the pay packets were in their hands. We need to concentrate on real wages. Real wages grow fastest when inflation is kept under control.

To keep inflation under control this year at least we have to plan incomes in the way in which we on the Government Benches believe other parts of the economy should be planned. It was in pursuit of that aim that July's White Paper "Winning the Battle Against Inflation" was published. Within it was included the settlement figure of 5 per cent. I know that there are many different views on both the propriety and the practicability of 5 per cent., but the arithmetic is beyond dispute. Settlements at or about 5 per cent. will produce an overall earnings increase of about 7 per cent. or 8 per cent. Earnings increases of that order will allow us to hold the annual inflation rate at about the same figure. As a result, our overall standard of living will be maintained.

If, on the other hand, earnings were to rise by 15 per cent. or 20 per cent., inflation would increase even faster. In real terms—and it is real terms that matter—we would as a nation be worse off. There is no escape from that simple formula. Nor do the Government seek or choose to evade its implications. Our first duty is to describe the policy that will best preserve the standard of living of the British people. Our second is to do all within our power to bring that policy about. It is not an obligation that we propose to run away from, either tonight at 10 o'clock or during the weeks ahead.

I believe that that obligation applies with special force in our consideration of the interests of the lowest paid. A desire to do something for the lowest paid is perhaps the strongest argument in favour of incomes policy. It was the free-for-all that made them the lowest paid. Within the system of free collective bargaining, workers with little industrial strength, employed in the least profitable industries, have little hope of enjoying a reasonable standard of living.

Mr. Norman Atkinson (Tottenham)

In nothing that my right hon. Friend has said so far, including the criteria that he has set out backing the use of an incomes policy, has he indicated that this year is the last of any phases of an incomes policy. Will he now give an assurance that the promise made in 1976 and 1977 that there would be an orderly return to free collective bargaining—respossible bargaining—now applies to next year and that he will now advocate a return to free collective bargaining?

Mr. Hattersley

The orderly return to free collective bargaining of course remains our aspiration and remains the policy of the TUC, but I think that my hon. Friend will agree with me that even the TUC believes that the return to free collective bargaining needs to be qualified. It is because he believes that, I suspect, that he raised this point during the passage of my speech on the lowest paid.

Most people accept that free collective bargaining alone cannot meet the needs of the lowest paid. It is that sort of topic and interest that we must begin discussing with the TUC.

Mr. Skinner

On the basis of my right hon. Friend's argument that this semi-statutory, or whatever it is, kind of incomes policy is likely to benefit the low paid—we can dispute that, of course, but those are his words—can we be assured that in the public sector negotiations, particularly the Health Service and refuse workers and so on, which are coming up in December and January, reaching finality in January, the Government will acknowledge that 5 per cent. is not sufficient because most of these workers are in the low-paid category? Many of us feel that this debate about sanctions, supposedly, is really about trying to nobble the public sector workers.

Mr. Hattersley

If my hon. Friend pauses a moment, he will agree that sanctions, as he calls them, are essentially concerned with the private sector. [HON. MEMBERS: "What do you call them?"' I call them what the White Paper calls them—discretionary action.

If my hon. Friend pauses for a minute, he will agree that sanctions, as he calls them, directed against the private sector can hardly be conceived of by the Government as a way of depressing wages in the public sector. I repeat what I said about those in the public sector. The only hope of meeting their needs is from some orderly planning in wages. The White Paper that we debated in July actually includes a paragraph through which and by which special concessions can be made for the lowest paid. I believe that many members of the Government—indeed, the Government in their entirety—would not be happy to support a wages policy which did not include that proviso. My hon. Friend says that he and some of those sitting around him do not believe that a wages policy has helped or could conceivably help the lowest paid.

Mr. Skinner

It has not done.

Mr. Hattersley

Let me remind my hon. Friend of the year in which wages policy provided a £6 flat-rate increase for all workers, including the lowest paid—

Mr. Skinner

You are not doing that.

Mr. Hattersley

—and that was the year in which many lower-paid workers received a bigger increase in their salaries and a bigger improvement in their standards of living than anything they had previously enjoyed. Indeed, anyone whose sole interest is an improvement in the welfare of the lower paid should not be arguing against an incomes policy. He should be fighting tooth and nail for an incomes policy which provides special selective benefit for the lowest paid.

Mr. Ron Thomas

I am trying to follow my right hon. Friend's suggestion that incomes policies have helped the lower paid. Apart from the statistics which show that they have not, can my right hon. Friend explain how, in a capitalist system, if the unions give up a legitimate claim to higher earnings in a firm such as Ford, which made £300 million profit, that can be transferred to low-paid workers? The only way that this transfer can be achieved is by Ford workers getting as much as they can and paying 30 per cent. tax on their increased earnings, which will happen, of course.

Mr. Hattersley

I think that my hon. Friend misunderstands the position. I must tell him the position frankly. If, as I hope, we are to have a system under which the lowest paid are specially helped, planning, as we intend to do, a wage increase which is consistent with our other economic policies, there are some people and some unions, including unions such as the one of which I am a member—a union which basically represents the highest paid among industrial and engineering workers—which must make their own concessions and their own sacrifices on behalf of the people on the lowest pay, whose interests they seek to help. I have no doubt that, throughout the trade union movement, there is a substantial body of opinion which realises the social justice of that policy and wants to see it implemented.

I believe, and I shall continue to believe, that we can operate an overall wages policy which contains a measure of justice and equity. We said that only a 5 per cent. settlement policy can produce the right inflation result and we are not prepared to argue, as apparently the Opposition argue, that the strong and the powerful should enjoy increases appreciably in excess of that figure while the poor and the weak average out other people's good fortune by receiving negligible increases.

Certainly we accept that the public sector should respect the policy, but equally we expect it to be observed within private industry. We have made perfectly plain our decision that, where private industry implements settlements in excess of the White Paper, we shall be unwilling to finance those settlements through Government expenditure.

I know that some of my hon. Friends, as well as the Opposition, are critical of the discretionary action that we have taken in support of pay policy because they believe that the Government should neither inhibit nor prevent free collective bargaining. I understand that in taking up that position they are moved, motivated, by a matter of principle.

Mr. Skinner

And party policy.

Mr. Hattersley

Let us put it this way: neither principle nor party policy can be the case with the Opposition. The right hon. Member for Lowestoft (Mr. Prior) will not move the amendment in favour of a statutory incomes policy. The right hon. Lady who leads his party told the electors of Penistone, according to the report in the Financial Times of her visit there, that free collective bargaining would not be permitted in the nationalised industries or other areas of the public sector". All those who are rallying round from the Opposition Benches tonight in favour of uninhibited, free collective bargaining voted with enthusiasm for the Industrial Relations Act six years ago. In fact, they simply want to inflict the maximum political damage on the Government, to score a party point.

That is proved by the nature and by the occasion of the debate that they hoped to hold last week. The hon. Member for Chelmsford (Mr. St. John-Stevas), the Shadow Leader of the House, explained on radio why he had not chosen to put down a motion which robustly defined the principle for which the Opposition would fight. His answer could not have been more frank: There is no point in putting down a vote of confidence unless you have reasonable reason to believe that it is going to be supported by the minority parties. It is difficult to imagine a more frank statement of the triumph of tactics over principle.

Mr. Norman Tebbit (Chingford)

While on the subject of radio broadcasts, perhaps I could take the right hon. Gentleman back again—

Mr. Tom Litterick (Birmingham, Selly Oak)

You can take him anywhere you like.

Mr. Tebbit

Perhaps the hon. Gentleman and I will agree on where I can take him. I should like to take him back to the broadcast made during the October 1974 election by his right hon. Friend the then Secretary of State for Prices and Consumer Protection, who said: There is no reason to believe that there are any further price increases in the pipeline. Does not that make absolute nonsense of all the first part of the right hon. Gentleman's speech, in which he blamed all price increases on the inheritance from the previous Government?

Mr. Hattersley

It is absolutely typical of the trivialities of the hon. Gentleman that he should return to that sort of point. He says that the small quotation that he has given invalidates all the assertions that I made about the performance of the previous Government. If he can tell me one of those which is wrong—indeed, if he can understand them —I shall give way to him immediately.

Mr. Tebbit

All I want to do is to help the right hon. Gentleman. Will he tell me whether he thinks that the right hon. Lady the then Secretary of State was telling the truth on that occasion, or was she telling an untruth, in the interests of being elected again in October 1974?

Mr. Hattersley

I thought that the hon. Gentleman—[HON. MEMBERS: "Answer."] I certainly do not intend to pursue the hon. Gentleman down the road that he chooses to follow. I propose to deal seriously with the matter in hand, which is the occasion and nature of this debate. If the hon. Member for Chelmsford wishes to intervene, I shall gladly give way.

Mr. Norman St. John-Stevas (Chelmsford)

The right hon. Gentleman asked the House whether we could think of a better example of the triumph of tactics over principle than my statement. Has the right hon. Gentleman considered his own career?

Mr. Hattersley

I turn now to another example of the cynicism of the Opposition. Since we last debated discretionary action in February of this year, a number of companies have chosen to give publicity to the Government's refusal to do business with them. The Ford Motor Company is not the first example of sanctions or discretionary action that has become publicly known. Brain Haulage, High Speed Turnings, Hall Foundries, V. W. Spencer Engineering, and T. Baker and Sons are all examples of occasions when this great matter of principle might have been aired on the Floor of the House of Commons, but the Opposition did not rise to their defence.

The right hon. Lady the Leader of the Opposition did not lose her temper on behalf of a small company. It was only when the Ford Motor Company made the headlines and received the sort of publicity that has characterised the debate over the last two weeks that the issue was brought before us. It is very clear that "principle" for the Opposition lies very firmly and very squarely in newspaper headlines.

What is simultaneously pathetic and disreputable about the attitude of the Opposition is their wish to be associated with the manifestly popular and clearly successful counter-inflationary policy but their refusal ever to support the application of that policy when it involves actions which are either dangerous or difficult.

Those deplorable double standards are typified by the amendment that the Opposition propose to move today. It begins with a pious call for an improved inflation rate, pausing only to describe 7.8 per cent. as "high" without apparently recalling that when they left office the retail price index stood at 13.2 per cent. and was rising, and rising fast. The amendment then goes on to back away from the parts of the policy that are necessary if it is to be implemented successfully.

The willingness to support popular general principles but the determination to run away from their difficult application is characterised by the entire Conservative attitude to incomes policy.

Mr. Robert Adley (Christchurch and Lymington)

Will the right hon. Gentleman give way?

Mr. Hattersley

No.

We are told that the Opposition are in favour of wage settlements of about 5 per cent., but they believe that the figure ought to be an average. They tell us every week of a group of workers who deserve to receive more than the average, but they never nominate groups who must make the compensating sacrifice to keep the average intact.

The Government have taken up a more honourable position. That has sometimes obliged us to tell some workers that we do not believe that they should receive the wage increases that they claim. It also requires us to face both the practice and the principle of discretionary action. There is no doubt that discretionary action has helped in securing many wage settlements consistent with our counter-inflation policy. That was the conclusion of the Financial Times monthly survey of business opinion, which was published on 4th December. It was the judgment of the chairman of the economic committee of the British Institute of Management, broadcasting on 28th November. It is the evidence of wage settlements reported to the Government. But, as well as this practical justification, I believe that discretionary policy can be justified in principle.

There are many low-paid workers who during the year will settle in accordance with the Government's guidelines. Indeed, many have already done so. I can see no reason why they, through their taxes, should help to finance the inflationary wage increases paid to better-off groups. Basic wage increases of, say, 15 per cent. or more will contribute to inflation in a way that is directly to the detriment of the lower-paid workers, let us say the lower-paid shop workers who settled within the guidelines last Monday. I cannot construct an argument that requires those shop workers to help foot the inflationary bill either through investment grants or public purchasing.

Mr. David Crouch (Canterbury)

On the question of what the right hon. Gentleman calls discretionary action, I think that the whole House would like to know what discretionary action or sanction the Government are prepared to take against powerful bodies such as the Transport and General Workers Union, which has today told the oil companies that it will call a national strike of all oil tanker drivers on 2nd January in support of a 25 per cent.—plus wage claim, having turned down a 13 per cent. offer. Where is the discretionary action to be applied —on the oil companies or on the TGWU?

Mr. Hattersley

I am sure that the hon. Gentleman's weaker-minded colleagues will laugh at that. They will also recall, as they do so, that even in the Ford case, when we were asked time after time to make a judgment on the way in which we reacted, we said that we were not prepared to react until the settlement and position was absolutely clear. That applies to the example that the hon. Gentleman has pointed out to me. However, I make it absolutely cleat that I believed that the criticism of us today was not that we had run away from that policy but that we had applied it too fiercely.

Mr. J. Enoch Powell (Down, South)

On a point of order, Mr. Speaker. Is it possible to ascertain the nature of the objects which the hon. Member for Bolsover (Mr. Skinner) is eating, and of which he appears to have a large quantity still available, in order that it may be determined whether they are included amongst the substances which it is permissible to eat in the House?

Mr. Speaker

Order. I remember in my early days in this House that an hon. Member was unwise enough to try to eat an orange in the Chamber and was pulled up on a point of order. What we must show is courtesy and good manners to each other, which I am quite sure we shall receive.

Mr. Hattersley

For the reasons that I have described, the policy of discretionary sanctions must remain, temporarily at least, as it stands. But clearly, with a new pay round and a new Parliament next year, the whole issue will be decided by the new Labour Government then. I hope that those of my hon. Friends who hold a different view on these matters will accept that none of us in the Government views discretionary action with any great enthusiasm. The simple fact is that we contemplate a return to double-figure inflation with even less relish and are determined that that undesirable state will be avoided.

There is no doubt that it can be avoided, and today's debate ought to be conducted against the background of our real inflation prospects. In good times and in bad, when the change in the RPI was likely to rise or when it seemed certain to fall, I have always given the House the best forecast at my disposal. That is not to say that my predictions have always been readily accepted.

When I said in June that inflation would remain for the rest of this year at or about the April figure of 8 per cent., the hon. Member for Gloucester asked me whom I thought I was kidding, and whether I would be prepared to repeat my "fraudulent inflation forecast ". She went on to say that rising raw material prices, rising interest rates and rising national insurance contributions were bound to have an effect on inflation by the end of this year. What I said in June was that inflation would remain during 1978 at or about 8 per cent. The five monthly figures for the annual increases which have been published since then are 7.4, 7.8, 8.0, 7.8 and 7.8. That pattern can be preserved. We can and, I believe, will keep inflation within single figures at or about its present level. The evidence for that grows increasingly strong. I hope that people who deny that prospect will understand the damage that they do to the national interest.

Nothing is more likely to push up the inflation rate than the fear that the inflation rate will rise. Millions of trade unionists, accepting the need to hold down inflation, will accept reasonable settlements, as long as they know their wage increases will not be overtaken by increases in the cost of living. Spreading the fear of price escalation actually helps to bring it about.

I have no doubt at all that some Opposition Members have done that intentionally, for I repeat that their only aim and their only interest is political. They know the support that we receive for our success in holding inflation has made a victory on some future occasion certain.

Our aim is different. It is to continue the success we have achieved, to hold down inflation, and to build on that central policy an economy where unemployment is negligible, where new investment increases year by year, and where prosperity continually expands.

5.3 p.m.

Mr. James Prior (Lowestoft)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof while stressing the need to achieve a further reduction in the present high rate of inflation, declines to support the Government's arbitrary use of economic sanctions against firms and workers who have negotiated pay settlements beyond a rigid limit which Parliament has not approved ". The Government motion was full of self-praise and good intentions. Rather like the performance of the right hon. Gentleman the Secretary of State, the good intentions and the self-praise are sadly lacking in what the Government have done over the past few years.

It is really extraordinary that for the Government, and certainly for the Treasury Bench, the years 1974, 1975 and 1976 appear never to have existed as far as their statistics and their record are concerned, let alone the policies on which they fought the October 1974 General Election.

As for receiving lessons from the right hon. Gentleman about the behaviour of the Opposition with regard to pay policy, when I think of what I and my right hon. Friends have said and stood up for in the last few months, in trying to support sensible economic policies, I am surprised that he had the cheek to stand at that Dispatch Box and say what he did. I might quote later what the Prime Minister, when he was sitting on these Benches, said to the South Wales coal miners at the time of the miners' strike.

The Secretary of State adopted this afternoon the same tone as the Chancellor of the Exchequer was using on Saturday night on television, when comparing our performance with that of our European partners. I do not think that it is necessary for the House to spend a great deal of time in looking at the record of the past four years or so, but the right hon. Gentleman's motion deals with a number of points and I think that they should be met.

The first is the Government's self-congratulation on controlling inflation. Well, what have they done? West Germany, from February 1974 to August 1978, had inflation of 20.6 per cent., the United States of America 39.7 per cent., Japan 45.5 per cent., Canada 49.1 per cent., France 56.8 per cent., and the United Kingdom 96.1 per cent. Of the major countries only Italy has a worse record than ours, and her record was 98 per cent. That is inflation.

I now turn to the question of improvement in living standards, dealt with in another part of the motion. The Government have done marvellously well there. Looking at the real take-home pay, on average earnings, of a family with two children under 11, at June 1978 prices, we find that the figure for 1970–71 was £64.60, for 1973–74 £71.40, and for 1977–78 £64.90. That is an increase of 30p since 1970–71, and a good deal below the figure in 1973–74. Labour Members below the Gangway have put down an amendment condemning the Conservative Party for mounting a serious attack on working-class living standards ". I can only tell them that the working class would be a lot better off under a Conservative Government than they are under a Labour Government.

Then we come to unemployment. All I will say about unemployment is that when the Conservative Government left office the level of unemployment was below the OECD average, and that under Labour the level of unemployment has been well above the OECD average.

I now turn to the subject of industrial production and productivity. The latest figures have arrived this afternoon. If we take the industrial production index for all industries, we find that in the third quarter of 1973 it was 110.6. In October of this year it was 109.5. In five years we have made absolutely no progress at all.

If we take the international comparisons between other countries and ourselves, we find that Japan is top of the league with 12.8 per cent., and that we are bottom of the league with 0.1 per cent. So much for that record.

The same thing applies to productivity. Between 1973 and 1976, our productivity actually fell, whereas between 1970 and 1973 only Japan had a better record than we had.

Having dealt with the Government's motion—

Mr. Ronald Atkins(Preston, North)rose—

Mr. Prior

I should like to get on a bit before I give way. The Secretary of State was not very good at giving way earlier.

I now turn to our amendment and to the use of sanctions—although I must not call them sanctions any longer. I have to call them discretionary action ". I suppose that is the great advantage of a university education. The use of sanctions by the Government, in support of their pay policies, goes much wider than the validity of pay policy itself as a weapon in bringing down the level of inflation. It is a major constitutional issue, it concerns the rule of law, whether powers granted by this House should be used for an entirely different purpose from that for which it was granted, and, above all, whether those powers should be used in a way which discriminates against some but not others, and where decisions as to who shall be picked out are made in secret on grounds which are not disclosed. As Terry Becket has recently said, They are outside the law and they make outlaws of men of integrity. However passionately I may disagree with the policies—

Mr. Powell

I wonder whether, at this point, on the constitutional issue, the right hon. Gentleman will clear up a point about the wording of the amendment which he is asking the House to support. The last words of it are which Parliament has not approved ". Does that mean that the Opposition would support the arbitrary use of these sanctions if the limit were statutorily fixed, or would they support the use of those sanctions if the limit had been in a White Paper approved by the House as a statement?

Mr. Prior

In this respect we are talking not about the limits of pay policy, whether it be 5 per cent., 10 per cent. or whatever figure is taken, but about the fact that Parliament has never given approval for sanctions or arbitrary treatment of this nature for purposes other than those for which it was put on the statute book. That is the point that we make in the amendment. It is not related to a specific pay policy figure.

Mr. Powell rose—

Mr. Prior

Perhaps I may go one stage further before the right hon. Gentleman intervenes again. If the Government had a statutory pay policy and said that, in the maintenance of that statutory pay policy, they intended to use sanctions or the law in a number of different ways to impose it, that would be an entirely different matter. There would not be much support for it by the Opposition, but at least that would be parliamentary government, as it were. The way that it is being done at the moment is not.

Mr. Powell

Is the House to understand that the words which Parliament has not approved qualify" economic sanctions ", not a rigid limit?

Mr. Prior

They certainly apply to economic sanctions. The question of a rigid limit does not come into it in this instance.

Last Thursday, when we should have been having this debate, the hon. Member for Salford, East (Mr. Allaun) said: This is government without explanation, government by concealment. It is happening continually, and it is eroding our democracy." —[Official Report, 7th December 1978; Vol. 959, c. 1642.] That is the view that we take about these sanctions. I believe that the Executive are subordinate to the supremacy of Parliament and the Government have flouted that principle in this instance.

This issue has come to a head over the treatment of Ford. If it had not been Ford, it would have been some other company. I understand that there are now 242 companies on the so-called black list. We can never be certain, because the number changes from day to day. We know that these decisions are apparently taken by a Cabinet committee. I think it is called EYP, but in theory it does not exist.

I think that my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), when he winds up the debate for the Opposition, will quote the case of the British Exhibition Contractors' Association—another recent example of sanctions being applied in a most arbitrary and unfair manner which will create the maximum damage to the exhibition industry and to our export business.

I gather that the committee which sits on these sanctions is presided over by the Chancellor of the Exchequer. I am surprised that he does not defend his policies today. Why is he not taking part in the debate? If he cannot take part in the debate in the House, why does he not perhaps take part in a debate on television? I never knew that the right hon. Gentleman was such a blushing violet. Why did he not take part in the debate on Saturday? The explanation at the start of his television performance was that, owing to the fact that the House of Commons was to debate these matters on the following Wednesday, no questions on sanctions or pay policy would be raised with the Chancellor. Why not? Why could not the country know his views on sanctions? Was he frightened of giving the country his views on sanctions? Why did he not do so? He had the opportunity. As far as I know, we do not have any seven-day rule operating now, except that which the Chancellor chooses to bring in for himself. For the Chancellor and the Government Front Bench, the end justifies the means, even though the end is looking distinctly tatty at the moment.

Last year sanctions were imposed to keep overall increases down to 10 per cent. The final outcome was 16.2 per cent. in manufacturing industry—14.2 per cent. overall.

We are now told that it would be unfair on those who have settled for 5 per cent. if others, such as Ford, can get away with it. That contrasts sharply with the attitude that the Labour Opposition took in 1973–74. Many millions had settled in November 1973, but the present Prime Minister and others went round the country at that time undermining the Conservative Government's policy.

If in this pay round we could have an overall settlement averaging 5 per cent., we all recognise that that would help to keep down inflation and unemployment. That would be a reasonable situation into which to get.

Unthinkable though it is that that figure should be translated into individual flat-rate figures—I believe that goes for all Opposition Members—that is precisely what the Government have sought to do. They have tried to put it all into a single flat-rate figure. I see no signs of that flat-rate figure of 5 per cent. being sustained, not because of anything that we have said, but because tht figure was plucked out of the air—it looked very good indeed ahead of an elction —and no proper attempt was made to sell it to the country, the TUC, the CBI or anyone else at that time.

Last year Ford was not sanctioned. It was early in the pay round. The rigid 10 per cent. was still not being applied, so we are told, although that did not apply to James Mackie, which was blacklisted long before. The Government knew that the new engine plant at Bridgend was at risk if grants were withdrawn. It is in an area where we recognise that we need new development. We also recognise the faith shown by Ford in going to South Wales in the first place. But it also happens to be near the Prime Minister's constituency.

We sometimes wonder about the criterion for development district status, temporary employment subsidy and sanctions. Is it unemployment, breach of pay policy or marginal Labour seats? We have seen too many examples of that in the last couple of years not to be cynical about what is happening.

Ford loses purchasers. What about British Oxygen? Presumably there will be some other device for that company. No criteria are laid down.

What about the TUC and its grants for training? It would be silly to take sanctions against the TUC. But would it not be fairer if that were the purpose of the pay policy?

Ford is a multinational company. Neither the company nor its workers evoke from people the warm-hearted response which perhaps they merit. But no one can deny that in recent years Ford has been an important positive force in the British economy.

Let us consider Ford's record. It has an investment plan of £1,058 million in Britain in the next four years and it contributed £453 million net on the balance of payments this last year. Whilst other car companies have been propped up by Government aid and have been shedding labour, Ford has increased its labour force by 7,000 in the past three years. At Bridgend it is building the most modern engine plant in the world. It has great influence with Japanese, German and American investors.

Ford withstood a nine-week strike in seeking to defend Government pay policy. Because of it and the inflexibility of the 5 per cent. norm, in the end it probably settled for a higher figure than if it had not been under Government threats. It resulted in enormous damage, loss of profit, increased imports, particularly into car fleets previously held by Ford, and damaged confidence in Ford plants throughout the world.

What is the conclusion of Ford management? If sanctions are to be imposed anyhow, why take on a strike or why take a long one instead of a short one next time round? The conclusion, which many others will draw, is that it destroys the argument that to allow Ford to go unsanctioned would open the door to others.

Ford management, which I have known for many years, is very bitter, and senior management has taken it personally. We can at times be truthfully critical of management—perhaps its management—but this episode will have poisoned relations between the Government and industry in a manner damaging to our future industrial performance.

Given all that I have said, what is the Government's defence? It is that some penalty has to be imposed on firms which break the pay guidelines. The argument runs that management is better able to stand up to union pressure by stating that it will lose contracts or other handouts if it exceeds the guidelines. It enables employers to hide behind the skirts of Government and to say "We would like to pay you more, but your Government will not let us." If the Prime Minister were here, I might almost say, in the words of his old song, "Can't get away to pay you more today, my Government won't let me."

This is a curious position for the Labour Government and Labour Party to be in. Employers, castigated by them day in and day out, year in and year out, for their meanness are now being enalised if they pay more. It conjures up a picture of cash-loose and fancy-free employers itching to pay more but held back by a stern Chancellor and Prime Minister. That is the picture as some employers see it. Sanctions on employers have become the only weapon which the Government dare to use to try to even up the imbalance in bargaining power which Government policy and legislation have created over the years, particularly in the past four years. That even applies to pay policy itself.

I take as a minor example the operation of schedule 11 to the Employment Protection Act. Indeed, the main justification for schedule 11 is that it is now to act as a safety valve for the Government's pay policy. Therefore, while Ministers give the impression of being tough on 5 per cent., and as Labour Members below the Gangway know, their own legislation is being used to get round the supposedly rigid norm.

When the legislation was being discussed by Parliament, Ministers argued that it would assist only the absolutely low paid. But the main beneficiaries are principally white collar employees, often working in engineering, who are members of unions with good research facilities which are able to exploit some apparent unevenness in pay. Anyone who doubts that should read the recent study on schedule 11 and the concept of the general level by Incomes Data Services.

During 1977, the first year of its operation, there were 149 awards by the Central Arbitration Committee. In the first 11 months of this year, there have been 488, and there is about a four-month delay in getting a hearing. From what one gathers, about 50 per cent. of schedule 11 claims are "collusive ". In other words, the unions and employers are getting, together and looking for a way round pay policy.

I heard yesterday of a case concerning electricians. One group turned down a productivity deal which had been accepted by a number of others. Straight away it made out a case under schedule 11, with no productivity, and put in for exactly the same increases which everyone else received with a productivity scheme. That is standing Government policy on its head. When the Employment Protection Act was going through the House, we warned the Government time and time again that this would be the effect of what they were seeking to do.

Mr. Norman Atkinson

Will the right hon. Gentleman clarify the Conservative Party's position on incomes policy? He has said that the Conservative Party would support the idea of incomes policy if it was based upon variable norms. Presumably one of those norms, albeit variable, would apply to the Ford Motor Company, and that would obviously have to be less than the percentage increase freely bargained in the dispute. Will the right hon. Gentleman now apply all the criteria which he has set out and justify his square peg in this presumably round hole?

Mr. Prior

I shall come a little later to some of what the hon. Gentleman has asked, but I shall read him one paragraph of a note that I prepared precisely to answer the sort of question which I thought he might raise. There are obvious dangers in enunciating a general target or norm. Yet, in framing their monetary and other policies, the Government must come to some conclusions about the likely scope for pay increases if excess public expenditure or large-scale unemployment is to be avoided. Therefore, I and the whole of my party want to see a far greater degree of discussion, in advance of the pay round, on what the nation as a whole can afford to pay. In the long run, that is the only way in which we shall get any sense into wage bargaining. Few dispassionate people now doubt that there is an imbalance of bargaining power and that Government efforts in statutory or imposed pay policy, including the use of sanctions, have resulted in so many distortions, anomalies and arbitrary interventions that they are actually holding back the prosperity and economic performance of the nation.

We must ask ourselves why we alone of the advanced industrial societies have had to resort year after year to such policies in our efforts to control inflation, and why year after year our standard of living has dropped further behind that of our overseas competitors. We have debated these matters for years. That was the reasoning behind "In Place of Strife ", which the last Labour Government sought to introduce. Of course, that was torpedoed by the present Prime Minister. I bet that he would take a different view today if he had half a chance. That was the logic of the Industrial Relations Act.

I am not suggesting that the approach of those two initiatives should, or could, be copied again. What I am saying is that we cannot go on as we are, on whatever side of the House we may sit. The vast majority of our people and trade unionists are moderate, reasonable people. They are deeply worried about the way things are going. I should like to quote "The Waterfront and Industrial Pioneer ", not a Conservative paper, which commented on what Tom Jackson had to say the other day at a meeting in another part of this building. [HON. MEMBERS: "Moral Rearmament."] So what? I do not happen to be a moral rearmer, but what it says is quite important in this respect: It states: Some blame the leadership at the top for the situation. Others point the finger at shop stewards and local officials. But the fact is that we need to look to our roots in Britain today. A nation reaps what it sows in character, attitude and actions, and the wrong seed has been sown. The truth is that the wrong seed has been sown by the Labour Benches year in and year out ever since the war. Labour Members are now reaping what they have sown, and they do not like it. The sooner they give way to others, the better it will be.

Of course, we need to make changes. I suggest to Labour Members that one of the best things we could do would be to pass quickly, in place of some of the rubbishy legislation with which we are now being inflicted, a piece of legislation which permits the Government to provide funds for secret ballots, election to union office, strike action or other purposes for which a union asks them to be used. Why do not the Government devote some time to a Bill bringing in money for that purpose? After all, I think that it was in 1975 that 100 Labour Members signed a motion asking the Government to do this.

There is no great pressure of Government legislative business at the moment. This would be a measure which would be widely supported throughout the country, and which could do more than anything else to get some balance and moderation into pay bargaining. [HON. MEMBERS: "What would you do? "] So far as I am concerned, if the Government do not wish to introduce the Bill, we would be quite prepared to introduce it after Christmas, with Government time to push it through the House. Something has to happen and Labour Members know it has to happen. We are not pushing this on the trade unions, but we know that many trade union leaders and many people at shop floor level are demanding it. Why cannot we be sensible in this House for a change and push it through?

Mr. Doug Hoyle (Nelson and Colne)

I am interested to hear what the right hon. Gentleman says about ballots being held before a strike decision is taken. Would he also agree that a ballot should be held before a strike is called off?

Mr. Prior

We want unions freely to make maximum use of ballots before strikes take place, while strikes are going on, and before people go back to work. I am a democrat. I respect the decisions which those people would reach. I suspect that, in a number of cases, they would vote to strike, but at least they would have had a fair and proper chance of deciding for themselves. That is what we want.

I shall have no faith that the Government are serious about industrial relations or the prosperity of the people until they bring in legislation of that nature. Why do they not do so? I hope that we shall hear from the Minister what are the Government's objections to bringing in legislation of that nature straight away. It is a simple Bill. It would have all-party support. Let us get on with it at the earliest opportunity.

Mr. John Cronin (Loughborough)

The right hon. Gentleman has raised an interesting point. Would he give a simple answer? Would a secret ballot have made the slightest difference to the course of the Ford negotiations?

Mr. Prior

I suspect that it might, but I am not even saying that. I am saying, let us have it and let us accept the verdict of true democracy. If the decision is to go on strike, we shall know that that decision has been taken secretly and in the proper manner.

British Leyland is at the moment engaged in a secret ballot. All the workers are engaged. Good luck to them. This is their third ballot. On the first ballot, they voted one way. On the second ballot, they voted another way and rejected what the company wanted to do. Now they are having a third ballot on another issue. I am perfectly prepared to respect the outcome of a secret ballot. The people of this country are thoroughly fed up with seeing shows of hands and intimidation. Let us have some true democracy in the way that our decisions are taken and then those decisions will command much more respect.

Mr. Adley

Is my right hon. Friend aware that a group of Ford workers at Southampton wrote to the hon. Member for Southampton, lichen (Mr. Mitchell) and sent copies to a number of Members of Parliament representing South of England constituencies asking us to use our best endeavours to bring about what my right hon. Friend is requesting?

Mr. Prior

I know that this was the desire of many of the Ford workers at Southampton. We should respect that. We should also recognise that in the case of Ford the workers broke their contract. Their union leaders supported them in breaking it and Ministers remained silent. The Ford workers jeopardised their future jobs by withdrawing fire and security provisions. Ford cars were not on the stand at the Motor Show. Mr. Moss Evans and the Transport and General Workers Union put in a 60 per cent. claim. By no means could that be called a responsible claim. If we are to have responsible bargaining in this country, we do not start with a figure of 60 per cent. We know that some wild figures will be stated, but let us try to reach a reasonable consensus wherever possible.

Enormous patience and understanding will be needed. We should recognise the fear of insecurity that change can bring. We know that dramatic change is not consistent with our history, but we also know that pressure for change—the dissatisfaction bordering on despair that exists in Britain—will grow and is growing.

Professor Meade, in a recent article, said that this can be done through greater understanding and consensus, otherwise by the less pleasant manner of being exposed by events. This is what will happen. All the shouting on the Left will not stop these unpalatable things happening to Britain. Why do we not get together and do something in the ways I am suggesting? These are the only ways forward.

We cannot allow a once great country to be relegated to the second division. When my right hon. Friend the Member for Sidcup (Mr. Heath) started the negotiations to enter the European Community, the French rejected the approach because we were too strong. We were too powerful a country to join the Community at that time. Last week, we were too weak even to be a member of the EMS. We have lost our strength in 17 years. [Laughter.] If hon. Members laugh about that, let them look at the industrial power of Germany and France and other countries.

We have to do better. We censure the Government tonight, not just because they have chosen the wrong weapons and the wrong policies in the fight against inflation, which is a national problem in which we are all concerned, but because they are using arbitrary and discriminatory power without parliamentary authority and ignoring the demands of common justice. We can win the fight against inflation, but not at the expense of those traditions of freedom and democracy of which this House has been the foremost upholder.

The Prime Minister told the parliamentary Labour Party last Thursday: I don't like sanctions. I never have done. They're a messy business and the sooner they are over the better. I would suggest to all hon. Members that tonight we have the best opportunity of getting rid of them and following the Prime Minister's words.

5.28 p.m.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

I intend to follow the right hon. Member for Lowestoft (Mr. Prior) in some of his criticisms of the Government's present policy, but I also note with genuine regret that he was unable to outline, on behalf of the official Opposition, what their pay policy would be if they came to power. I say that with a double note of regret, not just as a debating point but because if he were to outline what he believes a Conservative Government should do many of us would find it acceptable. I suspect the reason why he does not outline it is that a fair section of his own party would not support him. This is a problem facing the Government as well. It appears that it might face a future Conservative Government with equal force.

It is important that we accept in this House that all parties at one time or another have supported arbitrary pay policies. Indeed, all Government have got away with them in the short run. The most draconian of all have been the total pay freezes introduced by Conservative Governments. We have all accepted at different times that such pay policies are justified to deal with a particular economic crisis.

Last year, when the Government were faced with an inflation rate tottering over 20 per cent., we took the view that we ought to co-operate with them in trying to remedy that crisis. We were faced with a voluntary pay policy which had the support of the TUC and which was therefore largely effective.

I think that the first part of the Government motion is justified. Their track record in the last 18 months has been creditable in reducing the rate of inflation. We can say, without putting it too highly, that the previous policy was, at any rate, semi-successful. The use of sanctions in that period was limited and lasted only a short time.

My hon. Friend the Member for Colne Valley (Mr. Wainwright), who speaks for the Liberal Party on trade and industry, spoke in February when we voted with the Government. He made absolutely clear that he expected the Government to use the breathing space which that policy offered to set about constructing a long-term and workmanlike—that was the adjective he used—prices and incomes policy in order to have a long-term policy to put before the House. Our main criticism is that that is precisely what the Government did not do.

An attempt is still being made to pursue the same short-term policy but over the long term and without the agreement of the unions. Therefore, one gets into the almost Gilbertian and certainly unfair situation in which companies like Ford, under pressure from powerful organisations which have not agreed to the policy, are put in the Government dock and penalised. Also, sanctions are largely "phoney ". If it is not too delicate a matter to raise, I think that sanctions as a general weapon are getting the reputation of being "phoney ", because they will not work.

I do not agree with every announcement of the CBI, but Sir John Methven was right to say the other day: Government has now developed a whole panoply of informal and often secret weapons —black lists, contract clauses…and wide discretionary powers under statute—which it is operating in total secrecy with no right of appeal and which it accepts will not be used on a uniform basis ". My first question is, what is the object of sanctions? Is it punishment? I do not think that the Government say that—

Mr. Hattersley indicated dissent.

Mr. Steel

—and I am glad to see the right hon. Gentleman shake his head. The object is deterrence, but how can one deter others if the policy is not clearly visible to deter? I do not believe that it can be made to work.

Let us consider the admittedly politically-charged question of the trade unions. On 28th November, when asked by a member of the Opposition Front Bench about the fact that the TUC had paid its own employees more than a 5 per cent. increase, the Secretary of State for Employment said: The principal consideration in this case, as in so many others, is whether discretionary actions are available to the Government. In this case, discretionary actions are not available."—[Official Report, 28th November 1978; Vol. 959, c. 202.] That is totally incorrect, because the latest figures show that grants from the Department of Education and Science to the TUC, for perfectly good training purposes, were £1 million this last year. The Prime Minister was near the mark when on the same issue he said two days later that it would not be "sensible" to impose sanctions in that case. I have heard of a case, however, in which a voluntary organisation with fewer employees than the TUC, yet dependent for much of its work on grants from the appropriate Government Department, has been leaned on by the Department for giving one of its employees an increase over 5 per cent.

We cannot have one law for the weak organisations dependent on Government grants and another law, equally unwritten, for the powerful organisations which it would be politically embarrassing to tackle. This is not a defensible policy. Our main criticism is that there is no long-term policy. The hon. Member for Liverpool, Walton (Mr. Heller) summarised the Government's policy in the debate on the Queen's Speech much more effectively than any Minister has so far done: We did not introduce a statutory incomes policy. Well, we did and we did not. It was and was not."—[Official Report, 9th November 1978; Vol. 957, c. 1285. That remains the best philosophical summary of the Government's position that we have had so far. It is at least an honest summary of the position.

What would a Conservative Government do? The Leader of the Opposition went to the Ford plant on Merseyside either just before the pay claim was made or at about the same time. I remember her saying on television, because I was struck by it at the time, that if she were in office she would simply withdraw from the whole matter and that the company would be left to bargain entirely on its own. That struck me as a fairly horrifying policy.

I know that the right hon. Lady always chides me here and outside for being too young to have a long memory of events, but I do remember 1971 and I know that in that phase of the last Conservative Government's policy, before they came back to a pay policy, that was precisely their policy—in other words, none at all. In the Ford dispute there was a strike of the same duration as the one that we have just had, and there was a settlement, in which the Government did not involve themselves, of 30 per cent.—not 17 per cent. No one will seriously back a return to that kind of policy. It is noticeable that the right hon. Member for Lowestoft did not attempt to argue that policy today.

At some point, particularly if and when we reach a General Election, the Conservative Party must say what its policy is. On the front page of The Times—an historic document—on Wednesday 11th October, with only one column separating them, are two contradictory statements on pay policy. The right hon. Member for Lowestoft had said in a speech the night before: We recognise the dangers of a pay explosion, or the trial of strength that might foreshadow it. One column further to the right on the same page is a statement made in a television interview by the Leader of the Opposition: You will not get…more output unless they are allowed to bargain with their own companies. At some point, that conflict must be resolved.

We at any rate have resolved it by our consistent espousal of a policy which should be put before the House and enshrined in statute. My hon. Friend the Member for Cornwall, North (Mr. Pardoe), who, I am almost relieved to see, is not just yet with us, argued in the last debate on this subject, in a speech that I read carefully, that the only consistent speeches on pay policy were made from this Bench. He added with characteristic modesty that that was because he made most of them himself. I hope that the fact that I am making one will not upset the record of consistency.

I want to outline the three component parts of a sensible prices and incomes policy. First, the main effort of a new prices and incomes policy should be directed to productivity, the increase of profits and the sharing of profits. It is quite the wrong way round for any Government to set up an arbitrary pay limit and say, "By the way, anything that you can manage on productivity is all right." The whole emphasis of the policy should be the other way round. The chronic failure of our economy is the lack of effective output per man and per pound invested compared with our international competitors. It is productivity bargaining and profit-sharing proposals on which we started timidly in the Finance Bill last year.

Why should the Ford workers in America be entitled to a share in the fruits of their labour whereas the Ford workers in Britain must remain effectively wage serfs, not entitled to a share in the considerable success of the company? It means developing much more rapidly forms of industrial democracy and partnership and co-operatives on which, again, a very small start has been made.

Mr. Douglas Henderson (Aberdeenshire, East)

I am following carefully what the right hon. Gentleman says about profit sharing. What remedy does he suggest for workers in the public service?

Mr. Steel

I accept that different aspects of the principle of the policy have to be applied in different circumstances. There cannot be profit sharing where the State owns the enterprise, but that does not prevent other forms of productivity bargaining or the use of the concept of value added—the precise machinery that we have advocated for our pay policy. That can, of course, apply not to the whole of the public sector but certainly to large parts of it.

It is interesting to note when I talk about our formula for using the value added in an enterprise as the basis of deciding what the pay dividend should be in any one year that if one had applied our formula to the Ford company, in the light of its records the settlement would have been about that which has been achieved. We argue that it is fair and logical and that it ties the economic reward of the individual to the success of the enterprise in which he is involved.

Mr. Norman Atkinson

The right hon. Gentleman has just enunciated a contradiction. Both he and his hon. Friend the Member for Cornwall, North (Mr. Pardoe) have set out the ideas for profit sharing, but subject to the overall criteria for incomes policy, which include dividend restraint. How can one have dividend restraint and so deny the shareholders or workers participating in profit sharing the fruits of their productivity at the same time as holding down general increases?

Mr. Steel

First of all, I am not building everything on the precise mechanism of profit sharing that we introduced in the Finance Bill last year, which I recognise is a limited, but none the less encouraging, step in the right direction. Secondly, as Ministers have confirmed many times, when that measure becomes available—I know that it is a year delayed—the dividends received by the individual under profit sharing will fall outside the pay policy. That is one of the scheme's attractions. That is only the first leg of the pay policy that we want.

The second leg is that we accept that the Government, in consultation with bodies such as the TUC, the CBI and the chambers of commerce, should lay down each year the size of income increase that we can afford to give ourselves over and above productivity and profit-sharing schemes—in other words, the amount that we can afford in terms of the cost of living, national dividend or whatever phrase we care to use. The Government should do that, and do it openly. The Government would then be entitled to penalise any firm that exceeded the provision. We have suggested doing so by imposing a surcharge on the national insurance contribution. That would not necessarily stop inflation. It would not necessarily mean that no one would exceed the Government's provision. However, it would ensure that those who cause inflation pay something back to the nation in compensation.

It is interesting that President Carter, having accepted the principle of a tax-linked scheme, is now to apply the principle in reverse and is offering a tax bonus to employees and firms that keep within the pay guideline. It does not matter which way round the principle is operated. The important thing is to act with the authority of Government so that the position is clear and the calculation is known and foreseeable by all.

The third leg of our pay policy is that we believe that there must be some national referee or pay body to which special cases may be referred for permission to exceed the statutory guideline. The nonsense of the present Government's policy is that every time there is a difficulty, or a pressure group appears in support of a special case or public opinion rallies behind a certain group, an ad hoc inquiry is set up. Each Government over the past 10 years have done grave damage to the economy by abolishing whatever pay body happened to exist when they took office. It is essential to have a permanently accepted body of authority and independence if pay policy is to work effectively.

One of the tasks of a statutory policy is to look after the lowest paid who otherwise fall behind. That is one of the benefits of such a policy. If we do not have a statutory pay policy, how can we, protect the interests of the lowest paid? I have put before the House the three legs that compose the policy that we think should be laid before the House.

The right hon. Member for Lowestoft was right when he said that we have to accept that Britain has been in a long-term decline in comparison with our industrial competitors. The low level of investment, the low level of output and the high level of industrial disruption should be matters of grave concern across the Floor of the House.

The Leader of the Opposition recently acted in rather a silly way. The right hon. Lady is not a stupid woman but on occasions she is a silly woman. I thought that she was rather silly when during questions to the Prime Minister on the EMS she suggested to the Prime Minister that the great decline had happened in the past four and a half years when the Conservative Party was conveniently out of office. That type of remark lowers the level of confidence in politics and political debate.

We are all responsible for Britain being in a long-term decline. Something must be done about that. For example, at Times Newspapers there has been an attempt to bargain with 16 different trade unions on the introduction of new technology. That cannot make sense. I am tired of going to one industry after another and gaining but one impression, although I accept that there are some notable exceptions. When I go to a meeting of a trade union committee in a large company I often find a group of trade unionists sitting in a grubby office and feeling that the world is against them and that the employers are out to do them down. When I go to the board room I meet the directors and the public school accents. They believe that they are the victims of a Trotskyite conspiracy.

Time after time I get the impression that one of the abiding sins of British industry is a lack of communication between the two levels. It is up to us to give a lead. These people are separated in their educational background, in their housing background and increasingly in their Health Service experience. The class divisions in Britain are not paralleled in any of the countries of our industrial competitors. Unless we tackle that problem we shall never be able to talk about a fair incomes policy, boosting the economy or anything else.

The CBI was right when at its congress it acted against the wishes of its leadership and passed a motion calling for constitutional and electoral reform. That was a move to usher in changes to encourage a feeling of co-operation, partnership, participation and, therefore, higher productivity.

Why do not we see such changes taking place? Why cannot we get a statutory policy that everyone in the House knows and understands? The reason is that the extreme Left in the Government and the extreme Right in the Opposition will not wear it. We might as well accept that that is why we do not have such a policy. We talk about secret ballots and trade unions, but we know perfectly well that if there were a secret ballot among hon. Members—there are good constitutional reasons why that cannot be—there would probably be an overall majority in favour of a policy on the lines of that which I have spelt out. Consensus is prevented by our structure of politics.

I do not believe that the present course can be made to work. That is why I and my right hon. and hon. Friends will vote against it tonight. We cannot stand firm on a quicksand. We cannot brandish the big stick if it turns out to be a broken reed. My charge against the Government is that they are not only unwilling to bring a coherent policy before the House for approval but even unprepared to bring forward their ramshackle policy for the approval of the House. If the Government are reluctant to do that, it is high time that we took our different views to he people and said "Let us have a Parliament that is prepared to take some action on these matters."

5.56 p.m.

Mr. Doug Hoyle (Nelson and Colne)

First, I must declare an interest. I am the president of ASTMS. My right hon. Friend the Secretary of State for Prices and Consumer Protection, who opened the debate on behalf of the Government, is a member of the same union.

I hope that the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) will not object if I do not take up everything that he said. I wish to concentrate on what has been said on behalf of the major Opposition party and by my right hon. Friend. However, I found the right hon. Gentleman illogical when he said that he and his colleagues are in favour of a coherent statutory incomes policy but that they will be voting against the Government tonight, and, from what I have read in the press, it seems that they will be supporting the Tory amendment. There is no logic in taking that course yet declaring a belief in an incomes policy.

I am sorry that the right hon. Member for Lowestoft (Mr. Prior), who opened the debate for the Opposition, is now leaving the Chamber. I always listen to the right hon. Gentleman with a great deal of interest. He has helped to clear my mind and the minds of many of my hon. Friends who would have abstained tonight. He has probably drawn us towards the Government Lobby. In that respect he has done a first-class job. He has done an even better job than the Government Chief Whip has been doing for most of the week.

The right hon. Gentleman's knowledge of trade union affairs is considerable. I know that he is an active member of APEX. Indeed, he paid the political levy for a long time. He is a man who deserves to be listened to with much interest and attention. However, he should tell us the truth about Tory policy. He does not believe in free collective bargaining of the type that I and other trade unionists support. He believes in applying a strict monetarist policy that would make it almost impossible for people to maintain their present standard of living. If applied, his policy would mean rising unemployment and a lowering of the standard of living of the British people. I hope that those outside the House will not fall for the cant and hypocrisy that I know will come from the Opposition Benches.

These remarks do not mean that I was satisfied with all that my right hon. Friend said. I am far from satisfied with Government policy. In the course of my remarks I hope that I shall cause my right hon. Friend to think again. Unfortunately, Government policy does not line up with the policy of the TUC and the Labour Party conference, although I know that some hon. Members wish to get rid of the conference. Nor does the Government's policy line up with the policy of most major unions or the national executive of the Labour Party.

The Government's policy has been rejected. That has happened for good reasons. It has been rejected by both sides of industry. The issuing of norms and sanctions makes for real difficulties in the planning of an effective industrial strategy. Unfortunately, there is an undue emphasis on wage control. I must tell my right hon. Friend with sorrow in my heart that there is also a real lack of price control. That is one of my criticisms. Our approach has been—possibly quite rightly —to regard inflation as a problem that must be tackled. Unfortunately, we have made inflation our overriding priority at the expense of other objectives such as the reduction of unemployment and increased economic growth.

The Government operate a monetarist policy. It is not as savage as that which we would have if there were a Conservative Government. But we have gone too far down that road. It is doing much damage to industry. The damage is felt not only by white-collar workers but by other skilled workers. Industry is unable to provide the proper salary structures. Many highly skilled people are leaving industry. That is a tragedy since we all want to restore the industrial base of the nation.

The policy results in labour shortages. British Aerospace and Rolls-Royce are suffering labour shortages because they cannot attract skilled men at the right rate of pay. Many of their potential employees work for sub-contractors who pay them the right rate. That is not the way to achieve a proper and efficient allocation of the country's labour. We should help the companies that are the seed corn of the country's future.

Other anomalies arise from the application of an incomes policy. It is not the right time to freeze salaries and to have inequalities in salary structures. Under the present policy the public sector is more rigidly contained than the private sector. That means that the public sector is falling behind. Many highly skilled people are poorly rewarded because they are dedicated to serving the public sector. That cannot be right.

Incomes policies apply more to the large than to the small firms. They apply more to the large than to the small groups and to the large than the small groups and more to the employed than to the self-employed. Barristers and accountants, for instance, are not faced with the restrictions with which the rest of the nation must deal. That cannot be justice.

Sanctions represent another element of discrimination. There can be no pretence at fairness in the way in which sanctions are being applied. The Ford Motor Company breached the pay guidelines last year but it escaped sanctions. This year the company can afford to pay increased wages and the workers were right to get what they could. The company has said that it will not breach price guidelines. Yet sanctions are being imposed upon the company. That cannot be justice. How can it be justice when the lowest tender from the most efficient firm is not accepted? Are we to go to a less efficient company? That is the road that we must follow if we impose sacntions.

We run into even greater dangers by following that road. What will we do about the British Oxygen Company? If we apply effective sanctions to BOC, not only the British steel industry but other industries and many hospitals will be closed. That would be nonsense.

What will happen about the tanker drivers? They were promised jam last year. What will they be given this year? Will they be offered only a loaf with no jam or butter on it? They will not accept that. It would also be nonsense to apply sanctions against the oil companies. If the Government tried to do that, British Airways would be closed down at a stroke.

I appeal to the Government to think again. Will they not at least have a moratorium while they discuss the policy again with the TUC and the CBI? Surely that is not too much to ask of the Government. None of us wants a winter of wage discontent. That is not desired by the trade union movement. Surely it is not desired by the Government.

The Government have been able to make the public sector adhere rigidly to the pay guidelines. That has resulted in a worsening of salaries and conditions in the public sector. We are moving towards confrontation in that direction.

Neither the trade unions nor the Government want such a confrontation. Could we not examine the possibility of ad hoc inquiries into the Health Service, local government and the low pay of technicians in the universities? That would be a way out of the dilemma.

We must look for a way out. It will be no good if we blunder on and hand over the government of the country to the Opposition so that they can ruin the economy by operating it in fits and starts. We must be more flexible in our policies. We must get out of the straitjacket.

The sanctions that are being imposed against Ford are like a gnat on the hide of a rhinoceros. They are not worth the trouble and bother.

It is time that my right hon. Friends listened more to their friends. Too often they listen to their enemies. They know what happened to previous Labour Governments which went down that path. There is immense good will for the Government in the country and in the trade union movement.

Trade unionists do not want a Government returned which will be led by the right hon. Member for Finchley (Mrs. Thatcher) with all the damage that that would do to the trade union movement. It is not too late for the Government to rethink their strategy. They should think again about having a moratorium and setting up ad hoc inquiries into the problems of the low paid.

My right hon. Friend the Secretary of State spoke with sympathy about the low paid. But they want more than sympathy. They want the wherewithal to pay the bills that will arrive during the bleak winter months. I plead with the Government to think again. The last thing that we want is for the Opposition to be returned to government.

6.8 p.m.

Mr. Reginald Maudling (Chipping Barnet)

I can claim to have supported the need for incomes policy as strongly and consistently as anyone in this House. This has caused me trouble from time to time, incidentally. But I cannot go along with the sort of nonsense that we have heard today from the Government. Quite frankly, the Government's present proposals are from cloud cuckoo land and nothing else. Their policy is to impose sanctions in order to punish firms which have been forced to yield to blackmail by refusing to buy their products when they are the cheapest and best available. That is cuckoo in any language under the sun.

The case against the Government's imposition of sanctions was so strongly argued by my right hon. Friend the Member for Lowestoft (Mr. Prior) that I do not need to go any further into that. He demolished the Government's action.

The wider problem, which remains and has done for 20 years—and this is the biggest problem facing this country apart from productivity—is how to contain wage inflation. This is basically a political and not an economic problem. It can be solved only by political means and not by economic means. That is relevant to today's debate.

There are some other cloud cuckoo-landers, including writers on economics, who say that prices can be kept stable if the money supply, by which I suppose they mean effective demand, is also kept stable. They argue that prices in those circumstances cannot increase and that unemployment would contain excessive wage demands. That is rubbish. Prices can increase in those circumstances. There may be no more money, but there will be fewer goods to buy, and the supply and demand equation will be tilted just the same.

The people who lost their jobs in those circumstances would not be those who received the great wage increases. That latter group would by definition have the industrial muscle to secure such increases and would therefore have the muscle to protect their employment. This is an illusory argument.

There is also the argument about suppressing wage inflation by monetary means. That calls for permanent deflation, because, under that argument, once the deflationary pressure is released the situation returns to the same inflationary state again. All experience in the past 25 years has shown that quite clearly. Some of us have known that policy. We used to call it stop-go 20 years ago. It is just the same these days.

For any Government to have an effective defence against wage inflation they must tackle the problem at its root, which is the monopoly wage demand and the power that is exercised in pushing such demands to the detriment of the general public. This is a fundamental point and any Government who continue to ignore it are ignoring what matters.

Of course, the difficulties are enormous, as we have known for 20 years. Of course, I agree that we should avoid rigidity, but to sit back and to wait for what is called free collective bargaining—I am not quite sure what that means—to become responsible bargaining is to wait until the Greek calends. There is no chance of that happening, and everyone knows that. The Government recognise that there is no chance of collective bargaining, if it is free, becoming responsible. If that were not so they would not have a wages policy.

That is why in their present policies the Government are attempting to maintain a degree of wage restraint, but their sanctions policy just will not work. In the first place, it applies only to private industry. Sanctions can be imposed in a fuddled way on private industry, but sanctions cannot be imposed upon the public employer. The public are the public employer, and we cannot impose a sanction upon ourselves. There must be different policies for the public and private sectors for dealing with this fundamental problem of wage-push inflation. However, the policies for public and private sectors alike must recognise the causes of this form of inflation.

The first of those causes is the expectations built up beyond what productivity can justify. Not once in his speech did the Secretary of State mention productivity. Why do we not hear about productivity from the Labour side? We hear about wage restraint, wage inflation, wage demands and free collective bargaining. However, we want more productivity. If only we could get our productivity more into line with the levels in other countries, these problems would be easier to deal with. The first real problem of an incomes policy is to get expectations more in line with possible productivity, not by reducing expectations but by increasing productivity.

The second reason for our current problems in wage disputes is the new awareness of the industrial power of disruption in a modern society. A small number of people can cause very great damage, even suffering, to large numbers of the public. That is a totally different situation from the old industrial dispute between employer and employee. The sight of people pursuing their wage claims in industrial disputes by refusing to admit supplies to the sick in hospital is most distasteful. There is something wrong. This new awareness of the industrial power of disruption must be countered by a new awareness of how wrong it is to use such a weapon.

The third reason for wages policy is the emotions aroused by comparability. We must never underestimate the importance of those emotions. A leading trade unionist said the other day that if there is to be a rat race for wages his union must join in. One understands that. If there is to be a free-for-all, the leader of any union must support the claims of his members. The demand for comparability and for fair, equal and comparable treatment is a very proper fundamental human demand which must be the basis of any rational incomes policy. Sometimes I think that this is the biggest problem of all. There must be exceptions to any general level of wage increases, be that an average, a norm, or whatever. But who is to decide what the exceptions shall be, and who is to ensure that they remain exceptions? The problem we have seen in the last two decades has been that when exceptions are made they soon cease to be exceptions and become the general rule. The people with an exceptional claim in the long run suffer because they are swamped by industrial muscle which enables everyone to get that same treatment.

Obviously many people are entitled to special treatment. There is a lot of talk today about the lower-paid workers in many of our public services. That obviously is true. But who is to decide who is entitled to special treatment, and how is it to be ensured that once these people receive that special treatment it does not then become the general rule? We ought to aim at much greater and more systematic recourse to independent arbitration, which will operate in individual cases within a national framework agreed at "Neddy" or between the main partners in the economy, a framework that would specify what the economy as a whole could bear. Within that framework there should be far more systematic application of the principle of independent arbitra- tion and the settlement of individual claims.

Mr. Litterick

The right hon. Gentleman has made his point about wages very clearly. Are we to assume that he would be opposed to the examination of prices and profits through a process of what he calls independent arbitration? If that is the case, surely he is asking the working class to submit to arbitrary interference with the circumstances in which their awards are determined while leaving others free to decide what would be exploited levels.

Mr. Maudling

Where a monopoly power is exercised, be it in the case of wage claims, prices or profits, the same considerations must apply. Where there is free competition they do not apply. With monopoly power they must apply irrespective of the source of that power.

I want to make a positive contribution to what could be, possibly, a more effective incomes policy. The public and private sectors must be dealt with separately. In the public sector, the Government must take the responsibility for deciding the level of major wage settlements. There is no other means by which the Government can control settlements in the public sector. Cash limits are useless without strict price control, and the combined action of cash limits and strict price controls will only have the effect of making nationalised industries bankrupt so that the public will have to pay for them.

There is no effective way of controlling the level of wage settlements in the public sector other than by direct action. I should like to see the establishment of an independent body, such as the National Incomes Commission which we set up in 1963 and which did some good work in this area, to which the Government could have recourse and to which both parties could have access before the Government reached a determination. But the ultimate decision in the public sector can rest with the Government only if they are serious in their determination to maintain a policy against wage-push inflation.

In the private sector, I should like to see, in one form or another, independent arbitration made compulsory in major disputes. I agree that it would be difficult and complicated and would need the authority of the House, but I believe that it would be possible for the House to authorise legislation so that, on major matters, independent arbitration was compulsory. The Government could be given the authority of the House to ensure that when an independent award is made, it is carried out.

Those are my suggestions and my attempt to make a positive contribution. I must stress that a policy for productivity is our greatest national problem. No doubt all the difficulties will be paraded, but the present difficulties parade themselves. The Government are tinkering with the problem. The nation must be told clearly what lies before us if we go on as we are at present.

Several Hon. Members rose—

Mr. Deputy Speaker(Sir Myer Galpern)

Order. At least 15 right hon. and hon. Members are still anxious to take part in the debate. If hon. Members will limit their speeches to 10 minutes each, everyone who wishes to speak will be accommodated before the speeches in reply begin.

6.22 p.m.

Mr. Eddie Loyden (Liverpool, Garston)

It is important to start by defining the differences in the attitudes towards the question before the House of my hon. Friends and Conservative Members. It conies ill from the Conservative Party, which introduced the Industrial Relations Act, which ultimately sent dock workers to gaol, to parade their opposition to sanctions, since the sanctions under their Act were the most pernicious that could be imposed in human terms.

My hon. Friends and I have a totally different approach from Conservative Members in our opposition to sanctions. Regardless of what the Government say, sanctions are inextricably bound up with incomes policy and anyone who is opposed to incomes policies, as are many of my hon. Friends, must also oppose sanctions.

The Government are drifting towards a position of the so-called voluntary wages policy fast becoming a statutory policy. Although there may be a difference of approach between this Government and the Conservative Government that introduced the Industrial Relations Act, I must warn that if my right hon Friends follow their present course much further, we may find that we are establishing a permanent wages policy. That seems to be the direction in which the Government are heading.

For the first three years of the Government's life, they sought a response from the trade union movement in order, according to the Government, to get the economy right and to deal with inflation. The trade union movement was united in its response and gave the Government its blessing for the period that lay ahead.

Since then, we have had phases 1, 2 and 3, and that course will lead inevitably to a statutory wages policy. Those who support such a policy must spell out what the penal clauses will be and how they will be applied, because it is not possible to have an incomes policy of the sort that has been paraded before us today without penal clauses in order to enforce it. When my right hon. Friend the Member for Huyton (Sir H. Wilson) brought the social contract before the House, he was rather coy on the question of how the Government would respond if wages went outside the norm. There was silence about the Government's intentions in that direction.

The trade union movement has been impatient to move back to free collective bargaining. Those who argue against free collective bargaining were not very vociferous in the 1920s and 1930s when central wage bargaining kept wages pitiably low. It is only since the decentralisation of wage negotiations and the shift of power from the centre to the point of production that wages have been forced up. My hon. Friends and I believe that that was the right move because wages had been held at a lamentably low level for many years. Those who oppose free collective bargaining are arguing, in effect, for a form of central collective bargaining which means that the wheels of history will have to be turned back for the trade union movement.

Our trade unions use their power, which has been described by Conservative Members as a monopoly power, very responsibly. There have been many times when my hon. Friends and I have thought that the 2 million members of the Transport and General Workers' Union should have used their power to achieve certain ends, but there has been no evidence that the trade union movement is prepared to use its power in circumstances in which my hon. Friends and I believe that it should.

In recent months, there have been unending attacks on the trade union movement. Not a day passes without Conservative Members attacking the movement. It is the responsibility of Labour Ministers to resist those attacks. Whatever the issue, Tory Members will find some way of attacking trade unions. Of course, they never refer to the monopoly position of capitalism or the multinational companies which make the trade union movement look very weak. The power of the multinationals is a demonstration of monopoly power being used effectively every day.

Sanctions are a corollary of an incomes policy and those of us who oppose an incomes policy must also oppose sanctions. There are wider implications. Even some of my hon. Friends have argued that sanctions are a mere cosmetic and do not mean anything because they cannot be effectively applied. Certainly, I do not believe that men of the calibre of my right hon. Friend the Prime Minister and his Cabinet would enter upon a confrontation just to prove a point or to insist on this cosmetic action being taken in order to satisfy the Prime Minister and the Government.

I do not believe that it is the Government's intention to punish Ford or any of our other large entrepreneurs and industries, but I believe that we shall see the application of rigid wages control in the public sector. If it were said "We took on the big boys, including Ford ", the Government would probably be justified in sticking rigidly to 5 per cent. in the public sector. However, the whole motivation of the Government is to satisfy the Prime Minister and the distant future, far beyond what was visualised.

All this became evident when GEC contemplated the establishment of Schreiber at Runcorn. Before the firm could obtain Government finance, it had to agree to adhere to a wages policy running as far ahead as 1981–82—a forward commitment of three or four years. At that time Ministers were not talking of phases 4, 5 and 6. However, the Government were threatening sanctions against that company, which at Runcorn could have meant the loss of 1,000 jobs.

I hold no brief for the GEC or any other company in respect of sanctions, but my view is that in the present economy we should return to free collective bargaining. It is also necessary that the present sanctions should be ended. Those sanctions can affect certain sections of industry. For example, if dock workers exceed the pay norm, what will happen to the £35 million of Government investment in the London docks? In such circumstances the Government will have no option but to withdraw the money that would have been available for those docks. Because of that action, the whole area will be affected.

My right hon. Friend the Secretary of State for Prices and Consumer Protection has paraded all the arguments on the subject of low pay. However, a simple way to deal with that problem is to introduce a statutory minimum wage limit. When my right hon. Friend the Chancellor of the Exchequer is challenged on this point, he does not say how the mechanism will operate, or what will happen if the unpaid wages of Ford workers are taken in bags on the following Monday morning to the Liverpool city council in order to pay workers there the money that the workers at Ford have not taken up. That would surely be nonsense, because all that would happen is that Ford profits would rise and the Ford workers would remain underpaid.

There is sufficient evidence to show that if the Government wish to tackle the subject of low wages—and we all accept that it is a major problem—they should bring in a statutory minimum wage. I believe that such a step would deal with the problem virtually overnight. It is obvious that the Government, in the present circumstances which they themselves have set, cannot introduce such measures. They have avoided taking the necessary Socialistic measures to begin to plan the economy for the benefit of the mass of the people. They have attempted to maintain the present system in a period which has seen an international crisis in capitalism. If they continue on this course, they will get further into difficulties.

It is our job not to allow the Labour Government to go too far along that path. If they are heading for the cliffs, someone must tell them to go no further. We must try to head them off. The loyalty of those who argue on those lines cannot be challenged. We are concerned that the Government may be endangering the whole Labour movement. We must not allow the Labour movement to be endangered or sacrificed. Somebody at some time must tell the emperor that he is wearing no clothes.

I have heard nothing from the Labour Front Bench to convince me that tonight's vote is other than an important one for the Labour movement. If the present path is followed by the Labour Government, it will pave the way for the return of a Conservative Government. That will not be the fault of those of us who are trying to steer the Government along the correct lines this evening.

6.36 p.m.

Mr. Anthony Grant (Harrow, Central)

In view of the request of the Chair to be brief, I shall not take up the arguments of the hon. Member for Liverpool, Garston (Mr. Loyden), who spoke with the authentic voice of the Left wing. I shall be interested to see whether the hon. Gentleman will follow his words with action later this evening. Again, because I shall be brief I shall not deal with the remarkable speech made by my right hon. Friend the Member for Chipping Barnet (Mr. Maudling)—a speech with much of which I agreed. It was a thought-provoking contribution. Instead, I shall concentrate on two short points.

I wish first to deal with the subject of small firms. I thought that the Labour Government had belatedly decided that small firms were a good thing. They had until recently a Minister responsible for small firms. That was the case until the hon. Member for Keighley (Mr. Cryer) resigned in high dudgeon about something or other—a resignation which does not seem to have made very much difference. Furthermore, we thought that the Chancellor of the Duchy of Lancaster was supposed to be undertaking wonderful and magical things on behalf of small firms.

In this debate we must remind the Government that many small firms depend for their existence on the success of large firms, such as Ford and others. If Ford had stuck to the 5 per cent. required by the Government and had faced a total and permanent shut-down, that firm would have turned away from the United Kingdom, leaving many small firms and their employees high and dry and in great difficulty. However, Ford settled with its trade unions and, for the time being at any rate, it appears to be staying in this country.

The Government are punishing Ford for taking that action and settling. At least, I presume that they are punishing the firm. One gathers that the sanctions —or discretionary action, as it is called—are meant to be effective. The right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) expressed some doubt about whether the action will be effective. If that is the case, what are we doing with this charade? Why cannot we all go home? On the assumption that the Government intend this action to be effective, the result, if it means anything, must be a cut-back in the activities and investment of firms such as Ford.

One of the groups which will undoubtedly suffer will be the small subcontracting firms, which are wholly dependent on Ford. Whatever blame may or may not attach to Ford, I must emphasise that the small firms are wholly innocent. The Government are in danger of drowning all the minnows in the pond or, to use another phrase, are taking a steamroller to crash the ants in the strawberry bed. How do the Government square such action with all the soft soap and lip-service about small firms? Do they believe that the innocent must suffer with the guilty to get the Government out of the hole which they have dug for themselves?

The second group which will be dismayed by Government policy comprises the many unemployed, or those who are about to become unemployed, in the regions. I have always believed in the importance of regional policy. No Government should allow the less prosperous areas of the United Kingdom to fall into decay. The Labour Government have been right to pursue a policy, as did their predecessors, designed to attract industry to locate operations in areas of high unemployment such as Merseyside, West Central Scotland or the North-East. It is a difficult enough task to persuade industry to go to the regions, which in the ordinary commercial way it would reject. Therefore, it is necessary to provide incentives to attract industry to go to those areas. How are firms such as Ford, BOC or any other large company, to invest in these regions if they are to be told, as the Chancellor of the Exchequer tells them, that the incentives will be withdrawn if they have to pay more wages to stay in business? The answer is that they will not invest in the assisted areas any more. It may be that the Ford company is too far advanced to withdraw from South Wales. One could hardly blame it if instead it invested abroad. Many other firms finding themselves in the same ludicrous position will undoubtedly reconsider their plans for the future.

Who will suffer? It will not necessarily be the large companies. They will just operate in non-assisted areas subject to industrial development certificates, go abroad or not do anything at all. The areas that are trying to attract industry and the wretched jobless living in those regions will suffer, as will the taxpayer, who will have to foot the increasing social security bill.

I do not know how all this squares with the White Paper, or how it is designed to encourage the regeneration of industry, to guarantee living standards and to make possible a continuing fall in unemployment.

I am not opposed to an incomes policy. It is most unwise for any Government, whether Labour or Conservative, to commit themselves to rejecting an incomes policy as an essential weapon in the armoury against inflation. But this Government's policy is totally ludicrous and inflexible, and it simply will not work.

The Government have got themselves into a "Catch 22" situation. We all know that the 5 per cent. limit was merely a device to demonstrate the Government's alleged toughness for an autumn election. When that election was called off, the Government were hoist with their own petard. As a result, they can hardly be surprised if people in small firms and all those people working and struggling in the regions use one word to describe the Government's protestations of sup- port, and that word is to be found in the Left-wing amendment. The word is hypocritical".

I support the amendment moved by my right hon. Friend the Member for Lowestoft (Mr. Prior). I shall be interested to see whether the Left wing below the Gangway will pluck up the courage to do so as well or if, as I suspect, they are only chocolate soldiers.

6.42 p.m.

Mr. Ron Thomas (Bristol, North-West)

The hon. Member for Harrow, Central (Mr. Grant) invites us to join him when he clearly makes out that he and the Front Bench are in favour of a statutory incomes policy. That is in essence what he is saying. The right hon. Member for Chipping Barnet (Mr. Maudling)—who has now left, I am sorry to say—made it quite clear that the whole power of the State should be thrown against what he described as monopoly trade unions.

As my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) said, throughout the 1920s and the 1930s there was no question of using the power of the State in that way. But as soon as it is felt that the trade unions have perhaps got a little bit too much power, the Government want to introduce political proposals. To say that it is a political problem demanding a political solution is a euphemism for saying that what we need is a law which will bring the whole power of the State against any group of workers who we feel, on some kind of decided capitalist yardstick, have overstepped the mark.

The right hon. Member for Chipping Barnet also mentioned productivity. One thing that is positively correlated in terms of productivity of our competitor countries is the level of capital investment. The people who are represented by Conservative Members have failed dismally to invest in British industry in order to increase productivity. The only way to increase productivity is by more horse power and better capital equipment. The capitalist class in Britain has failed miserably to do that. It would rather invest money abroad or in property, land speculation and currency speculation.

The hon. Member for Harrow, Central and the right hon. Member for Chipping Barnet talk about our problem being wage inflation, but I shall quote Hugh Scanlon in the days when he really understood these matters. He said that if wage increases were Britain's problem, Detroit would be a desert and Calcutta a paradise. That is the essence of the situation.

The hon. Member for Harrow, Central mentioned Ford and the fact that it might not invest. It is investing in countries where wages are far higher than they are in the United Kingdom. Wages in the United Kingdom are a disgrace, by and large, throughout the European Community.

Mr. Anthony Grant

I do not know why the hon. Member for Bristol, North-West (Mr. Thomas) is tackling me with this when I am, to some extent, in agreement with him. I wish we were like Detroit. I wish we were able to have the sort of wages workers have there. But it requires a very different system from the one we have.

Mr. Esmond Bulmer (Kidderminster)

Is the hon. Gentleman aware that the Ford workers in Germany produce exactly twice the output of the Ford workers in Britain with the same plant and equipment? How does he account for this?

Mr. Thomas

That is not true, and I suggest that the hon. Member does a simple course in capital widening and deepening. He will then see the difference between what is happening in this country in terms of investment in the car industry and what has happened overseas.

I am simply making the point to the right hon. Member for Chipping Barnet, first, that he wants to see the power of the State brought in whenever it is decided by the Government that a particular group of shop stewards are, to the Conservative Party's way of thinking, protecting too much the workers that they represent, and, secondly, that our problems, so far as they are due to a lack of productivity—and I accept that—are due to a lack of capital investment in British industry. In those terms, British capitalists and the last Conservative Government have an appalling record.

Mr. Loyden

On the question of under-investment, is my hon. Friend aware that in the rubber industry, in which an approach has been made to the trade unions for an increase of about 18 per cent. in productivity—which the trade unions have not resisted—there is a par- ticular plant on Merseyside where, if one wants a spare part, one must go to the British Museum to find it?

Mr. Thomas

Yes, I am well aware of that and that a good deal of the capital equipment in British industry is many, many times older that that in competitor countries. It is well known that the British workers have far less capital equipment at their elbows than workers in other countries.

I question the whole suggestion—I cannot call it an analysis—from both Front Benches of an incomes policy and sanctions in terms of that policy. One cannot have that kind of incomes policy without sanctions, which at the end of the day means working people going to prison for trying to improve their standard of living. That is what it is all about.

The Secretary of State, who, like me, is a member of ASTMS, says at one minute that other factors enter into inflation. He then says that the Government's whole analysis is based on the premise that only wages create inflation.

The Secretary of State dealt with the index of retail prices. Does he look at the index occasionally? I have the Department of Employment Gazette for November, so let us look at some of the main items. Food, which has a weighting of 25 per cent., has doubled in price since 1974. is that due to increases in the of agricultural workers? Come on, tell me. The answer is "No ". Another major item, which is weighted at 11.3 per cent., is housing which covers mortgages and rents. Is this due to increased wages of those who work in the building industry? No. In the first case, the increase is due to the CAP; in the second, it is due to direct Government policies.

Another item is fuel and light, which has gone up from 100 points in 1974 to 230 in November this year. Is that due to the wage claims of workers in the nationalised electricity industry? It is not. It is due to direct Government and IMF policies.

Yet another item is food consumed outside the home. That has gone up from 100 points to 213. Is that due to the massive wages of those working in Garner's Steak Houses?

Everyone refers to the retail price index, but few ever look at it. People are all too ready to say that increases in the RPI are due to wages. But there is no evidence for that at all. I shall quote to the House from "Labour's Programme 1973." It said: Certainly, labour costs are an important element in prices. But they are very far from being the only one, as recent experience has shown. In the period of the Tories' freeze ' earlier this year, food prices soared—but neither the farm workers nor the shop workers received a penny more in wages. Council house rents and the prices of houses for sale shot up relentlessly, while the building workers' pay was frozen. The same thing applies today when we look at the actual increases in the RPI.

My right hon. Friend the Secretary of State quotes a 7 per cent. wage increase against a 7 per cent. price increase. He does not tell us whether he is talking about the same period. I remind him that when shop stewards negotiate with management they are already talking about an erosion in their standard of living of 10 per cent. or 12 per cent. over the last 12 months. They are not talking about today. Even leaving that on one side, does not my right hon. Friend realise that, if a worker gets a 7 per cent. pay increase, 30 per cent. of it goes in tax and he will have to pay higher pension rates as well? He is not objecting to that, but with the net result he cannot then meet a 7 per cent. increase in the RPI. It is no good his giving his wife an extra 7 per cent. less 30 per cent. because she will not be able to buy the food with that money.

We have been told about the relationship between inflation and unemployment. Perhaps the Government will tell us why West Germany has the lowest level of inflation in the world, almost, yet it still has more than 1 million unemployed. Are the Government saying that if we get unemployment down to 1 million that will be an economic miracle and we should all be satisfied?

Mr. Max Madden (Sowerby)

Does my hon. Friend agree that as well as there being 1 million unemployed in West Germany another 1½ million West Germans have been sent to other countries?

Mr. Thomas

Yes, indeed; they have exported them to other countries.

A lot has been said about low pay. If the Government want to do something about low pay, they can bring in a mini- mum earnings level. The TUC fixed the sum of £30 some years ago. Prices have doubled since then, so it is now realistic to talk about a £60 minimum earnings level. If the Government are really concerned about low pay, they should realise that they employ most of the low paid—in local authorities or in the public sector. What do they do? They insult them by saying that these workers can have a bit more than 5 per cent. provided they do not get any more than £44.50. What a sum in this day and age.

If Ford workers had forgone part of their legitimate pay claim, what mechanism would transmit that from Ford workers to low-paid workers in the public or private sector? Let us face up to the situation. In 1977 Ford workers had a 12.3 per cent. pay settlement against a background of £121 million in company profits. In 1978, with profits of £246 million, the company offered 5 per cent. The profits were doubled. The right hon. Member for Lowestoft (Mr. Prior) talked about the Ford claim being 60 per cent. He did not worry about Ford profits being more than £246 million. The 5 per cent. was offered against a possible background of Ford making £300 million profit this year.

What are Ford workers supposed to do in those circumstances? What are the workers in the engineering industry supposed to do with this 5 per cent. pay policy when Rolls-Royce management tells them that in order to implement the national agreement it will take out of that 5 per cent. the cost of overtime premiums, night shift premiums and other supplements so that some will get only 2¼ per cent.? Rolls-Royce is sub-contracting work to other firms which ignore the pay policy altogether and which can take on people tomorrow and pay them what they like. There is nothing to prevent a firm from sacking its labour force and taking it back next week on twice the wages.

We all know that this so-called pay policy does not affect those who are self-employed and many others as well. We all know that there are hon. Members who pontificate about industrial democracy but who would take away from the representatives of working people the most important weapon that they have to negotiate freely in the shop, factory or establishment in which they work. They take this weapon away and give it to some group of unelected bureaucrats who are not answerable to anyone.

The Government were very reluctant to use sanctions for any other purpose. We tried to get them to use sanctions in introducing planning agreements. It was not possible. It has not been possible for four years and it is still not possible. It is only possible to introduce sanctions as part of their counter-inflation policy because they believe that wages create inflation, and therefore they must control wages. They are not prepared to use sanctions on oil companies which say that unless they get the right returns they will not bother to exploit North Sea oil. The Government simply continue to suck up to those oil companies.

Mr. Kenneth Lewis (Rutland and Stamford)

Will the hon. Member tell us whether he will vote against the Government tonight since he is making such an excellent speech against them? It appears that nobody on the Government side supports the Government other than the hon. Member for Loughborugh (Mr. Cronin). In fact nearly all Labour Members seem to be against their own Front Bench.

Mr. Thomas

If the hon. Member had been here throughout the debate, he would have found that there was a consensus between the Conservative Front Bench and the Government Front Bench on the need for an incomes policy. The only thing they are arguing about is the kind of sanctions that should be used. The right hon. Member for Lowestoft wants to ensure that we have ballot after ballot after ballot so that at the end of the day we take away any power that the shop stewards might have and we put them in prison, as was the case with the dockers. On this side of the House we have the form of sanctions that has been suggested.

At the beginning of his speech my right hon. Friend talked about discussions with the trade union movement. I hope that he will admit that the working people of this country have made the sacrifice to deal with the situation which besets the Government. The sacrifice was not made by those who live on dividends. We never heard anything about rents or profits or dividends. We have a fiddling little Bill which talks about dividend control but which simply means that dividends will be paid out later or that there will be increased capital gains. Workers who give up a pay claim forgo it for ever.

The Secretary of State has readily admitted that until he took over there was no control over prices at all. He said that there would be further meetings with the trade unions next Wednesday. I urge him to listen to Labour Party and TUC policy and to say that for the time being we shall have a moratorium on sanctions and that we shall get down to discussions with the TUC, then report our discussions back to the House when we return after Christmas. That is the way to tackle this matter. We should not have a head-on confrontation with those people who are opposed to an incomes policy but who are even more opposed to the Conservatives.

7 p.m.

Mr. Reg Prentice (Newham, North-East)

My hon. Friend the Member for Rutland and Stamford (Mr. Lewis), in his intervention in the speech of the hon. Member for Bristol, North-West (Mr. Thomas), made the point that I was going to make, which is that the Government will be lucky if there is a single speech from the Labour Benches in support of the case put by the Secretary of State for Prices and Consumer Protection. There is no vocal support for the Government on those Benches. Those who may support them with their votes tonight are not able between them, on present evidence, to rally even one spokesman from the Government Back Benches in favour of the Government's policy.

I want to make three points very briefly. I hope that the first is relatively non-controversial, but I cannot promise the same for the other two.

For many years many of us have been thinking aloud about incomes policy and about the relative failure of successive British Governments of both parties, and successive Governments in other Western democracies, to find a blueprint for a counter-inflation policy which has been a permanent and comprehensive success. If it were possible—and with the wages policy of this Government it is probably not possible—it would be healthier if the House could meet today genuinely as a council of the nation, trying to exchange ideas on how such a policy could evolve.

The main point I want to make here is that a substantial contribution to the debate has been made in recent weeks by the Confederation of British Industry. The Government pretend to have a policy, but have none. As my right hon. Friend the Member for Lowestoft (Mr. Prior) said, the 5 per cent. guideline was an election slogan for an election that never happened. It certainly is not a policy. The Trades Union Congress has no counter-inflation policy. I think that its stance is preferable to the Government's, because it does not pretend to have a policy. It refused to sign the piece of paper that was laboriously drafted, after weeks of effort by representatives of the Government and the TUC, to pretend that there was common ground.

I think that I am the first person in this debate to mention the CBI's policy. I do not say that it has produced a complete blueprint—no one has done that—but it has gone much further in producing constructive proposals for dealing with these permanent and difficult problems than anyone, certainly in Government or TUC circles.

I commend to the House chapter 7 of "Britain Means Business 1978 ", which was approved at the CBI national conference in Brighton a few weeks ago. I do not intend to outline the whole chapter. The annual timetable suggested in it involves the meeting of a forum every year, probably in May or June, when management and union views and other views would be put, to try to get as near as possible to a consensus on what the nation could afford and on the priorities and guidelines that should affect wages and salaries settlements in the following 12 months.

The CBI goes on to propose that settlements in the private sector should be brought together as near as possible in a few weeks in the autumn, so that around the beginning of November there could be a general increase, at least in the main pacemaking settlements, which would be common and would not be subject to leapfrogging during the ensuing 12 months.

The CBI proposes as a next step that the public sector should reach settlements in the spring to take effect from the beginning of the financial year. It proposes that the Budget should be, as it were, the last act in this cycle, and that the nature of the Budget should take account of the nature of wage and salary settlements already agreed. The process would then start again for the following year.

I believe that that is a framework within which we could have the right sort of co-operation between the parties involved, without having a corporatist solution. We could combine a generally moderate approach to wage and salary settlements with the degree of flexibility that we need in order to deal with incentives and to reward success. I leave that thought particularly with my right hon. Friends on the Opposition Front Bench, because I hope that a policy of that kind will be the policy on which the incoming Conservative Government will build when they take office shortly.

I want next to be a little more controversial and to refer particularly to the way in which the Ford dispute underlined the positive discrimination practised by this Government over the past four and a half years in favour of the trade union movement—or at any rate of trade union activists, which is not the same thing—and against management. We have had steadily, step by step, over the past four and a half years a shift in the balance of power, which has been bad for industry and above all bad for rank and file trade unionists. That shift in the balance of power away from management has been one of the reasons for Britain's relative economic decline in recent years. It has been assisted by the Government's legislation and by specific acts of Government in various situations.

The Ford dispute underlines that. Here I draw attention to the conduct of both sides in the dispute. I should like to hear tonight from any sponsored members of the unions involved. I do not blame the union side at Ford's for pressing for a settlement above 5 per cent. I think that the state of the company's finances justified that, and that the union was right to press for it. But the way in which it pursued the claim was outrageous. I give three examples.

First, a strike was called immediately the management's first reaction was known. One message that should go out from this House and should be reflected on the Government Front Bench is that the strike weapon, if it is ever to be used, should be used as a weapon of last resort, not as a weapon of first resort. If there had to be a strike at Ford—and I am not convinced that there need have been one at all—it should have been of much shorter duration, causing less damage to the company and the country and losing a smaller amount of wages for the members involved.

The second outrageous thing was that the strike was called when there was still a month to run of the old agreement at Ford, which contained a no-strike clause. There was a time when trade union leaders of the calibre of Ernest Bevin, Arthur Deakin or Bill Carron would have said "We must keep our word. We have pledged our word. We expect employers to keep their side of the bargain and we must keep ours." Now it seems to be fashionable for trade union leaders to regard such a pledge as a mere formality that can be ignored.

The third aspect of that industrial action which I find intolerable is that firemen, safety officers and security officers were taken out on strike along with everyone else. I gather that that is the first time that has ever happened in the history of labour relations in the Ford Motor Company, which has been a stormy history, as we all know. As a result, expensive and unique capital equipment was left unguarded, or was guarded by volunteers who were not trained for the job. The future livelihood of everyone who worked at Ford was put in jeopardy by that particularly stupid piece of union militancy. Yet the unions come out of that dispute without any sanctions being applied against them, without any real word of criticism of them from right hon. and hon. Members on the Labour Benches.

How does the management come out of the dispute? Here I rely on the report that was sent to all hon. Members by Sir Terence Beckett on 27th November. The management went into the negotiations intending, as Sir Terence said—and I accept this—to try to achieve two things: a substantial settlement that would be fair to the workers involved, and would be seen to be fair, and an improvement in productivity, above all by reducing the number of unofficial stoppages, of which there had been a great number in the previous year or two.

I believe that if Sir Terence and his colleagues had been able to conduct those negotiations without arm-twisting by the Government they would have reached a quicker settlement and would have done so without a strike. The amount agreed would certainly have been above 5 per cent., but it would probably have been below 17 per cent., which was the value of the ultimate settlement. But they took account of the Government's wishes. They tried to carry out the Government's policy as well as their own policy. They tried very hard, and they paid a considerable price for trying hard.

After that, Sir Terence Beckett was summoned to a kangaroo court composed of the Secretaries of State for Industry, Prices and Consumer Protection and Employment. Indeed, he was summoned twice, first to make his defence and secondly to receive his sentence. The members of the kangaroo court were prosecutors, judges and jury in a trial action for which there was no basis in law. Sir Terence knew and the Secretaries of State knew that they had found him guilty before he went in the first time.

I have one criticism and only one to make of Sir Terence Beckett's handling of this affair. It is that he should not have bothered to turn up at those meetings. He should have treated that ridiculous tribunal with the contempt that it deserved, and I hope that any future leaders of industry will say "We will go and talk to Ministers about serious policy matters, but we will not provide any kind of respectable facade for proceedings of this kind."

My final remarks concern sanctions. The case has been deployed from the Opposition Benches in a previous debate. It has been deployed again today in a speech of remarkable force by my right hon. Friend the Member for Lowestoft. The one aspect which I wish to underline was not dealt with by the Secretary of State, and it ought to be dealt with. It is the simple constitutional point.

These sanctions are a constitutional outrage. If the Government intend to adopt this policy, it ought to be founded in legislation. They ought to have the courage to come to this House and accept the verdict of the House on whether they should have power to fine people or to take privileges away from people because of their policies.

It is a constitutional convention that Ministers should use power given to them by legislation for the purposes of that legislation—the purposes generally as intended by Parliament in the first place and generally as defined in the long title of the Act of Parliament concerned. In other words, export guarantees should be granted or withheld according to criteria relating to exports and the firm applying for the export credit. Financial assistance given to firms to develop in areas of heavy unemployment should be allocated according to regional policy and the criteria involved.

We must bear in mind that, over the last generation or two, successive Governments have acquired more powers—powers granted by Parliament and granted for purposes which most of us accept. But if Governments are to use those powers to the limit of legal acceptability in the sense that they are not acting in a way which can be successfully challenged in a court, their powers become unlimited.

I am trying to suggest to Government supporters that as members of a democratic party—I assume that that is still their claim—democratically elected for the time being, they are the guardians of the constitution. They are its custodians. If they manipulate power in this way, they strike a blow at the very democracy which has created them and all of us.

It is no coincidence that this is happening in 1978, late in a decade when the Labour Party has departed step by step from the old democratic traditions of its pioneers and those who led it until the early 1960s.

Mr. Cronin

Surely it is a fundamental democratic privilege for any purchaser to choose the vendor that he wants when he makes a purchase. I should have thought that the Government, in using their discretion about whether anyone should receive special consideration in the form of export guarantees, temporary employment subsidy or a subsidy for opening a factory in a development area, should bear in mind the company's reliability from the point of view of the national interest.

Mr. Prentice

My argument is that the Government should bear in mind that company's reliability in respect of the kind of aid it is receiving. If it applies for export credit, whether it is granted will depend upon its viability as a business, its track record in exports, and so on, but it should not depend on whether it has offended Government policy in respect of incomes. The hon. Member for Lough-borough (Mr. Cronin) intends, presumably, to take part in the debate, and I hope that he will develop the argument that he has just advanced. But it should be totally unacceptable that a Government should use powers of this magnitude which were intended for quite different purposes to try to reinforce a policy for which they have no other legal sanctions to use.

Hon. Members on the Right wing of the Labour Party—I think that the hon. Member for Loughborough is one of them—should reflect on the extent to which their party has departed from democratic standards since 1970, this being a significant example of that trend. This is a decade in which we have seen leading members of the Labour Party attack the rule of law by making working-class heroes of the law breakers at Pentonville, the Shrewsbury pickets and the councillors at Clay Cross. It is no accident that that contempt for the rule of law should now be reflected in contempt for the unwritten conventions of our constitution. Neither is it a coincidence that the Labour Party national executive committee this morning discussed a draft manifesto which would, amongst other things, vastly increase the power of the State, weaken the power of Parliament and make this country a less democratic society.

These are the issues which Government supporters face. It is significant that, with the exception of the hon. Member for Loughborough and possibly the right hon. Member for Fulham (Mr. Stewart), for most of the debate there has been no one on the Government Benches who was likely to say a word in defence of the Government. But they ought to be very worried about the direction in which the Government are moving, and they ought by their votes tonight to indicate to Ministers that this simply will not do and that there has to be a change in direction.

7.17 p.m.

Mr. Martin Flannery (Sheffield, Hillsborough)

The right hon. Member for Newham, North-East (Mr. Prentice) has been lecturing this House on democracy, equity and fairness in the trade union movement. I venture to think that his electors have a view about his opinion of what constitutes democracy, having sent him here for specific reasons which he has consistently violated in the past year or so.

From the Tory Front Bench we have heard the voice of Moral Rearmament. We have heard from the Liberals why they should not vote with the Tories, but will. We have heard from the Government their opposition to their own party and the TUC. Those right hon. and hon. Members on the Opposition Benches who talk about me and my hon. Friends giving the Left-wing viewpoint of the Labour Party know that the group of us who sit below the Gangway are giving the authentic viewpoint of the Labour Party and the TUC which has been arrived at democratically in full conferences, and that the Government are in almost headlong collision with that viewpoint.

My hon. Friends and I put down in my name an important amendment to the Government's motion. We are sad that it will not be called. If it had been, the difficulty, not to say the dilemma, of the Government and of ourselves would have been eased considerably. But we have listened to the Tories crowing and have taken note of it.

It will not be surprising, therefore, if I follow the general lines of the amendment which embodies the policy of the Labour movement in its entirety. The Government are now in open and headlong collision with the entire Labour movement regarding their policies. That is why my hon. Friends and I, very sadly, are opposing the Government. The Government's line is in direct opposition to that of the Labour Party and the TUC, and they know that.

We therefore have a situation in which the Tories are opposed to the policies of the Labour movement and the Government Front Bench are opposed to those policies. The Government claim that, despite this, they have the support of the general public. That, of course, is an imponderable and there is no proof of it whatsoever. Opinion polls, the North Berwick election and so on have made the Government dizzy with success. Our conclusions stem from conferences which took decisions. Those decisions are on record, and we know that. But no one should be so arrogant as to assume that what the general public believes at this moment is in line with our thinking. The lack of support for the 5 per cent. guideline and sanctions on the part of the organised Labour Party and the TUC is on the official record. It needs no polls to prove it.

The Tories' position is one of sheer hypocrisy. Their record over scores of years illustrates this. The Industrial Relations Act was the most horrific and unworkable sanction of all. The Opposition put that on the statute book and then finally they fled from it and admitted that it was totally unworkable. It was a draconian measure which the right hon. Member for Newham, North-East did not mention this evening. That apparently was some kind of democratic measure of his new friends. But—

Mr. Prenticerose—

Mr. Flannery

In a moment. The right hon. Gentleman attacked the Industrial Relations Act when he was on the Labour Benches. Does he now agree with it?

Mr. Prentice

I criticised it then and I still criticise it in retrospect. The difference between the Industrial Relations Act and the sanctions we are discussing today is that the former was approved through the proper processes of Parliament and was the law of the land. Therefore, it should have been observed—although it was not always. What we are talking about now is sanctions which are not founded on the rule of law at all.

Mr. Flannery

The right hon. Gentleman knows that working people throughout the ages have struggled and fought against unjust laws which bound them hand and foot and prevented trade unions from working properly.

Let us take the question of wages. Whenever did a Tory Government, all through the long, weary years of the building up of the trade union and labour movement, support a fair wage for any working man or woman? The Tories are on record as relentlessly attacking, with all the means in their power, working men and women who struggled for a living wage. We all know what they would do if they were in power. They would, as our amendment says, mount a serious attack—[Interruption.] Hon. Members who come into the Chamber only occasionally to intervene should listen to what I am saying and see whether it is fair or unfair.

The Tories would mount a serious attack on the living standards of all working people. Working people know this; let us make no mistake about it. The Tories would attack the unions, no matter what they say about being able to live in peace with them. That is one of the first things they would do. Most of them nostalgically look back to the Industrial Relations Act and would love that Act to be on the statute book once again. The Tories would hold down wages, except, of course, their own and those of their chums, which would rocket, as Mr. Barber made them rocket when he was in power. They would massively —and it is on record—cut public expenditure.

That is the reality of what the Tories would do. What does that mean? They would launch a full-scale attack on the education system. They are on record as having said that the first thing they would do when they came to office would be to repeal the 1976 Act on comprehensive education. That would require an all-out onslaught to unscramble the 83 per cent. of children who are now attending comprehensive schools.

The Tories would attack the nationalised industries—they always do. They would cut the Health Service, because cuts in public expenditure mean that there would be an all-out onslaught on the Health Service, which is so dear to the hearts of our people and which needs much more money allocated to it for the care of the sick, the old and so on. They would help the rich.

These are the things which, traditionally, the Tory Party has always done.

Mr. Thomas Swain (Derbyshire, North-East)

Doss my hon. Friend agree that prior to the Industrial Relations Act, which was vicious in its essence and application, the Trades Dispute Act 1927, passed by a Tory Government, who refused recognition to the trade unions until at least 1942, had a serious effect on the living standards of trade unionists? It is a bit of historic fact, but going back over the years and looking at the Industrial Relations Act, as it was framed, we see that it was specifically based on the non-recognition of trade unions within the 1927 Act.

Mr. Flannery

Of course, I agree with my hon. Friend. What he is saying is that whenever the Tories are in power they make inroads into the living standards and the conditions of working people up to the point where the working people say "No further ", as they did, for instance, in 1974.

The so-called 5 per cent. pay guideline has long been overrun. The Government should look back at the distant position that the 5 per cent. embodies. It has gone. It is as dead as the dodo. By standing up to defend this overrun position, the Government weaken their own credibility in the eyes of working people. Let us take, for example, Mr. Jackson and Mr. Weighell at the Labour Party conference and the TUC. As soon as they went back to their membership, and boasted about having consulted them, they received a most resounding kick in the backside from their members. They are now having to admit that their own membership, their own executives, have instructed them, quite bluntly, to ask for increases far in excess of 5 per cent. We all know that, whenever the 5 per cent. limit comes into question, only a handful of people have accepted it compared with the millions in the trade union movement.

We know the position at Ford. There is no need to go over that, though hon. Gentlemen opposite can do so if they wish. We know the position of the Bakers' Union, for instance, which is in dispute at the moment. We know that the National Union of Journalists is asking for a £20 increase. We also know—and I have spoken from platforms with them —that the public service workers, represented by NUPE, are ready to move into the struggle. The miners—and it must irk Mr. Gormley to have to admit this—are geared and ready for action.

All these working people have categorically stated that the 5 per cent. limit has gone. It is historic. It has been relegated to the dustbin where it ought to be. Workers are applying for bigger wage settlements. The finest thing that the Government could do would be to reconcile themselves to the harsh reality of that fact and be flexible and yielding to some degree, and then possibly what they wish for will emerge.

The teachers are also dissatisfied. I remember once when they had a strike that they were accused of being wildcat strikers. It was the first strike that they had had in 100 years, but the hon. Gentlemen who control the newspapers and editors know how to slam practically everybody who asks for a working wage.

I am sure that we have noticed, incidentally, that every worker who supports the Government on the 5 per cent. policy makes an exception in his own case. Workers want restraint for others, but when it comes to their own unions and themselves they want an exception to be made. It is enough to make anyone cynical, but that is the fact of the matter. When prices are rising and people have families to clothe and feed and have rents to pay or mortgage repayments to make—and these costs are all rising—it is physically impossible for them to live with only a 5 per cent. increase.

Therefore, they have notified their own Government, whom they have put in office, that that has gone and that they wish that the Government would accommodate themselves to it. Incomes policies are for other groupings, other unions and other people. The 5 per cent. has been a dead duck for a long time, and it is time that the Government realised that.

I now briefly mention the question of sanctions—or, to use a euphemism, discretionary action. The very fact that the Government are using the euphemism for what was called sanctions shows some slight retreat from the position they have occupied hitherto. Who knows?—they may unbend on this, because it is totally unworkable. The Government have french-polished themselves into a corner, and the Tories love it. The Tories are as happy as larks about the Government having pushed themselves into this diffi- cult position. They are stubbornly clinging on to another position like the 5 per cent., which has been overrun. The Government are not only engaging in a desperate and unworkable measure. They are, firstly, antagonising their own supporters, who put them in office, and, secondly, they are a godsend to the Tories by engaging in this policy. Of course, as one would expect, with their massive propaganda machine, the Tories are exploiting these two major factors to the full.

My hon. Friends and I have adopted every possible measure of compromise to try to meet our Government half way. We have done our utmost to persuade the Government to heed their own movement, which built them and put them in office. Few as we may be—and we are the people who are conducting the struggle in this place; there are very few others—we occupy the fundamental position of the entire organised trade union and Labour movement. We on these Benches have more right than anyone to give that viewpoint, but we have been rebuffed—

Mr. Crouch

Which Lobby will the hon. Gentleman be going into tonight?

Mr. Flannery

I expect the hon. Gentleman to be shouting out and interrupting. I tolerate it, but—

Mr. Crouch

Will the hon. Member give way?

Mr. Flannery

No, I have no time to give way. I am nearing the end of what I want to say, and others wish to speak.

Mr. Crouch

I want to know in which Lobby the hon. Member will be voting.

Mr. Flannery

The hon. Member will just have to hang on for that.

I return to the point I was making. From these Benches we are putting the central fundamental position of the Labour movement. We have been rebuffed on each and every occasion. But we believe that in the long run the stand that we are making here will be vindicated in the eyes of all of the people who have put us here.

We make one last plea to the Government, whose staunchest supporters we count ourselves to be: cease being intransigent and unify our ranks by meeting us half way. That would be an honourable path for the Government to follow.

7.33 p.m.

Mr. Michael Latham (Melton)

On 1st January the Prime Minister said on radio that the sanctions blacklist was a figment of the media's imagination to a large extent. Five days later, Mr. J. G. Littler, a senior Treasury official, admitted in writing to the director of personnel of the John Lewis Partnership that the company was already on a circulated blacklist—those were the very words used in his letter—and had been so far over a month without anyone notifying the partnership officially to that effect.

The Prime Minister's blunder was also made four days before the Department of Transport told George Wimpey and Company that the whole group had been placed on a "tender blacklist ". The company's crime was to have a subsidiary company which had not broken the 10 per cent. guidelines and which did not intend to break them but which was a member of a trade association which had done so.

Both of those deplorable incidents—there have been others—illustrate the shambolic way in which this hole-in-the-corner policy has been administered.

Before dealing with the present position, I want to mention two other things about those classic blunders over John Lewis and Wimpey. I take Wimpey first. The Secretary of State for Prices and Consumer Protection said to the House in the debate on 7th February that Wimpey was told that, because its subsidiaries seemed likely to become party to an agreement outside the guidelines, "certain consequences might ensue "for the whole group. Because the agreement was not made, no action was taken, and he said: There is no more and no less to it than that."—[Official Report, 7th February 1978; Vol. 943, c. 1268.] As I tried to show in my speech in that debate, the right hon. Gentleman's information was completely inadequate and incorrect.

Subsequently, on 9th February, a Treasury spokesman was quoted in the newspaper Construction News as admitting that Wimpey had been blacklisted, and he added that this was quite deliberate, saying: The firm did not pay the money. This was really the object of the exercise—to stop them from paying. We don't want to shut any door after the horse has bolted. He admitted that the blacklisting was a "little premature "but said that this was Treasury policy.

In short, the Secretary of State was misled by his officials. The firm was blacklisted incorrectly, in secret, without any right of appeal and without ever having broken the guidelines. No apology was ever given to the firm. Nine months after that debate, no Minister has ever seen fit to apologise to the House.

Regarding John Lewis, I would advise all of my hon. Friends to read the published correspondence on the matter, because it is an absolute gold mine of unconscious humour and bureaucratic confusion. It illustrates perfectly the lamentable incompetence of the whole policy. Let us take, for example, the note of the telephone conversation on 11th August 1977 between a lady civil servant of the Department of Employment and the John Lewis director of personnel. It says: She accepted that the partnership had been placed in a very difficult position and said that the inequities in the pay policy had got through to the higher levels of the Government. There was no suggestion that the partnership had acted improperly or irresponsibly. We were a very large and respected company, and they fully understood our difficulties, but on their side they were bound to apply the policy as it stood, even if it produced unfairness. That comes from the company's record of the conversation. The Department has admitted that it does not have one, but it does not deny its accuracy, and, indeed, has published it. The note concludes with the following observation, for the file, by Mr. Andrews about that lady civil servant. He said: She was obviously extremely embarrassed by the whole affair and clearly wished that the queries had never arisen. She gave the impression that she also rather wished that the ground would open and swallow her up. I bet she did. No one should blame her, because the truth is that as all this policy has been trotted out, she had been given an impossible job to do. The John Lewis farce arose because the company, which employs 25,000 people and whose wage bill is £54 million, decided to pay 444 typists and salesmen an extra £5 or £6 a week in order to prevent them from leaving to work for competitors. The addition to the wage bill of the company was £27,000, or 0.002 per cent. of the total bill. For this, the whole absurd structure of the black list was trotted out, and it was trotted out in the most incompetent way.

The truth of this squalid affair is really very simple. The Government did not know what to do. They let off Ford and Vauxhall last year but blacklisted Mackies. This year, in May, they let off Mackie, which had not renegotiated its agreement, so that it could complete a deal with Bangladesh—and then they blacklisted Ford.

It is no wonder that civil servants cannot administer such a policy. It is no wonder that these farcical blunders take place. It is no wonder that the press could not get any sense out of the Ministry at the time as to what sanctions on Ford were supposed to be. It is no wonder that the lady civil servant dealing with John Lewis wished that the ground would open and swallow her up. It is quite deplorable for Ministers to place their officials in so exposed and indefensible a position by this lawless, secret and undefined procedure.

That brings me to the strange behaviour of the dog which did not bark in the night—the Department of the Environment. The building industry, in which I work and have worked for 11 years, is well known to have a system of rampant site bargaining. Indeed, in 1972, the TUC accused it of leading wage inflation. Men are paid according to site pressure. At present, some bricklayers in the South-East are getting £150 a week or more, and wage costs are rising rapidly. Yet, with the farcical and erroneous exception of Wimpey's, no building contractor has ever been blacklisted since stage 1 began four years ago, but no one believes that no contractor has not paid over the odds at some stage.

Why should this be? After all, the Department of the Environment published elaborate details of how its black list would be compiled as long ago as December 1975. It would involve circulars to local councils, giving the names of which firms were not to be allowed to tender. Why has this never happened?

I believe that the reasons are twofold. First, the Department has discovered to its embarrassment that if a local council, on the Department's advice, knowingly refused to accept the lowest tender because a firm was on the non-statutory black list for breaking the voluntary pay policy, it would be open to the threat of investigation by the district auditor and possible surcharge for wasting ratepayers' money. Secondly, the officials themselves might be left to carry the can if a mistake were made, as it was made over Wimpey.

In January 1976 I asked two Questions of the Secretary of State for the Environment. The first was whether the lists of contractors to be denied the right of tender should be contained in a normal departmental circular signed by an official of his Department, published and generally available to the public, and whether he would accept full personal responsibility, including any possible legal responsibility, for any errors which might be contained in such a document. The Under-Secretary of State lamely replied: It is contemplated that the normal departmental circular procedure would be adopted should the need ever arise. I am advised that my right hon. Friend's personal responsibility raises legal questions and would depend on the circumstances of the case. In answer to a second Question from me about protecting civil servants from libel actions if they erroneously blacklisted a contractor, the Under-Secretary said: It is the practice to indemnify civil servants against claims brought against them arising out of acts committed bona fide and within the scope of their employment"— [Official Report, 26th January 1976; Vol. 904, c. 18–19.] In short, if a mess-up takes place, as has happened, the civil servant is left hanging out to dry. The Minister's personal responsibility depends on the circumstances of the case, and if necessary the taxpayer will cough up to indemnify. No wonder the DOE does not want to look too carefully at what is happening on building sites.

But what about the new contract conditions announced to the House last February? It is true that the DOE has imposed these conditions by force majeure in the areas where it is itself the direct client. It did not, incidentally, consult the building industry about that but simply told it. It has done nothing at all about imposing the contract clauses on local government, which is the building industry's largest customer, because it has no powers to do so.

Indeed, when I exchanged correspondence in the spring with the Secretary of State for the Environment about an apparent attempt by the North Tyneside borough council to impose the new conditions unilaterally—an attempt which was subsequently abandoned—the Secretary of State confirmed that he had no power to require local authorities to use these new conditions, and that—the House will be amazed to hear—he did not even intend to suggest to them that they should do. I was told: A local authority seeking guidance of this Department at this point in time would be advised to continue using the old contract conditions. That is what the Secretary of State wrote to me on 15th May. The Secretary of State is shrewd enough to see that the whole black list and contract conditions policy is a bureaucratic nonsense, and he wants as little to do with it as possible.

The whole policy of sanctions reveals the arrogance of power. Governments have no right to blacklist honest companies which have broken no law. The Government have tried to use the apparatus of the State to cow firms into submission and in many cases they have succeeded. Yet it is open to any firm, when asked by the Department of Employment for details of its wage increases, to tell it to mind its own business. But so powerful is the State, in both its purchasing nexus and its bureaucratic authority, that we even hear of firms favouring a black list because it makes it easier to negotiate with the trade unions.

So it has come to this, in Socialist Britain 1978. Business men have become so accustomed to receiving handouts, or being pushed around by the State, that they now welcome State direction, backed by no force of law, to tell them what to offer their workpeople in wages. But there is no reason why this House should put up with this. We are here to make laws and to check a Government who do not keep to the law. The Government have not dared to pass a law on wage limits. They have not even dared to introduce one. So they have no right to act as if they had such powers or to do so in a secret and indefensible manner. Ministers know that this policy has failed. They know that their Back Benchers are increasingly reluctant to support them. They should accept the logic of events and act with honour. The policy should be abandoned now.

7.46 p.m.

Mr. John Cronin (Loughborough)

The hon. Member for Melton (Mr. Latham) made an interesting speech. I am sure that all of us, Mr. Deputy Speaker, were edified to hear of the difficulties which arise with conscientious lady civil servants and building contractors and the minute problems which arise. But sanctions—or discriminatory action—are a somewhat crude weapon, and there are bound to be occasional difficulties of this nature.

I am rather puzzled by the hon. Gentleman's insistence that the Government are doing something illegal or unconstitutional. Surely it is one of the basic rights of any democratic society for any purchaser to choose from any vendor he wishes when he wants to make a transaction. I should have thought that the Government would be entitled to have the same freedom.

With regard to the other matters, such as export guarantees and temporary employment subsidy, it is perfectly right that the Government should take into consideration the national interest when deciding whether to make grants of this nature. I should have thought that this was self-evident. It happens on frequent occasions.

If a company is exporting in a way which is contrary to our foreign policy, it is quite customary for the Government to intervene and prevent such action from taking place, and to prevent the company from getting a licence to export. That is done purely in the national interest. Why it should be considered to be contrary to the national interest to take action on wages—the most fundamental point of our economy at the moment—I am at a loss to understand. I do not think that the hon. Gentleman has made his case.

The right hon. Member for Lowestoft (Mr. Prior) made his usual rather friendly and persuasive speech. In fact, I heard him say that the whole Tory Party was strongly in favour of wages being kept to an average of not more than 5 per cent. higher than they were in the previous year. But he did not give any indication as to what alternative he had to the Government's present policy. He suggested that there should be ballots before strikes, but is there any hon. Member who really thinks that balloting would have had the slightest effect on the recent Ford negotiations?

I suggest that when a powerful union is seeking to increase the income of its members to an unreasonable extent, if the psychological factors are right the union members will ballot in favour of a strike, just as they will enthusiastically put up their hands in favour of a strike. For that reason, there must be some sort of Government control.

One of the sad circumstances from the point of view of Labour Members is that there has been some breach—I think quite a small one—of the accord which has continued between the Trades Union Congress and the Government up to the present. I sympathise with those of my hon. Friends who probably feel the same about it as I do. But I suggest that it is quite a minor breach of good relations, because the TUC is still committed to rendering some assistance in the way of keeping a close watch on progress towards controlling inflation and in considering action.

It is heartening to realise that the TUC is meeting my right hon. Friend the Chancellor of the Exchequer next Wednesday, and that on the agenda will be the question of action to be taken to achieve some broad understanding on prices and wage increases. The relations between the Government and the TUC, therefore, are in a far from critical state. I believe that the TUC needs to be more forthcoming. At present the TUC is thinking in terms of a £60 minimum wage—that would be an excellent idea—and a 30-hour week, but it is not offering the Government anything in exchange.

Some members of the TUC want price control but no form of wage increase control. Such a situation would rapidly lead to industrial chaos, unless there were some kind of moderating influence such as has been brought to bear by the Government. It is important that there should be no semblance of confrontation between the Government and the TUC. The partnership should continue and, in a Socialist manner, achieve the best possible result for this country.

We have had ceaseless criticism of the Government's pay policy from both sides of the House. Many of those criticisms are justified. The Government's pay policy is far from ideal and it is having a few bad effects. For example, the rigid limits are making the keeping and recruiting of management in industry difficult. It is making it difficult to keep and recruit engineers and technicians and to attract new workers. Impaired differentials are resulting in a shortage of skilled labour throughout industry. That is even more serious than it sounds, because unskilled labour depends greatly on skilled labour. Therefore, it tends to increase unemployment.

Industry these days is talking about doing without a wages policy. It may be that the big companies could negotiate satisfactorily. However, I suggest that is only in their own interests. If they took the example of Ford and allowed massive wage increases, as occurred recently, such increases would go on their prices and be contrary to the national interest.

Many trade unions have already settled within the 5 per cent. limit. I am referring to moderate unions, such as the National Union of Hosiery and Knitwear Workers in my constituency. If, in compliance with Government policy, workers in one industry settled for about 5 per cent. and then saw the Government drop price controls and pay policy and let other industries do what they wish, they would consider that to be unfair and intolerable.

I expect that my right hon. Friend the Chief Secretary knows that there is widespread discontent with the Government's policy on wage control among many trade unions. I recently attended a meeting of the South Derbyshire branch of the National Union of Mineworkers. Representatives at that meeting said—in simple Midland terms—" We are sick of the Government's 5 per cent. wage limit." We must bear that in mind.

I agree with most hon. Members that the Government's incomes policy is in many ways unsatisfactory and full of anomalies and inadequacies. But I invite hon. Members on both sides of the House to consider the alternative. No doubt, the right hon. and learned Member for Surrey, East (Sir G. Howe) will condemn the Government's policy, but I am absolutely certain that he will not offer any alternative. There is no alternative, except to apply some form of sanctions on excessive wage increases.

The right hon. Member for Lowestoft talked about the desirability of returning to free collective bargaining. He said that at the moment there was an imbalance in trade union power. Most Opposition Members know that if there were a return to free collective bargaining, trade unions with powerful bargaining power could enforce exorbitant wage increases. If trade unions are given power to enforce exorbitant wage increases, there will be increased income, wealth and standards of living for the strong and powerful at the cost of the weak. That is the very opposite of Socialist policy. I suggest that there is therefore no argument at present for discarding the Government's policy.

Mr. Litterick

Is my hon. Friend suggesting that the way to help the weak is to make the strong weak?

Mr. Cronin

I cannot give a "Yes" or" No" to a question in such general terms.

Mr. Litterick

My hon. Friend put it that way himself.

Mr. Cronin

I suggest that the Government, by controlling the excessive bargaining power of strong unions, are helping those who have wholly inadequate wages. My hon. Friend knows that many people are so placed.

Mr. Litterick

My hon. Friend will have to prove that argument.

Mr. Cronin

I submit that the Government's policy is the only possible one and that it must be enforced. Unless there is a statutory form of wage control, which is quite impractical for obvious parliamentary reasons, sanctions or discriminatory action must continue. Otherwise, inflation will return on an absurd scale.

Hon. Members on both sides of the House agree that there are many inadequacies in the Government's policy, but it has the support of the majority of the public.

Mr. Litterick

Who says so? Prove it.

Mr. Cronin

I do not wish to keep up a dialogue with my hon. Friend.

Mr. Litterick

Prove it. That is all I am asking my hon. Friend to do. He makes bland assertions about those who support the policy, yet gives us no evidence. One man's opinion is not proof.

Mr. Cronin

I should be the last person to suggest that one man's opinion could be taken as positive proof in this instance. I ask my hon. Friend to look at the public opinion polls. It is no use my hon. Friend laughing. These are the facts. Since it became clear that there was a clear-cut division between the Government and the Tory Party on wage policy, the public opinion polls have made it clear—much to the dismay of the Opposition—that the general public support the Government's policy and realise that it is the only alternative to a return to massive inflation.

Mr. Ivor Stanbrook (Orpington)

The hon. Gentleman is making a strong argument by his own standards for retention by the Government of a sanctions policy. Does he agree that, if so, it would be far better for that policy to be embodied in legislation so that justice would not only be done but would be seen to be done? Everyone would then know how he stood and how to adjust to the situation. The present policy is so secret that no one knows what the law is or what might happen.

Mr. Cronin

Legislation of that nature would be impractical with the present balance in the House. It would also be undesirable, because such action would be necessary for a short time only. What is the use of legislation to reinforce a policy which not only works satisfactorily but will inevitably be dropped, I should think, by the summer at the latest?

I suggest that there is an important dividing line here. Any of my hon. Friends who abstain, or vote with the Opposition, will certainly be handing over the working people they represent to an even more severe and reckless regime. How one votes tonight must be a heavy responsibility, even on those who hold strong feelings, such as my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick). I believe that they have a heavy responsibility to support the Government at this particularly critical time. I am confident that my right hon. Friends the Chief Secretary and the Secretary of State for Prices and Consumer Protection will work out with the Chancellor a better policy than we have at present. Some better policy must overtake the present one. But, until a better policy is found, we must support the present one because there is no practical alternative.

8.0 p.m.

Mr. Douglas Henderson (Aberdeenshire, East)

The hon. Member for Loughborough (Mr. Cronin) must rest easy at nights if he has no concern about the effect of the sanctions policy or about positive and negative discrimination. It would be hard to imagine a more blatant abuse of Executive power than the way in which the sanctions policy has been adopted against industry. It is very easy for the hon. Gentleman to say "The Government can choose from whom they buy cars or to whom they give export credit." But the legislation was voted upon on the basis that people should get export credit if they satisfy certain criteria. We now have the ludicrous situation where the Government will have to pay more for cars because they will not buy them from the cheapest bidder.

I believe that this House is placing public servants in an extremely invidious position if we are asking them to carry out policies of this kind on ministerial fiat only. We do not have to look very far back, or very far away, to realise what happened in the United States when during the Nixon Administration there was a gross and blatant abuse of executive power. What is the next stage? Will the Chancellor now ask the inspectors of taxes to examine the personal tax affairs of managing directors if their companies fail to carry out the Government's policy? Where does this end when there is Executive abuse of sanctions?

My right hon. Friend the Member for Western Isles (Mr. Stewart) recently raised the matter of Ford with the Prime Minister, and asked: What legal or moral basis does the right hon. Gentleman have for taking these proceedings against the company? The Prime Minister replied: I do not want to argue morality at the Dispatch Box. It is not a moral question."— [Official Report, 28th November 1978; Vol. 959, c. 216.] I am sorry to say that I think it is a moral question in terms of the rights of people and the rule of law. If a Government get away with this kind of behaviour, there is no telling to what limits they might go. Labour Members below the Gangway who are agonising about what they should do tonight must remember that very often my own party and other parties—it must be remembered that there is more than one Opposition party—have to agonise about how they will vote on a particular issue. On this issue, I have no more confidence in those who sit on the Conservative Front Bench than I have in those who sit on the Government Front Bench. We must examine the terms of these motions and realise that at the end of the day Governments will respond only if they are actually defeated in this House.

One can have as many meetings as one likes, and one can get as many ministerial assurances as one likes, but if Labour Members want to stop this sanctions policy they must go into the Lobby and defeat it. We heard a very moving speech from the hon. Member for Sheffield, Hillsborough (Mr. Flannery), who is temporarily absent. I expected to hear the denouement that that was the logical conclusion of the arguments he presented, because if Labour Members do not vote down sanctions tonight the Government will say quite rightly that they now have a parliamentary majority for them and can, therefore, carry on with this policy. Therefore, whatever may be the consequences on another day—and I gather that the Government consider there may well be a consequence on another day—on this specific issue, those who are opposed to this policy have a duty to go into the Lobby and defeat it tonight.

I have listened to the debate with a great sense of dejá vu about incomes policies and what happens. We have had a succession of incomes policies, probably over the last 25 years. Every new Government who come into office seem to take up an incomes policy and within two or three years there is a cosmetic operation after which the incomes policy starts again.

I was naughty enough to look up the debate of 18th July 1974, headed "Pay Board (Abolition) ". There the then Secretary of State for Employment, now the Leader of the House, said that the purpose of his order was to abolish the Pay Board and restore free, collective bargaining in this country ". He added: One of the main objections I have always had to the system of the Pay Board and the whole method of the compulsory control of wages is that it takes many essential effective powers away from the House of Commons…and places those responsibilities in the hands of bureaucratic boards and bureaucratic bodies of one type or another."—[Official Report, 18th July 1974; Vol. 877, c. 693.] That is a very queer denunciation of the policy which we are being asked to approve tonight. Let it be quite clear that, if there is a vote in favour of the Government, it will be claimed to be legislative approval for the sanctions policy and for its consequences.

I am not at all convinced that this policy will succeed for very much longer. Those of us who know the real situation outside know perfectly well that the whole system is riddled with anomalies. For example, we are told that there can be agreements for productivity. Yet those of us with rural constituencies know that in regard to farm workers, for example —I notice several Labour Members from rural constituencies—it is not possible to have a productivity deal for one farm worker on a farm. The average number of farm workers on a farm is now two or three. How does one have a productivity deal for them?

We know perfectly well that yet again the public sector has fallen behind in relation to the private sector. One of the most salutary things I did during the recess was to go round all the public service offices in my constituency, and the public servants at whatever level—manual and non-manual—told me that they feel they have been cheated. They said "Had this policy worked, the differential between our wages and those in the private sector would have been constant between 1975 and now, but instead a gap of between 25 per cent. and 30 per cent. has opened out." The Government will face a massive explosion of anger from the public sector within the next few months, if not weeks.

Mr. John Home Robertson (Berwick and East Lothian)

Does the hon. Gentleman honestly believe that the kind of free-for-all about which the Conservative Opposition are talking will help the low-paid farm workers and the low-paid public sector employees to whom he has just referred?

Mr. Henderson

I am grateful to the hon. Gentleman for that intervention. It shows his concern for the low-paid farm worker, but the fact is that the low-paid farm worker will get very little out of this present policy. The farm worker is being held to 5 per cent., despite the fact that productivity in agriculture has been higher than in any other industry over the last 10 years. But the farm workers still have not had the benefit of that and are told by no less a person than the Minister of Agriculture, Fisheries and Food "I am sorry, you are stuck to the 5 per cent. policy, and unless you can work out some form of productivity deal you will get no more ".

I do not believe that the hon. Member for Berwick and East Lothian (Mr. Home Robertson) is claiming that that is a right or fair policy. I hope that he will support some way in which the farm workers are recognised for the job that they do.

We should also consider the situation where there is competition for labour. In my constituency, there are a considerable number of incoming industries, in the building trade and in engineering, which, once in, set the rate for the job. They may think that someone should be paid £85 for a particular job. But a local firm which is already in existence, and whose rate is set at perhaps £70, is then caught under the pay policy. It cannot then compete with the incoming firm if it is to comply with the pay policy. Indeed, many company directors have told me "We shall see our business destroyed if we are held to this 5 per cent. policy, particularly with the threat of sanctions over our head."

There are then people with inbuilt protection. There are some groups and occupations which evade all pay policies—people such as architects, solicitors and quantity surveyors, who charge a fee related to the value of the project they do. That is an inbuilt protection against inflation if ever there was one. In industries such as engineering, where great technological change is taking place, people need to be rewarded for additional skills required to operate new equipment. How is this to be done under the 5 per cent. policy? Conversely, it could be said that if people felt that it was a fair policy, they would look for fairness in the costs they have to meet.

In my constituency, the local authority is putting up house rents by well over 5 per cent., and the Scottish Special Housing Association is putting up rents by as much as 14 per cent. How can the Minister ask—perhaps he has a magic formula —those working on the shop floor to take 5 per cent. and be grateful for it? This problem is more severe in Scotland where costs are much higher than in any other part of Britain. Our industry has been more productive. The index of productivity of Scottish industry has been higher over the last seven years than in any other part of Britain, but family incomes have been consistently lower.

No London weighting allowance or special provision is available for people in Scotland. Scottish workers, unlike those in London, are not insulated by a weighting allowance. Many people in Scotland are beginning to feel that what is sauce for the London goose should be sauce for the Scottish gander.

The hon. Member for Bristol, North-West (Mr. Thomas), with whom I do not always agree, put his finger on an important point when he said that the Government and the Opposition are totally obsessed with wages as the source of inflation. We have heard virtually nothing else from hon. Members in this debate. In fact, one of the reasons why inflation has fallen has been the change in commodity prices and the change in the value of the pound.

An article by Dr. Graham Hallett, senior lecturer in economics at University College, Cardiff, in the July issue of Management Today showed that, since the 1973 and 1974 rise in commodity prices, there has been a far more balanced and stable situation.

The fall in the dollar has been a protection to the Government in terms of the value of the pound. Let us not get wages out of perspective. It would be a cruel irony if working people were to abide by this policy loyally and rigidly and still find that inflation had leaped out of control because of situations far beyond what is relevant to them. This is what the Government may face in the next few months in relation to commodity prices. I should like to hear more from the Government and the Opposition Front Bench. We should not martyr ordinary working people on this policy. For goodness' sake, let us abolish sanctions tonight.

8.13 p.m.

Mr. Robert J. Bradford (Belfast, South)

In response to the request, Mr. Deputy Speaker, to be brief, I would like to make three points briefly. When my right hon. and hon. Friends read the Conservative Party economic policy, or at least some aspects of it, in the summer of this year, we were delighted to see the return to Tory policy in rejecting wage restraints and pay codes. One can imagine our disappointment when the Conservative Party did not enshrine what was a fundamental plank of its economic policy in its suggested amendment to the Loyal Address.

My right hon. and hon. Friends would have been impatient to join them in the Lobbies had the Conservatives had the insight and the courage to enshrine this fundamental plank of economic policy in that amendment on 9th November. However, better late than never. Tonight, we agree that the nonsense of wage restraint has to be rejected. My right hon. and hon. Friends will take the opportunity of doing that in the Lobby.

I want to make two further points. I want to illustrate why, in the context of the Northern Ireland situation, we reject this 5 per cent. policy on wage levels. It is clear that the Province has the invidious record of the lowest income in the whole of the United Kingdom. The hon. Member for Aberdeenshire, East (Mr. Henderson) will probably argue that Northern Ireland and Scotland are on a par. The fact is that Northern Ireland shares two-thirds of the wage level of the United Kingdom. If wage restraint is persistently imposed, there will be no opportunity to close that gap.

We would do the Ulster people a great disservice if we supported the 5 per cent. level of wage restraint. We also believe that the sanctions which accompany this restraint are to the detriment of industry in Northern Ireland and hit large profitable companies such as Ford. I have a Ford plant in my constituency. Why do we take the risk, through this wage restraint, of making a profitable company unprofitable, especially in the car industry, which is exposed to such extreme competition from countries such as Japan?

At the other end of the spectrum, we have companies such as Mackie's. Even when that company broke the phase 3 pay code last year, its wage levels were much lower than the norm in Northern Ireland. Even after breaking the pay policy in the last phase, Mackie's wage levels were still below those for any manufacturing industry in the Province. One wonders why Mackie's has resorted again to adherence to the pay policy. Why has it not the courage to continue to defy the pay policy in order to bring its wage levels up to the norm in Northern Ireland?

The answer is simple. The Government have obviously said that they will overlook last year so long as the company rigidly adheres to the policy this year. This ludicrous policy has not only run the risk of destroying a profitable company like Ford; it has also enabled companies such as Mackie's to hide behind the Government's skirts in failing to bring their wage levels up to the norm in Northern Ireland. This incomes policy hurts the lower income wage bracket.

I turn to the question of market forces. The right hon. Member for Chipping Barnet (Mr. Maudling) said that he favoured some kind of arbitration to achieve a realistic guideline for wage levels. I am not convinced that there are as many dangers as he imagines in free collective bargaining. I do not believe that we need to resort to that kind of arbitration in order to meet what might be nothing more than a bogyman.

If it is accepted that there are some inherent dangers in free collective bargaining—we on these Benches have been consistent in rejecting that proposition—it is possible to argue that market forces can offset some of those suspected dangers. When we talk of market forces, we must return to two or three fundamental considerations. In free collective bargaining, no trade union official with an ounce of sympathy for his members would demand a wage beyond what the company could meet in the light of its profitability. Conversely, no industrial concern could be driven to meet a wage demand that it could not afford.

An important consideration in this tension and conflict is productivity. The wage levels and consumer prices of the Kingdom throughout phase 3 show that profits somehow helped to bear the brunt of inflation. So we have an interesting possible cycle, of productivity leading to good profits which in turn lead to the ability to offset inflation, with some in hand to increase investment so as to maintain an increase in productivity.

We have not spent enough time today examining the pressure of market forces as a factor in inflation. If the Chief Secretary can deal with that, it will be to the advantage of the debate.

8.22 p.m.

Mr. Tom Litterick (Birmingham, Selly Oak)

This debate is supposed to be about inflation, sub-titled "sanctions "and so on, but it would not be taking place if we had not had a slump which all the orthodox wise men said could never happen because we had mastered the cyclical nature of trade in a capitalist system. A long time ago, I read, in probably the most widely read standard economic text book in the capitalist world —Samuelson's "Economics "—that we have now learned to control these cycles. John Strachey wrote at great length in his book that the bourgeoisie, as he called them, had learned to control the cycles of boom and slump. Crosland did the same.

They were all seized with the strange notion that the days of boom and slump were over. They were all wrong. We mislead ourselves if we narrow this matter down to a disquisition about inflation and who caused it, forgetting that we are talking about the emergence from a slump—I think. I do not know whether we are going through a boom or going through the decline of a boom or going into a boom. Nowadays, booms are so short-lived that one has to be acute to notice them at all. The last one lasted about 20 months and had a devastating effect.

Listening to Conservative speakers tonight—I exempt the SNP spokesman, the hon. Member for Aberdeenshire, East (Mr. Henderson)—from the right hon.

Member for Lowestoft (Mr. Prior) onwards, I was irresistibly reminded of the remark by the humorist Michael Frayn that the only strike that the English middle class would support was a lunchtime strike for a wage cut by trade union officials.

I wondered what the right hon. Member for Chipping Barnet (Mr. Maudling) learnt from his time in office. He blethered on about "wage-cost inflation ". He said it at least half a dozen times and then solemnly advised the House that there could only be, in his phrase, "a political solution ". Such economic illiteracy is hard to credit in someone who held the offices that the right hon. Gentleman held. He evidently learned nothing.

In the 1970s alone, one would be hard put to discover even a brief period in which it could be said that wages played an important part in the inflationary pressure. The right hon. Gentleman seems to have nominated himself as the exception, but I think that everyone else in the House knew that the inflationary boom—all booms are bouts of inflation —was characterised by a massive, spectacular and almost unprecedented increase in commodity prices.

It was not just oil—that was just the topping off of the process, the last dramatic stage. The prices of such things as wheat, tin, zinc and copper more than doubled between 1971 and 1974. Some of them rose by as much as 300 per cent. Then came the famous explosion of oil prices.

The magnitude of that increase was no greater than the degree to which other commodity prices had increased in the previous two or three years. It was just the time scale and the political implications that were different—plus the novel fact that the oil States themselves could not spend the revenues. So the effect was significantly deflationary, like a huge tax impost on all the developed economies.

In addition, in the Northern Hemisphere economies in any case there was a massive increase in the quantity of money available. It was not just Anthony Barber who was daft: they were all daft simultaneously. The quantity of money was being multiplied year after year in all the developing economies of the so-called capitalist world. That was adding further to the inflationary head that was building up. Labour was running like blazes to stay in the same place.

That kind of boom had to end, and it did so spectacularly, with the collapse of the property boom. At least in the British economy, much of the so-called investment of the time was not real investment. It was investment of the type that the then Leader of the Liberal Party went in for—fringe banks, playing around with "funny money ", borrowing short and lending long and disregarding the fact that interest rates were astronomical. That had to collapse. Not only did it collapse but the community was asked to bail out a significant section of the private banking system. We still do not know the true cost.

Those were the mechanics of that boom and slump. They had nothing to do with wages. Since then, the labour force has sought to catch up because of what happened in those years. It has been inhibited by successive years of wages policy because, sadly, my right hon. Friends are as obsessed as the Tories with the notion that inflation, as they will describe it, is caused by wage-cost push and by nothing else. They will make passing references to other possibilities, but in their behaviour they act as if wage costs were the sole cause of inflation and that if only they could control the movement of wage costs all their boom problems and their inflation problems would be over. Secretly, of course, they do not believe that. We know that they acknowledge in their behaviour the significance of the quantity of money. In a rather furtive way, they are operating a significantly restrictive monetary policy. Members on the Opposition Benches have not quite straightened out their policies. Time does not press for them as it does for my colleagues on the Government Front Bench.

I suppose that we must congratulate the Government on their political skill in having persuaded so many otherwise sensible people to support them and what is basically a nonsensical policy of wage restraint. Undoubtedly they have succeeded in doing that. They have persuaded a significant number of trade union general secretaries, who are otherwise normal sensible men. I suspect that at one stage of the game a number of trade unionists were terrorised out of their wits by what the Treasury told them. In any event, the Government worked the trick. They persuaded the general secretaries, who in turn persuaded their members that their wages were the cause of inflation and that if only their wages could be controlled we would enter some sort of capitalist Valhalla. They told them that productivity would rise infinitely and wages would rise infinitely and there would be no problems.

There is no proof that we have a wages problem. However, there is much evidence that we have the lowest wages in Europe. That is why organisations such as Ford stay in the United Kingdom: it is worth their while to do so. In Britain they have the cheapest labour in Europe, but in addition they have a highly skilled labour force. That labour force has had to work with successive Governments who have been determined to ensure that organised labour cannot use its bargaining power. That acts as an insurance for companies such as Ford. They can continue to expect to get cheap labour indefinitely in Britain.

We in the Labour Party are being asked to sell that policy to the people. As everybody knows, the Labour Party does not support the Government's policy. It does not agree with any aspect of the Government's policy in this regard. We know that the TUC is virtually unanimously opposed to the Government's policy. Nevertheless, Government spokesmen say that they know that the majority of people support wage restrictions. My right hon. Friend the Secretary of State for Prices and Consumer Protection advanced that rather sad and pathetic argument and I asked him how the Government knew that they had the support of the majority. All he could say in reply was that some Tory newspaper editor had told him so.

Early-Day Motion No. 101 is concerned with agricultural wages. It tells us that the Agricultural Wages Board has recently raised wages to a level that is lower than that quoted in the White Paper entitled "Winning the Battle Against Inflation ". The White Paper quoted £44.50p a week as the level beyond which the Government will not allow any flexibility. That is because it would go beyond their 5 per cent. We know that there are many agricultural workers.

Early-Day Motion No. 45 refers to shop workers. They have been given a wage award that gives them less than the Government's magic £44.50. It is marginally less than that sum. They will not get any change out of any flexibility. That would seem to be so from the remarks of my right hon. Friend the Secretary of State for Prices and Consumer Protection.

There is yet another Early-Day Motion on the same theme that refers to the bakery workers. Do my right hon. and hon. Friends seriously believe that the agricultural workers, who know how wage restraint policies are affecting them and their families, shop workers and bakery workers support their policy? Do they seriously believe that? How could sane men who have family responsibilities support such a policy? It merely guarantees that their standard of living will be cut. If they are restricted to the 5 per cent. policy and if the cost of living—we have been told confidently that it will increase —rises by between 7 per cent. and 8 per cent., we are guaranteeing to everybody who is obliged to adhere to the 5 per cent. policy that their standard of living will be cut, if only by 3 per cent. But it would be much more. Ordinary workers are already working at subsistence or lower than subsistence levels, and we are asking a great deal of them. On that basis alone my rt. hon. Friends are on shaky ground when they assert that every-everybody supports their policy. I think that they are more likely to agree with my attitude.

I support the Government. It is my intention to keep them in office for as long as possible. From my contact and conversations with them, members of my constituency party are of the same view. They support the Government. They wish the Government to remain in office until it is opportune for them to name a date for the General Election, when we shall win. It is as simple as that. That does not mean that they support this tatty policy.

For that reason, many people are prepared to wear the idea of a Member who has no truck with this type of policy going in the Lobby to support the Government. They, too, are prepared to be expedient and to accept expediency in the name of a higher purpose. I do not expect everybody to accept that ideal, but I am sure that I make myself plain.

Mr. Home Robertson

There is widespread support for the Government's policy, surprising though that might seem to my hon. Friend. My presence in the Chamber is evidence of that. The Government have widespread support from low-paid workers and farm workers. If it were not for the support of farm workers, I should be sitting on the other side of the House. They support the Government's economic strategy. My hon. Friend falls into the same trap as many others of concentrating on the wages aspect of the policy. The support which the Government now have is based on the development of what we hope will be a Socialist policy which will cover wages and prices.

Mr. Litterick

My hon. Friend's interjection is predictable. It is time that he learnt the difference between the Labour Party and the Labour Government. I shall leave him with that thought. It is not an academic thought. I am tired of the Labour Party being discredited by Labour Governments. I shall leave that argument for another occasion and another place.

A small group of 26 of my constituents have been engaged in a wages dispute for more than three years. They are ideal Tory workers. They never say "Boo" to the proverbial goose. We never hear about them. They are dutiful and deferential. They are classic Tory workers.

Those workers became involved in a regrading exercise about three years ago. There was an institutionalised job evaluation scheme. It was decided that the 26 building workers should be upgraded. They engaged in procedure which validated that decision. But then the company said "No ". The 26 workers, through the Union of Construction, Allied Trades and Technicians, bargained in the normal way. All the constitutional bargaining procedures were available to them, and they used them. However, they could not reach an agreement and, although the employers did not like it, the matter was taken to arbitration.

The decision from ACAS was favourable for the workers, but at that point the company directors wrote to my right hon. Friend the Secretary of State for Employment telling him that a decision had emerged from ACAS which would result in an increase of more than was permitted under the pay policy. My right hon. Friend wrote back saying that he could not accept such an increase. Yet at the same time Ministers were blether-ing on about flexibility. This disagreement has been continuing for three years. There was the same hassle last year from the same group of workers. Last year they could not have more than 10 tier cent. There was no flexibility.

What will happen this year? Is the fabric of Christian civilisation to crumble if these 26 workers, who are employed by the huge Cadbury-Schweppes conglomerate in my constituency, are allowed to have their regrading, as has been agreed under the procedures available to them? Having been ideal employees, dutiful workers, and having obeyed every injunction and rule, they are nevertheless being put down. Are they to be put down yet again this year? Are they once again to be refused what their pay determination system has said they should have?

If these workers are not allowed the award made to them more than two years ago, it will be a sad day for the system. They have every good reason on their side. The company has every good reason to pay them. But it also has the means to frustrate the bargaining system. That means is the State. The company has learnt that all it has to do is to appeal directly to the Secretary of State for Employment, and the workers will be sunk. The Secretary of State will rule against an increase immediately if it is one iota beyond the 5 per cent. That is in flat contradiction to what is being said in the White Paper "Winning the Battle Against Inflation ". That White Paper talks about flexibility but in practice there is none. There should be.

Several Hon. Members rose—

Mr. Deputy Speaker(Mr. Oscar Murton)

Order. Four hon. Members still desire to speak, but the clock moves on fast.

8.42 p.m.

Mr. Hal Miller (Bromsgrove and Redditch)

I shall do my best to comply with your request, Mr. Deputy Speaker, but I have important points to make, and having sat throughout the debate I feel entitled to make them.

There has been one half-hearted speech in support of the Government's policy from the Labour Back Benches. It is a little galling to be accused of putting party politics before principle and then to hear the hon. Member for Birmingham, Selly Oak (Mr. Litterick), who is apparently opposed to the policy, indicate that he intends to support it in the Lobby for political reasons.

We have not heard so far to what wage increases are to be related. I agree with the hon. Member for Selly Oak that wages increases by themselves are not necessarily inflationary, but I add the proviso that they should be accompanied by an increase in output. However, hon. Members below the Gangway have not yet come across with any suggestion that increases should be earned by increased production. Until we reach some understanding on that basis, we shall inevitably be left with some form of pay policy.

Let us consider the means by which the Government can enforce that policy. The Prime Minister said that where he considered something to be in the national interest he thought it right for the Government to use any means within their power. But I question whether some of the discretionary action that has been taken is within their power. I should like an unequivocal answer to the point from the Chief Secretary.

When I was in the position of exercising power I was always advised by my legal advisers in public administration that discretionary power could be exercised only for the purpose of the relevant orders under which it was granted, not to range over the whole field of Government policy. Many times have I been tempted to exercise discretionary powers in pursuit of some other end of Government policy, but I have always accepted that it had to be limited to the specific purpose for which that discretion was granted in that particular ordinance.

The purchasing considerations may be slightly different, but the value of public money is at stake none the less. The export credit, and the other grants, would seem to my mind to fall clearly outside the realm of legitimate exercise of power. How is Government policy helping that increase in output which can alone pay for the increase in wages? The sad fact is that the Government policy has led to a lack of investment and to stagnant production, and has taken away all incentives from both management and men to remedy that situation. Until we can get out of this straitjacket, the Government policy envisages that we live in a static or a declining economy, and they are prescribing rules for how we ought to live in that kind of society.

I reject that analysis and therefore I reject the policy. I think that we need to have a dynamic policy, but the Government's whole effort up to now has operated entirely in the other direction. It is therefore no surprise that the index of industrial production has remained constant throughout their term of office.

I turn now to a brief examination of the Ford pay settlement and the effects of sanctions on that company, because they illustrate very well the point I am trying to make. To my mind they also show that the Government do not understand either what their policy is or what its effect will be. The Ford pay settlement has been declared—" decreed" would perhaps be a better word—by the Government to be outside the guidelines. I think that even the Government would agree that there is a fair amount of uncertainty as to the exact wording and meaning of the pay guidelines. Certainly it has not yet been possible to test their meaning in a court of law. However, assuming that the 'White Paper is intelligible and definitive as it stands, the Ford company believes that it has settled within the guidelines. How is that disagreement to be resolved? The Government have just declared that the Ford settlement is outside the guidelines and there is no means of testing that declaration.

On the other hand, the Ford company makes it plain that its pay settlement is designed to remedy the unofficial stoppages which, over the last year, cost the company £104 million. The company estimates the cost of the pay settlement to be about £48 million. Therefore, even if it is only half successful, the settlement will mean that its costs are more than covered. That would seem to me to be adequate proof that Ford is within the lines of policy. In case there were any reservation on the part of the Government, Ford has given a categorical commitment that it will not include in its pricing any element for increases in labour costs above 5 per cent.

So how is Ford outside the Government's guidelines? The fact that the negotiations began on a different basis does not mean that their conclusion was outside the guidelines. Furthermore, how can the Government now determine that the Ford productivity scheme will not work when they have sanctioned other productivity schemes? There is grave doubt about the efficiency of such schemes and whether there is any monitoring of the productivity so gained. In the case of Ford, the company is penalised before the scheme has even got under way. Where is the justice, and where is the sense of comparability in that?

The company firmly believes that the settlement was within the guidelines. It admits that it had to increase the starting offer to 9.7 per cent. before the unions would even discuss productivity, but once the company got the productivity talks going it brought the settlement back within the total effect of the guidelines. Why should sanctions be imposed before the scheme has even started?

Play has been made of the fact that Ford is a large multinational company and is therefore probably immune to the withdrawal of Government purchasing, which might, anyhow, free vehicles to be sold at higher prices to private buyers. That analysis is much too facile.

The Government have created uncertainty in the mind of one of our most successful companies which is investing most in this country and producing the higher wages that Labour Members wish to see for union members. Uncertainty has been created about the effect of Government policy and the direction it is to take. There is, in particular, uncertainty about whether the Price Commission will be brought into play by the Government, with the threat of further sanctions.

The Government should accept that uncertainty is a grave deterrent to continuing investment by manufacturing enterprises. The motor industry is now a European industry and it is easy for Ford to switch production and investment to other parts of Europe. If it is led to believe that the Government are creating a hostile climate towards investment, it will draw the obvious conclusion.

A senior member of the Ford board told me that at least the company in Britain could always say to Detroit before that, although there were problems of industrial relations and taxation in Britain, this was a country governed by the rule of law where firms knew where they stood. That no longer applies. Cannot the Government understand that that will have an effect on the company? If they do not, there is no hope for us until we get them out.

The Prime Minister said that Ford is only an example of the nation's dilemma and that people have to make up their minds whether they want prices kept down. The Government's record on keeping prices down, during heaven knows how many phases of pay policy, cannot be counted as a success by anyone. The reason is that the policy is entirely static. It contains no dynamic or incentive for the ordinary man to work harder.

I criticise the concept of productivity that has been applied, even by the Ford Motor Company. The overcoming of absenteeism or stoppages merely means that there has been a greater utilisation of capacity. It has not resulted in an improvement in the rate of work or output, which alone is the basis on which we can hope to compete with European countries. That is why the Government's policy is failing.

The people of this country expect us to resolve our differences and to get away from the acrid recital of history. We were taken back to the 1920s in the speech of one Labour Member earlier. For heaven's sake, we are about to try to live in the 1980s. We have to live together in this country.

I understand the feelings of certain Labour Members who believe that judges and the law in the past discriminated against workers. But why do those hon. Members want a statutory minimum wage? Why do they require so many employment laws to be passed? We must reach a consensus in these matters. It is no good blaming each other while the country goes to pot. We must get together and work it out. The people must have their choice, as the Prime Minister has said. If the Government are not willing to bring in a statutory policy, they have to proceed in the other direction by means of free bargaining.

The difficulty is that in present circumstances bargaining is not free. My right hon. Friend the Member for Lowestoft (Mr. Prior) suggested a secret ballot as a means of remedying the balance. I would go further than that. I believe—and this will come as a shock to Labour Members below the Gangway—that we need stronger unions. I wish to move towards a situation in which no benefits would be payable to unofficial strikers. I believe that once a union called a strike benefits could be paid out. But until that position is reached, I suggest that no benefits should be payable.

We must also move towards maintaining the differential between a person who is in employment and one who is out of work. I am trying to advance some constructive proposals to develop the consensus necessary to get this nation moving again. But, as the Prime Minister sayas, the people will have to make that choice. I only wish that the right hon. Gentleman would give us the chance.

8.58 p.m.

Mr. Sydney Bidwell (Ealing, Southall)

I am disappointed that the amendment tabled by my hon. Friends and myself has not been called. We wanted to show where we stand in respect of our proposal, which was designed to improve the original motion.

The Opposition's amendment is not designed to improve the motion. I feel that the prophecy of the hon. Member for Bromsgrove and Redditch (Mr. Miller) will not come to pass, partly because of the experiences of the trade union movement following the Tory Industrial Relations Act. Trade union memories of that oppressive legislation are too long.

I am optimistic about the outcome of the General Election and about the continuation of the development of British Socialism. We certainly do not see that development happening now, but we need to develop that concept if we are to bring about the partnership in industry of which the hon. Member for Bromsgrove and Redditch spoke.

There is no time to dwell on the matter of Labour movement policy running counter to Government's policy. The policy of the Labour movement clearly spells out the terms under which inflation can be successfully fought on the basis of the major decisions of the TUC, which is the bedrock of the British Labour movement, and of its political arm, the Labour Party. Sooner or later, the Government must get down to the brass tacks of accommodating that policy and of realigning themselves with the trade union movement. I hope that next week that process will recommence.

I hope that we shall implement the understanding that was achieved between 1970 and 1974 when the Labour Party was in Opposition. In that period we were all Socialists, and when in Opposition one achieves Socialist unity. But when the Labour Government are in power, many of our colleagues tend to veer away from Socialist aspirations. However, we live in hope about future developments.

I shall not spend too much time dealing with the alternative strategy. However, my colleagues and I do not just moan about the Government—we spell out alternative proposals. I am a sponsored member of the TGWU, I am a London Member, I have many friends in the Ford establishment and constituents in the Ford plant at Langley. Therefore, I followed the dispute with a great deal of interest. It was never on from the word "go ", bearing in mind the background of the TUC, the Labour Party conference and other events. It is the TUC first and the Labour Party second, as we all should know from the messages of history.

That should be remembered by the right hon. Member for Newham, North-East (Mr. Prentice), who was sponsored by the Transport and General Workers Union and who owes his presence in politics to substantial backing from that union. I do not dwell on his speech, but it does not make sense to have a 5 per cent. norm plucked out of the air when the previous norm of 10 per cent.-plus was supposed to be overcoming inflation. It does not make sense, particularly in the light of doubling of Ford profits.

German workers say that British labour is much too cheap and the Germans fear the extension of investment in Britain as a result of that. That has far more to do with the establishment of a modern Ford plant in South Wales than with special favours to the Prime Minister.

If sanctions are invoked, it will be very serious. The figures that have been elicited by the hon. Member for Glasgow, Cath-cart (Mr. Taylor) show that Government orders placed with Ford are substantial. That is why the TGWU general secretary last week wrote to the chairman of the TGWU group in this place—it is the largest of the trade union groups here—and reminded him that the policy of sanctions must inevitably injure union members in the Ford plant. We will not have it. It is not realistic. However, accommodation with the trade union movement is realistic and I wish my friends the greatest joy when they meet in the middle of next week.

9.2 p.m.

Sir Geoffrey Howe (Surrey, East)

I begin by responding to one point that was made by the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) and which was touched upon by other hon. Members. I make it absolutely clear that the Opposition amendment underlines our total commitment to the need to conquer inflation in this country. It also underlines the basis upon which the Opposition are united in the approach to that problem.

Labour Members have often cited the document that we published last year" The Right Approach to the Economy ". Our policy is set out in that document. It was reaffirmed by my right hon. Friend the Member for Lowestoft (Mr. Prior) this afternoon, and in the Queen's Speech debate early last month by the Leader of the Opposition.

The irony of it, and perhaps a hopeful feature, is that the Prime Minister and the Chancellor of the Exchequer last summer and in the summer of 1977 were seeking to achieve the same results by some of the same measures. We all start by emphasising the central importance of monetary policy. We all go on to assert that if monetary policy is being brought under control and the rate of expansion is gradually coming down, then the average total pay bill of the nation must come in line with that. Otherwise, employees will be priced out of their jobs, investment will be priced out of existence and firms will be driven into bankruptcy. There is a need for alignment between pay movements in general and monetary policies.

That average movement of pay cannot emerge as a single figure. It can only emerge in practice as a result of a myriad of arguments and agreements in the market place. On both sides of the House—and, indeed, in Down, South as well—

Mr. Powell

Yes, we are all right so far.

Sir G. Howe

—we were all agreed that we were setting out on an orderly return to normal collective bargaining. That return must be responsible, because those who are taking part in the process must recognise the responsibility for the consequences of their own actions. It must have regard to the realities of the bargains that are being struck, and it must be founded upon a proper balance between the power of those bargaining on each side of the market place.

My right hon. Friend the Member for Newham, North-East (Mr. Prentice) drew attention to the way in which the CBI has been spelling out in its policy document how we should be moving back in that direction. The Government must recognise that in so far as they have been seeking to go in that direction they have not received stronger support than they have received from the Conservative Party. I hope that tonight we shall hear from the Chief Secretary no more nonsense about the position that we adopt and that we seek to get the Government to adopt.

The Leader of the Liberal Party asserted a different point of view. Faithful to the gospel according to North Cornwall, he asserted his party's continued commitment to a statutory policy. I believe that the great majority of hon. Members on both sides of the House, certainly those who have had experience of Government or have been near to it, have now reached the view that it is not in the end possible or right to try to achieve the answer for which the right hon. Gentleman looks by Government control, even if that control is imposed by statute. Those of us who have sat in various pay committees of various Governments wrestling with the differences that must be struck between this and that interest group find ourselves driven to the conclusion, as the House was in 1968–69 and again in 1973–74, that that approach is not on. Therefore, I part company with the right hon. Gentleman there.

However, I agree with the right hon. Gentleman that if the Government are seeking to control pay, or if they are not but are seeking, as the present Government are, to intervene sporadically and unpredictably in the labour market, that should be done only upon a basis that is lawful, credible and above all evenhanded. It is because none of those things is true that we have criticised the Government tonight.

However one looks at the matter, therefore, there is no justification for the approach now being adopted by the Government. It does not work, because it cannot. Above all, it is essentially and irretrievably unjust.

First, the policy is indefensible to those who conduct bargaining on either side of the market place and to the country at large. Nobody on the Government side any longer really believes in it. When we look back at what happened in the last pay round we see that the policy was asserted as a 10 per cent. policy. The average outtum was 14 per cent. according to one calculation and 16 per cent. according to another. In the present pay round, with 5 per cent. asserted as the policy, that policy is already being destroyed by the exceptions that the Government have created and are continuing to license.

We see, for example, that in one of the paragraphs of the obscure text by which Ministers are guided in these matters provision is made for special cases to be considered by the people on the Government's undisclosed pay board. In the Financial Times of 25th November, it was reported that the number of British workers already demanding special exemptions under that paragraph had risen to about 1½ million workers in the first quarter of the present round—ambulance men, plumbers, heating and ventilating contractors, nurses, BBC employees, British Waterways Board employees, provincial journalists, farm workers, white collar civil servants—all of them seeking to take advantage of an exception which begins by driving a coach and horses through the 5 per cent. pay policy.

The activities of the wages councils cause immense bewilderment to employers who are trying to observe what they see left of the 5 per cent. policy. This summer, the Unlicensed Places of Refreshment Wages Council awarded increases of between 16 per cent. and 32.9 per cent. The Retail Bookselling and Stationery Trades Wages Council awarded increases of between 20 per cent. and 22 per cent. The Retail Bread and Flour Confectionery Wages Council awarded increases of 25 per cent. There we have a second group of licensed loopholes in the increasingly incredible 5 per cent. policy.

The third group consists of those who were mentioned by my right hon. Friend the Member for Lowestoft, the applications under schedule 11 which are going through—150 of them last year and almost 500 in the current year. As has been shown, about half of those are probably collusive, connived at by both employer and employee as a means of getting round the 5 per cent. policy and, what is more, connived at by the Secretary of State for Employment himself. As I understand it, he has described the schedule 11 exceptions as a very useful safety valve during a period of pay policy. Yet we hear the Chief Secretary trumpeting from time to time to the effect that the Government will certainly not turn a blind eye to this and that they will not stand by idly while it goes on. They do not stand by idly. They design and operate loopholes to allow the policy to be ignored.

Then we have the greatest exception of them all,the SFPDs, as they are known—the self-financing productivity deals—about which some astonishing comments have been made by people in all parts of the Labour Party. We have had several Government supporters today proclaiming their membership of ASTMS, and I do not hold that against them. But, since the beginning of August of this year, the general secretary of ASTMS has been following the orders which he gave his union at that time: Keep all wage deals secret. Don't let them know. Go for your self-financing productivity deals, but absolute discretion should be maintained, with no publicity and, above all, no contact with the Department of Employment. So the policy ceases to be policed in that.

Then we find one of the national officials of the Transport and General Workers' Union, Mr. John Miller, admitting only four or five weeks ago in a television programme that most of the earlier productivity deals which he had negotiated were phoney.

If one looks for a specific example, my hon. Friend the Member for Croydon, Central (Mr. Moore) has obtained the figures about what has happened in the much-vaunted productivity bargaining in the National Coal Board. Between the first half of 1977–78 and the first half of 1978–79, when the great productivity agreement went through, output of coal per underground worker went up by 1.6 per cent., whereas average wages per employee went up by 24 per cent. So we see the reality of this policy, and we must ask whether any Government supporter any longer believes in this policy and whether even the Prime Minister himself does.

Against that background, it is no wonder that Ford is the only case which so far has been wheeled before the Great British public for denunciation. We are witnessing what someone has described as the operation of the law of increasing marginal futility, and the Government are defending a Maginot line of mythology. It is incredible.

Beyond that, it is grotesquely unjust. My hon. Friend the Member for Broms-grove and Redditch (Mr. Miller) described very fully what has happened in Ford, and it is worth examining that as one example of it. As we all know, Ford paid more than 5 per cent. Was it because the company passionately wanted to, because it was determined to reduce its profits, because it was profoundly committed to the cause of spitting in the eye of the Government and overthrowing their pay policy, or because it was committed to exercising its own strength and was lusting to give away more money than it intended originally? That is absolute nonsense. In the words of my right hon. Friend the Member for Chipping Barnet (Mr. Maudling), we are living in cloud cuckoo land if we think that is the reality.

Ford paid the amount that it did at the end of the day because it was obliged to by the exercise of trade union power —trade union power, incidentally, probably provoked by the existence of the guidelines to press beyond 5 per cent. at all costs. That was the one thing that the unions were determined to do. They had declared in advance their intention to do so.

Why in those circumstances should Ford be subjected to punishment for what it was obliged to do in those circumstances, and punishment of a most extraordinary kind? I take just one example of the many elicited by my hon. Friend the Member for Chingford (Mr. Tebbit). He asked how widely extended the Government's policy of sanctions was in relation to Ford, and on the 1st of this month the Chief Secretary said: The Government's decision is not to place further contracts for Ford products, without regard to where they are made."—[Official Report, 1st December 1978; Vol. 959, c. 418] So that Ford vehicles coming from the factories of Belgium and Germany or anywhere else round the world are equally subject to the sanctions policy. How can anyone suggest that that is a just or a sensible policy?

The Prime Minister may not remember what he said at the time of the last Ford settlement in the autumn of 1977, when he was congratulating himself and Ford on a decision to place a Ford plant near his own constituency. He said this: Ford have shown confidence in Britain. In return we must do all we can to justify that confidence. He should be ashamed of himself.

The Secretary of State for Prices and Consumer Protection, at one point in his somewhat discursive speech this afternoon, said that the Opposition had taken up the cudgels in these matters only on behalf of Ford, and that it was only when a big company came along that we became interested. Ford is the only company that has been dealt with in this pay round. But has the right hon. Gentleman forgotten the two debates we had earlier this year in which, when the Ford settlement had been accepted, we were championing the lb hundreds of smaller employers who had been treated just as unfairly?

This week, since this debate was first advertised, we find an even more curious and disturbing example. The British Exhibition Contractors Association has been subjected to sanctions, so we now know. What has it done? That association arrived at a settlement, as I understand it, of 10 per cent. It was then subjected to strike action at the peak of the period when the Motor Show was being put together and had no option but to settle for a figure which is said by the Department of Employment to be 11.8 per cent. What was it to do? The Ford stand at the Motor Show had already been struck. Was the association to resist the strike and make sure that no other stand was on display at all? What option did it have? But the Government, once again, with grotesque injustice, brought their sanctions to bear on an employer instead of anybody else.

What can the association do now? It is told that it must renegotiate the agreements, agreements which are binding not just on the 170 firms which are members of the association but on many others which are bound by the same pay scales. What good does it do the Government in their counter-inflation policy? All Government contracts for exhibition work are met by competitive tender anyway—they go to the lowest bidder. Yet the Government have withdrawn altogether from that market. About one-third of those firms depend on Government business for survival. What is to happen to them?

My hon. Friend the Member for Gloucester (Mrs. Oppenheim) has given me details of a firm in her constituency which tendered for the Royal Navy stand at the Boat Show. which is to take place in a few weeks' time. That firm was desperate for work and it deliberately submitted a tender at a very low price with a very modest profit margin in order to get it. The firm was telephoned by the Royal Navy spokesman and told that its contract price was the lowest and that it would get the work but that he was waiting for the go-ahead. Ten days later —yesterday, indeed—the Royal Navy spokesman rang again and said that he could not place the contract with that firm after all and gave no explanation whatsoever.

There will, therefore, be no Royal Navy stand by the firm at the Boat Show and in Gloucester the firm will have its employment jeopardised. One is not surprised that the Government gave no explanation of what was going on.

The matter goes a great deal further than that. As I understand it, the Government, having withdrawn their custom from British firms in this business, are now deliberately inviting and receiv- ing applications from foreign firms. One firm received from the Department tender forms for exhibition construction in Bahrein and Cologne. That firm has been asked to return those tender forms because the Government will no longer go to it. The Department of Trade stand at the Paris exhibition was tendered for by a British firm which was told that it had submitted the lowest tender. The contract was withdrawn from that firm and has now gone to a French firm.

So far, new applicants for the list of tenderers with the Department of Trade include two Italian firms, and three German firms are applying to be on the Department's list. This is not the economics of a counter-inflation policy. It is the economics of a self-destructive madhouse.

The policy of the Government is unfair and unjust because it misses, as my right hon. Friend the Member for Lowestoft pointed out, the central problem. These problems are not with us because employers are lusting to give their money away, or because they are so overcome with a surfeit of power. They are happening because the scales of collective bargaining are hopelessly tilted in the other direction to an extent which is quite unjustifiable.

The Prime Minister himself, in a speech to the Labour Party conference, said quite candidly that society today is so organised that every individual group almost has the power to disrupt it. How is their power to be channelled into constructive channels? What have the present Government done about it, save to do everything possible to strengthen the hand of the militants and channel it into unconstructive channels?

The problem remains; and, indeed, it is getting worse. This House of Commons will be failing in its duty if we do not begin to speak up not just for the commuters and hospital patients and those who are affected by increasingly disruptive action but for the ordinary workers themselves, who have a great deal more common sense in these bargaining situations than some of their leadership will acknowledge.

Labour Members know that we must begin to restore the balance of power in the direction of workers of common sense. Would that they had as much courage in these matters as the general secretary of the Union of Post Office Workers. Is it not time for those who agree with him to say so? " Democracy" is seldom absent from the lips of Labour Members, particularly those below the Gangway. But we had a very curious observation from the hon. Member for Bristol, North-West (Mr. Thomas) this afternoon. He denounced my right hon. Friend the Member for Lowestoft and said that my right hon. Friend would like to have ballot after ballot after ballot and take away any power that the shop stewards might have. What kind of view of democracy is that?

The other day, the newly-elected general secretary of the Amalgamated Union of Engineering Workers, Mr. Terry Duffy, said in terms—and much to his credit—that in his view each worker who is invited to take part in industrial action should have a right to take part in a ballot to decide whether he did. If that argument is being advanced by a union which sponsors some of the Members on the Labour Benches, is it not time that we began to hear that argument being supported from the Government Front Bench?

Mr. Emlyn Hooson (Montgomery)

The right hon. and learned Gentleman has said that the position is getting worse. There are grounds for agreeing with him about that. But he said that he was in favour of "realistic and responsible" free collective bargaining. What is the difference between that and free collective bargaining? What would he advise the Government to do if they were of the opinion that the bargaining was not realistic and responsible?

Sir G. Howe

The Government must do what the present Government set out to do in the summer of 1977. What Liberal Members do not understand—but which is the lesson learned by members of Governments of both parties—is that it simply is not possible, for an extended period, for a Government to regulate these things by statutory or other intervention. We must return to responsible collective bargaining—

Mr. Hooson

What if we do not have it?

Sir G. Howe

It will be a long and painful road to travel. [HON. MEMBERS: "Oh."] The Lord President may laugh as he likes now, but that was the under- standing which he had when he was elected to office in 1974. It was the understanding on which hon. Members were elected to office. They have not allowed us to move in that direction.

In the real world in which we live, the balance of power is as it is. Sanctions against employers are exactly the opposite of what is needed.

Beyond that injustice, the point made by hon. Members on both sides of the House is that these sanctions are arbitrary and haphazard in the worst possible sense of the words. There is no pretence by the Government that these sanctions are now being applied in any consistent way. During the last round, the nationalised industries were invited to apply them. Now they are merely invited to take account of them. They have disappeared from that field. The Chief Secretary was saying, until a few weeks ago, that local authorities would be applying them, but it has now been concluded by the Government that it is not appropriate for them to be applied. With central Government, from month to month they become increasingly haphazard.

Last year Ford was not subjected to sanctions, because, as the Chancellor told us last year: As the Government have previously made clear, we regret the Ford settlement: but after consideration it has been decided that there is no discretionary action which would be appropriate in this case."—[Official Report, 1st December 1977; Vol. 940, c. 322.] Why was action not appropriate last year when this year all sorts of actions are appropriate?

How can anyone possibly see any sense in that? How can it be justified that the sanctions should he imposed this time after a secret court, where no reasons are given, and from which there is no appeal—a kangaroo court, as my right hon. Friend the Member for Newham, North-East said—and where the Government embark upon the public humiliation of one of Britain's most successful industrial leaders? It is a disgraceful approach.

It might be possible to bear that with fortitude if everybody was being treated similarly, but what do we find? It was reported last week that the Transport and General Workers' Union has decided to award pay increases to its officials to the tune of 23 per cent. What are the Government doing about that? A national officer of the union is quoted as saying: I doubt if the Government will apply sanctions against us…How do you take sanctions against a trade union? We are more likely to impose sanctions on them. What about the Labour Party at Transport House—that thriving hive of industry on which the nation depends? It has awarded pay increases to its employees to the tune of 12½per cent. Is there a breath of sanctions there? Has the Prime Minister decided to withdraw his Cabinet colleagues from meetings of the national executive committee or to take any courageous action of that kind?

Then we come to the news that the TUC has awarded increases to its own employees at the annual rate of 20 per cent., but once again we find that the Government regard it as not appropriate to impose sanctions. One wonders why.

My hon. Friend the Member for Ching-ford elicited earlier this month the information that the TUC is receiving very substantial discretionary sums of money from the Government. From the Department of Education and Science, for the education and training of trade unionists, it is receiving £1 million. From the Ministry of Overseas Development, for the training of overseas trade unionists, it is receiving £75,000. From the Treasury, for communicating the Government's industrial strategy "—[Official Report, 4th December 1978; Vol. 959, c. 510.] it is receiving £50,000.

The Chief Secretary was asked why the Government were not imposing sanctions, and this is what he told my hon. Friend: The only payments to the TUC which the Government could legally withhold are small amounts of money which the TUC receives to run courses for overseas trade unionists as part of the aid programme, and to communicate the industrial strategy. The main effect of withholding these payments would be to affect adversely the aid programme and the industrial strategy. I do not think that it would be in the national interest to do either."—[Official Report, 12th December 1978; Vol. 960, c. 146.] Yet the Government withdraw from Department of Trade exhibitions and overseas exhibitions. They withdraw their custom for the best vehicles for the Ministry of Defence.

Even in regard to the aid programme, as I heard two days ago, the Government have been issuing instructions to the Ministry of Overseas Development that tenders should no longer go out for Ford tractors for aid programmes overseas. If we can believe this we can believe anything.

The Prime Minister was asked in the House of Commons on 30th November why he was not imposing sanctions against the TUC. In his bluff, openhearted manner, he said that it was a matter of common sense that they ought not to do so.

The truth is that the Prime Minister and his colleagues are so beholden to the TUC that they dare not do so. So far from its being a matter of common sense, it is a matter of uncommon nonsense, and the House knows it.

Discretion of this kind, that the Secretary of State was claiming the right to exercise, is another word for arbitrariness. It means that we are living in a society in which 100 people can commit the same entirely lawful act and then find that only one or two of them are subject to punishment from which there is no appeal. We see the Government moving through this jungle with increasing certainty.

At the very heart of the Chancellor of the Exchequer's empire, the Bank of England announced this week that for the first time in 300 years its staff had decided to work to rule, whatever that may mean in that august institution. A pay settlement has been accepted from the Bank of England that is entirely in line with that awarded to employees of the London clearing banks. The London clearing banks' settlement on those terms was granted approval by the Department of Employment, but the Bank of England settlement, on exactly the same terms, has to be cleared not by the Department of Employment but by the Treasury, over which the Chancellor of the Exchequer presides. What happened? The secretary of the staff association was told that the matter had been referred for further consideration but that certainly it was in breach of the Government's pay policy. Neither Department will explain to him the reasons behind it. The Under-Secretary of State for Employment has refused to see him.

Looking at the Government's pay policy code, which has now been published, we find there stated: It is important not to circumscribe Ministers' discretion in dealing with cases…This is important in order to preserve Ministers' ability to distinguish between cases on grounds which may not yet be foreseen. That is the uncertainty to which we have been reduced in this respect. This policy has been reduced to a disreputable and discredited farce. It is high time that the House of Commons put it to death.

I remind the Prime Minister of the most important reason for that. On 28th May 1968–1968 was a memorable period in the Prime Minister's life—speaking with all the authority of an ex-Chancellor of the Exchequer, he said: This is a field in which the Government can get acceptance for a short run policy but does not have the expertise to secure fundamental changes nor the power to make its policy effective in the long run…there is no prospect of success in the long run so long as the solution is imposed from above…By the autumn of 1969 when the current powers expire, we shall have had legislation concerned with wages for 3½ years. That is long enough. That was a matter of earnest discussion in the Labour Cabinet at that time.

The Prime Minister (Mr. James Callaghan)

What would the right hon. and learned Gentleman do?

Sir G. Howe

If the Prime Minister had done me the courtesy of being here at the outset of my speech, he would have heard me say what I would do. We want no more lectures about the policy of the Conservative Party. It is time for the Prime Minister to face the reality of his own conditions. He is trying to maintain a policy on which his party and Government are split asunder from top to bottom. He is trying to maintain a policy which has been rejected by his paymasters in the Trades Union Congress. He is trying to maintain a policy which has not merely been rejected by the Labour Party conference, but that conference, by 4 million votes to 2 million votes, has called on the Labour Party to organise a campaign against the policy for which the Government are seeking the approval of the House.

This afternoon the Secretary of State for Prices and Consumer Protection asked us for a plainer example of the triumph of tactics over principle. Let him look at his own motion and he will see that the Government dare not even invite the support of the House for their policy. The right hon. Gentleman knows that if he tried to do that, he would lose the motion. Let Labour Members have the courage to sustain the campaign to which their party is committeed by supporting the amendment moved by my right hon. Friend the Member for Lowestoft.

9.33 p.m.

The Chief Secretary to the Treasury(Mr. Joel Barnett)

If one wanted to sum up what has just been said by the right hon. and learned Member for Surrey, East (Sir G. Howe), basically it would be that he agrees with the Government's motion and policy of reducing inflation but does not like the way that we are doing it and is not sure—indeed, has not the faintest idea—how he would propose to reduce it.

The right hon. and learned Gentleman said that he answered my right hon. Friend the Prime Minister earlier. He said that the answer would be "a long and painful process ". That was his answer. But we know what his answer is. We have had his so-called alternative in the past. It is interesting that the right hon. and learned Gentleman did not mention it tonight. I can understand that. My hon. Friends were right to point out that the right hon. and learned Gentleman's alternative would be a recipe for mass bankruptices and a massive increase in unemployment.

I turn now to some of the right hon. and learned Gentleman's criticisms, taking some of his epithets in turn. First, we were told—in the past, not in this debate today—that our policy 'was tyrannical and all the rest of it. That is not in the amendment either. The right hon. and learned Gentleman told us tonight, as did many Opposition Members, that it was against the rule of law. Let us consider the various sanction policies and see whether they are against the rule of law.

First, on the question of purchasing contracts, Ford is free to sell to the Government and the Government are free to buy, subject to the right to cancel. Ford agreed to abide by the conditions in the White Paper. That is a tyrannical use of the discretion available to the Government—or so we are told by the right hon. and learned Gentleman. The Government are exercising their proper discretion and freedom to buy, as any buyer can. Incidentally, we made it clear from 1975 onwards that we would have regard to all the factors, including the public interest. This is called "tyrannical ", but it is being done in France and now it is to be done in the United States as well.

We are also told that it is tyrannical to withhold selective grants. [HON. MEMBERS: "That is the worst one."] I am interested to hear hon. Members say that. The discretionary power in relation to selective grants was given to the Government, in the infinite wisdom of the then Conservative Government, in the Industry Act 1972, by which the Secretary of State was given the power to give such grants if it was" in the national interest ". That is stated in section 8 of the Act. We are told that that is not what was intended, but the right hon. and learned Gentleman was a Minister in the Department at the time, and it is pretty slap-happy legislation if he did not intend us to use it in respect of the national interest. What did he intend us to use it for? What does he mean by "national interest" if it does not mean to try to keep down the rate of inflation?

Then we are told that it is "arbitrary" to have a proper use of the discretionary power sensibly given to Governments by a Conservative Government in this case —a Government who did not want any Government to have rigid, inflexible powers with no room for manoeuvre. Therefore, they properly and perfectly sensibly wrote into the Act the discretionary power available to the Government to use in the national interest. That is precisely what the Act said.

As the House knows very well, in many Acts that we pass the word "may" is inserted—rather than "shall "—so that the Minister will have discretion and not be inflexible and rigid in the policy. But because we are using that discretion, the Conservative Opposition now tell us we are being rigid.

Mr. Tebbit rose—

Mr. Barnett

I intend to use my discretionary power in this instance. In this case it is a very limited power, although I hope a useful one, to keep out the hon. Gentleman.

Several Hon. Members rose—

Mr. Speaker

Order.

Mr. Barnett

We are told that the Conservative Opposition are desperately keen about small firms, yet we have had debates on sanctions on only two occasions—the first in relation to Sun Alliance and the second in relation to Ford. That is their concern for small firms. Those are the times when we have had sanctions debates. It shows that the Opposition's language about tyrannical and arbitrary power is nonsense. Then they turn to the question of secrecy. We are told that this is secret policy. Well, the Conservative Opposition seem to know enough about it to be able to describe it pretty graphically, although more than a little inaccurately. But where is the secrecy? We have described our powers in White Papers.

Mr. Budgen

Will the Minister give way?

Mr. Barnett

I shall not, because a few minutes of my time was taken at the discretion of the right hon. and learned Member for Surrey, East.

We have set out the powers in White Papers and have discussed them with the firms. The public and Parliament know what they are. The only secrecy is the names. The Government are perfectly willing to publish the names of firms which are subject to sanctions. Some names are published with no explicit consent from us, but, because this is a commercial matter between the Government and the firm concerned, we have said that we shall publish if the firms agree. So far, only one firm has agreed that we should publish.

Are the Conservative Opposition asking us arbitrarily, whether or not the firms agree, to publish the names of the firms? [HON. MEMBERS: "Answer ".] Frankly, the charges which they level are ludicrous, and the only cause of this debate was Ford. We are told that we are punishing the wrong firm for a whole variety of reasons that were given by a number of hon. Gentlemen, including the right hon. and learned Member for Surrey, East.

An editorial in the London Evening News, not normally a newspaper that supports this Government, said, on 28th November: It is also obvious that a lot of Ford's friends are impressed by Sir Terence Beckett's plea of mitigation. Namely, that the 17 per cent. settlement is not damaging. The editorial goes on to say: This is a resourceful argument: it is also a specious one. For, as Sir Terence knows perfectly well, it is not what happens at Ford that matters so much as what is likely to happen elsewhere as a result of the Ford deal. Ford has set the pace. It goes on: The pace Ford has set is frankly impossible. In this sense, Sir Terence and his colleagues have trampled the national interest underfoot.

Mr. Michael Latham rose—

Mr. Speaker

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

Mr. Barnett

As I was saying, Sir Terence was accused of trampling the national interest underfoot. I would not personally accuse Sir Terence of trampling the national interest underfoot, but I have no doubt whatever that the antics of the Opposition show a total disregard for the national interest. They are prepared to trample it underfoot for their own narrow party interest. Of that I have no doubt whatever.

The Conservatives are wrong anyway. It is not even in their party interest. The Opposition know, in the words of the London Evening News, that the pace Ford has set is impossible. They know it, if they want to be the least bit responsible. Indeed, Ford poses the central problem which was recognised by the right hon. Member for Chipping Barnet (Mr. Maudling). Anyone who wants to look seriously at the problem of how we deal with the central issue of winning the battle against inflation knows that the question is, if one stands by and allows one company to get 17 per cent. or more, what does one say to the others? This is the central problem that any Government face.

Mr. Crouch rose—

Mr. Speaker

Order. The Minister is not bound to give way.

Mr. Barnett

It is well known in this House that I give way probably more than most Ministers or most hon. Members, but I will not do so now. I want to consider, if I may, in this reasonably quiet House, the Government's incomes policy and the alternatives open to them.

The Government have stated guidelines which are by no means rigid. There is room to go beyond 5 per cent. There is more for the low paid in certain instances, and there are some special cases. There is also room for genuine self-financing productivity deals.

We are told that the Opposition do not like rigid norms. We were told on a previous occasion that the Leader of the Opposition does not like the four-letter word norm ". She said on ITN on 10th October: I don't think I could tell them any specific level "— no figure whatever, no guidance. The right hon. Lady, speaking to the faithful at Brighton, said: Responsibility can't be defined by the Government setting a fixed percentage for everyone, because the circumstances are different in every concern in the country, whether nationalised or free. That is very interesting. What is interesting is that at Penistone in June the right hon. Lady said: There will be no free collective bargaining in the public sector. I am not sure what policy there will be. There will be no guidelines, no specific figures, no free collective bargaining. What on earth will there be? Perhaps she will tell us some time.

I will tell her. The right hon. Lady is sitting between two right hon. Members—the right hon. Member for Lowestoft (Mr. Prior) and the right hon. and learned Member for Surrey, East—who, although they do not like her to notice it too often, have told us and her; perhaps sotto voce, that they are in favour of trying to achieve a 5 per cent. outturn in pay. They have said that. In all the speeches and interviews that the right hon. Lady gives, she has never been prepared to allow a figure to be dragged out of her in any circumstances.

Mrs. Margaret Thatcher (Finchley)

Quite right.

Mr. Barnett

She says that that is quite right. It is interesting that her two colleagues have had a figure dragged out of them. They recognise that the aim should be a 5 per cent. outtum. How will that be achieved? We are told that the answer is that one explains it to people. What—without giving them a figure? What is one to explain? This is a fascinating policy.

The difference between the Opposition and us is that the Government are prepared to spell out a policy, to say that it is 5 per cent, that we want to achieve. What the Opposition want is a rigid 5 per cent. average.

Mr. Prior

Perhaps I can help the right hon. Gentleman by quoting from a letter from the Chancellor of the Exchequer to me, dated 10th August 1977. Speaking of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), he said: He went on to suggest that there needed to be an understanding about the total increase in pay that the economy could afford, but that it would be unthinkable to translate that into an individual flat rate figure. I share this view, as you know.

Mr. Barnett

My right hon. Friend is absolutely right; what I want to know is which of the three Opposition Members is right.

There is a central problem facing this country. How do we deal with the problem of inflation? Pay is not the only issue, but it is the heart of the problem of how we get inflation down. The Opposition have not been prepared to face up to it. I know that the right hon. Member for Lowestoft is embarrassed because he has upset the right hon. Lady by mentioning that terrible figure of 5 per cent.

The case for the sanctions is the case for the Government to use every legal power which is available in what is agreed to be the national interest. Of course, there will be some anomalies, some differentials and some unfairness. But neither free collective bargaining nor incomes policy has over many years ever created fairness of a distribution of income.

However, without a moderate outtum now, if the Government were to abdicate their responsibilities, unfairness would be piled on unfairness, the anomalies and differentials would remain, others would be added, and on top of it all would be the ultimate unfairness of renewed inflation.

That is what would happen under the proposals of the Opposition.

How are we to avoid the upsurge in inflation and bring it down even further, which is the central problem? There are no quick cures or easy solutions. I am reading from "The Right Approach ", so I assume that it is right. But if there is no quick cure in the longer term, there will certainly—[HON. MEMBERS: "Read on."] I intend to read on. given time. If there is no quick cure for the problems of inflation in the longer term, it will be no easier if there is an upturn in the rate of inflation. I hope that we can agree on that. We shall not solve the problems by using the extravagant language that we hear from the Opposition Front Bench.

I willingly concede that the Government are not wedded to sanctions as a permanent solution to what is an intractable problem. I welcome the renewed discussions that we shall be having with the TUC. Those discussions will be starting on Tuesday. They will not be concerned only with pay; they will cover the whole range of economic and social policy. We can expect that the TUC will put forward constructive proposals, which is a great deal more than we can expect from the Opposition.

I turn my attention to the alternatives that are available to any Government, some of which have been put forward from time to time by the Opposition. There is the alternative of a truly rigid, full-blown statutory policy. Perhaps I should apologise to the right hon. Member for Lowestoft. In the past I have had some fun at his expense, especially when dealing with statutory policies. It may surprise Opposition Back Benchers to know that the right hon. Gentleman was merely repeating Conservative Party policy when he said that he does not rule out a statutory policy. It is all in the "blue book "." The Right Approach" makes it clear, after pointing out the difficulties, that experience demonstrates the unwisdom of…rejecting the idea ". The hon. Member for Oswestry (Mr. Biffen) is looking rather serious. I assume that he would have put it the other way round. The reason why certain passages appear in the little "blue book" is that the Tories know that their alternative policies cannot succeed and that they would have to return to a statutory incomes policy.

The Opposition's alternative incomes policy is, as we have been constantly told, all set out in the "blue book ". The hon. Member for Blaby (Mr. Lawson)—I do not see him for the moment—becomes very upset when Opposition policy is questioned. When we last debated these matters in February he told the House that the Government should not continue to ask questions about Opposition policy because the answers were all set out in the little "blue book ".

The "blue book" has 71 pages and two-thirds of one page relates to incomes policy. One alternative, covering six lines, relates to the West German policy for concerted action. As that is the Opposition's policy, I assume that they know what it is. It involves a highly centralised system of meetings between Government, employers and trade unions where they agree on a consensus on what should be the appropriate level of earnings for the following year. It is to be a "consensus"; it is not a norm. It is not that four-letter word. It is not an average but a consensus. If the Opposition are to propose concerted action of the West German style without setting out any specific figure, as the right hon. Lady tells us, how will they pursue that policy? I wish that they would tell us the alternative instead of using the sort of language that we have heard today. There is no conceivable alternative in that direction, and they know it.

Fortunately for the Opposition Front Bench, the "blue book" goes on to explain: It would be foolish to pretend that this can be accomplished overnight. They are certainly right about that. They tell us that they would use "every available means ". There would be no brandishing of norms. There would not even be brandishing of averages. Instead we should have the brandishing of monetary restraint and cash limits.

How will that system work? In the two-thirds of one page of the "blue book" we do not have that explanation, but there is another book. It is a little blue book containing 50 questions and answers. I read it and there was not one sentence that told us the answer to the problem. I looked a little further afield —[Interruption.] I am surprised that Opposition Members do not want to know the policy of their Front Bench. I am astonished. I thought that they wanted to know that policy. I think that I should tell them because they really do not know.

The policy of the Opposition in the other little blue book is "detailed explanation ". Perhaps the Leader of the Opposition will explain how she can have a detailed explanation without giving specific figures. How will the Opposition set figures for cash limits in the public sector without a guideline for pay? Are they really suggesting that they will have a cash limit on which they will make an assumption about pay and not tell anybody? Is that their policy? Is that a policy of full explanation? What will they do in the private sector? We are told that they will have free collective bargaining and a tight monetary target.

Mr. Prior

Hon. Members below the Gangway are leaving the Chamber.

Mr. Barnett

The right hon. Member for Lowestoft obviously does not want to hear what the Opposition policy is. The Opposition want free collective bargaining and a tight monetary policy. [Interruption.]

Mr. Speaker

Order. The House listened to the right hon. and learned Member for Surrey, East (Sir G. Howe) in reasonable silence. Only a few minutes are left.

Mr. Barnett

The Opposition believe in free collective bargaining with nothing to keep to the average but a tight monetary policy.

We were accused of operating an arbitrary and unjust policy. I can assure the Opposition that there would be nothing more arbitrary and unjust than a tight monetary policy and free collective bargaining which would be arbitrary on small firms in particular. There would be massive bankruptcies. [HON. MEMBERS:" Rubbish."] I have had a little to do with cash limits. Cash limits are now made to appear to be a substitute for a public sector pay policy. The right hon. Member for Chipping Barnet said in February that using the public tail to wag the private dog was not a great success in the past and would not be a great success now. But that is the Opposition's policy and nothing else.

Cash limits should reflect pay policy. They are not a substitute for pay policy. But the Opposition use cash limits as if they were a magic formula which will solve all our problems. The Opposition have exposed their inability to explain their policy. They have no answer.

Mr. Crouch rose—

Mr. Barnett

I shall not give way.

Mr. Crouchrose—

Mr. Speaker

Order.

Mr. Barnett

The debate has shown—

Mr. Crouch

Will the right hon. Member give way?

Mr. Barnett

No.

In today's debate we have heard much extravagant language. We have had not a single alternative. The amendment agrees that we must bring down the rate of inflation. [HON. MEMBERS: "Say something."] We have heard not a single alternative. The amendment stresses

the need to reduce the rate of inflation. The Government are prepared to act on that but the Opposition are prepared to do nothing—[Interruption.] I feel that I shall not be able to make myself heard in the last few minutes, but I shall try. I remember a dispute between the Leader of the Opposition and her right hon. Friend the Member for Sidcup (Mr. Heath). [HON. MEMBERS: "What about us? "] No, I want to talk about this lot —the Opposition. There was a major row between the right hon. Member for Sidcup and the Leader of the Opposition. The right hon. Gentleman came out on top. The right hon. Member for Lowestoft said that the answer to the problem was—

Mr. Humphrey Atkins(Spelthorne)rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the amendment be made:

The House divided: Ayes 285, Noes 279.

Howells, Geraint (Cardigan)	Molyneaux, James	Silvester, Fred
Hunt, David (Wirral)	Monro, Hector	Sims, Roger
Hunt, John (Ravensbourne)	Montgomery, Fergus	Sinclair, Sir George
Hurd, Douglas	Moore, John (Croydon C)	Skeet, T. H. H.
Hutchison, Michael Clark	More, Jasper (Ludlow)	Smith, Cyril (Rochdale)
Irving, Charles (Cheltenham)	Morgan, Geraint	Smith, Dudley (Warwick)
James, David	Morgan-Giles, Rear-Admiral	Smith, Timothy John (Ashfield)
Jenkln, Rt Hon P. (Wanst'd&W'df'd)	Morris, Michael {Northampton S)	Speed, Keith
Jessel, Toby	Morrison, Hon Charles (Devizes)	Spence, John
Johnson Smith, G. (E Grinstead)	Morrison, Peter (Chester)	Spicer, Michael (S Worcester)
Johnston, Russell (Inverness)	Mudd, David	Sproat, Iain
Jones, Arthur (Daventry)	Neave, Airey	Stainton, Keith
Jopling, Michael	Nelson, Anthony	Stanbrook, Ivor
Joseph, Rt Hon Sir Keith	Neubert, Michael	Stanley, John
Kaberry, Sir Donald	Newton, Tony	Steel, Rt Hon David
Kershaw, Anthony	Nott, John	Steen, Anthony (Wavertree)
Kilfedder, James	Onslow, Cranley	Stewart, Rt Hon Donald
Kimball, Marcus	Oppenheim, Mrs Sally	Stewart, Ian (Hitchin)
King, Evelyn (South Dorset)	Page, John (Harrow West)	Stokes, John
King, Tom (Bridgwater)	Page, Rt Hon R. Graham (Crosby)	Stradling, Thomas J.
Kitson, Sir Timothy	Page, Richard (Workington)	Tapsell, Peter
Knight, Mrs Jill	Paisley, Rev Ian	Taylor, R. (Croydon NW)
Knox, David	Pardoe, John	Taylor, Teddy (Cathcart)
Lamont, Norman	Parkinson, Cecil	Tebbit, Norman
Latham, Michael (Melton)	Pattie, Geoffrey	Temple-Morris, Peter
Lawson, Nigel	Penhaligon, David	Thatcher, Rt Hon Margaret
Lewis, Kenneth (Rutland)	Percival, Ian	Thompson, George
Lloyd, Ian	Peyton, Rt Hon John	Townsend, Cyril D.
Loveridge, John	Pink, R. Bonner	Trotter, Neville
Luce, Richard	Powell, Rt Hon J. Enoch	Van Straubenzee, W. R.
McAdden, Sir Stephen	Prentice, Rt Hon Reg	Vaughan, Dr Gerard
MacCormick, Iain	Price, David (Eastleigh)	Viggers, Peter
McCrindle, Robert	Prior, Rt Hon James	Wainwrighl, Richard (Colne V)
McCusker, H.	Pym, Rt Hon Francis	Wakeham, John
Macfariane, Neil	Raison, Timothy	Walker, Rt Hon P. (Worcester)
MacGregor, John	Rees, Peter (Dover & Deal)	Walker-Smith, Rt Hon Sir Derek
MacKay, Andrew (Stechford)	Rees-Davies, W. R.	Wall, Patrick
Macmillan, Rt Hon M. (Farnham)	Reid, George	Walters, Dennis
McNair-Wilson, M. (Newbury)	Renton, Rt Hon Sir D. (Hunts)	Warren, Kenneth
McNair-Wilson, P. (New Forest)	Renton, Tim (Mid-Sussex)	Watt, Hamish
Madel, David	Rhodes James, R.	Weatherill, Bernard
Marshall, Michael (Arundel)	Ridley, Hon Nicholas	Wells, John
Marten, Neil	Ridsdale, Julian	Welsh, Andrew
Mates, Michael	Rifkind, Malcoim	Whitelaw, Rt Hon William
Mather, Carol	Roberts, Wyn (Conway)	Whitney, Raymond
Maude, Angus	Rodgers, Sir John (Sevenoaks)	Wiggin, Jerry
Maudling, Rt Hon Reginald	Ross, Stephen (Isle of Wight)	Wilson, Gordon (Dundee E)
Mawby, Ray	Royle, Sir Anthony	Winterton, Nicholas
Maxwell-Hyslop, Robin	Sainsbury, Tim	Wood, Rt Hon Richard
Mayhew, Patrick	St. John-Stevas, Norman	Young, Sir G. (Ealing, Acton)
Meyer, Sir Anthony	Scott, Nicholas	Younger, Hon George
Miller, Hal (Bromsgrove)	Shaw, Giles (Pudsey)
Mills, Peter	Shelton, William (Streatham)	TELLERS FOR THE AYES:
Miscampbell, Norman	Shepherd, Colin	Mr. Spencer Le Marchant and
Mitchell, David (Basingstoke)	Shersby, Michael	Mr. Michael Roberts.
Moate, Roger

NOES
Abse, Leo	Brown, Hugh D. (Provan)	Cronin, John
Allaun, Frank	Brown, Robert C. (Newcastle W)	Crowther, Stan (Rotherham)
Anderson, Donald	Buchan, Norman	Cryer, Bob
Archer, Rt Hon Peter	Buchanan, Richard	Cunningham, Dr J (Whiteh)
Armstrong, Ernest	Butler, Mrs Joyce (Wood Green)	Davidson, Arthur
Ashley, Jack	Callaghan, Rt Hon J. (Cardiff SE)	Davies, Bryan (Enfield N)
Ashton, Joe	Callaghan, Jim (Middleton & P)	Davies, Rt Hon Denzil
Atkins, Ronald (Preston N)	Campbell, Ian	Davies, Ifor (Gowar)
Atkinson, Norman (H'gey, Tott'ham)	Canavan, Dennis	Davis, Clinton (Hackney C)
Bagier, Gordon A. T.	Cant, R. B.	Deakins, Eric
Barnett, Guy (Greenwich)	Carmichael, Neil	Dean, Joseph (Leeds West)
Barnett, Rt Hon Joel (Keywood)	Carter, Ray	Dell, Rt Hon Edmund
Bates, Alf	Carter-Jones, Lewis	Dempsey, James
Bean, R. F.	Cartwright, John	Dewar, Donald
Benn, Rt Hon Anthony Wedgwood	Castle, Rt Hon Barbara	Doig, Peter
Bennett, Andrew (Stockport N)	Cocks, Rt Hon Michael (Bristol S)	Dormand, J. D.
Bishop, Rt Hon Edward	Cohen, Stanley	Douglas-Mann, Bruce
Blenkinsop, Arthur	Colquhoun, Ms Maureen	Duffy, A. E. P.
Boardman, H.	Concannon, Rt Hon John	Dunn, James A.
Booth, Rt Hon Albert	Conlan, Bernard	Dunnett, Jack
Boothroyd, Miss Betty	Cook, Robin F. (Edin C)	Eadle, Alex
Bottomley, Rt Hon Arthur	Corbett, Robin	Edge, Geoff
Boyden, James (Bish Auck)	Cowans, Harry	Ellis, John (Brigg & Scun)
Bradley, Tom	Cox, Thomas (Tooting)	English, Michael
Bray, Dr Jeremy	Craigen, Jim (Maryhill)	Ennals, Rt Hon David
Broughton, Sir Alfred	Crawshaw, Richard	Evans, Fred (Caerphilly)

Evans Gwynfor (Carmarthen)	Lofthouse, Geoffrey	Rowlands, Ted
Evans, loan (Aberdare)	Lomas, Kenneth	Ryman, John
Evans, John (Newton)	Luard, Evan	Sandelson, Neville
Ewing, Harry (Stirling)	Lyon, Alexander (York)	Sedgemore, Brian
Faulds, Andrew	Lyons, Edward (Bradford W)	Selby, Harry
Fernyhough, Rt Hon E.	Mabon, Rt Hon Dr J. Dickson	Shaw, Arnold (Ilford South)
Flannery, Martin	McElhone, Frank	Sheldon, Rt Hon Robert
Fletcher, L. R. (Ilkeston)	MacFarquhar, Roderick	Shore, Rt Hon Peter
Foot, Rt Hon Michael	McGuire, Michael (Ince)	Short, Mrs Renée (Wolv NE)
Ford, Ben	McKay, Alan (Penistone)	Silkin, Rt Hon John (Deptford)
Forrester, John	MacKenzie, Rt Hon Gregor	Silkin, Rt Hon S. C. (Dulwich)
Fraser, John (Lambeth, N'w'd)	Maclennan, Robert	Sillars, James
Freeson, Rt Hon Reginald	McMillan, Tom (Glasgow C)	Silverman, Julius
Garrett, John (Norwich S)	McNamara, Kevin	Skinner, Dennis
Garrett, W. E. (Wallsend)	Madden, Max	Smith, Rt Hon John (N Lanarkshire)
George, Bruce	Magee, Bryan	Snape, Peter
Gilbert, Rt Hon Dr John	Mahon, Simon	Spearing, Nigel
Ginsburg, David	Mallalieu, J. P. W.	Spriggs, Leslie
Golding, John	Marks, Kenneth	Stallard, A. W.
Gould, Bryan	Marshall, Dr Edmund (Goole)	Stewart, Rt Hon M. (Fulham)
Gourlay, Harry	Marshall, Jim (Leicester S)	Stoddart, David
Graham, Ted	Mason, Rt Hon Roy	Stott, Roger
Grant, George (Morpeth)	Maynard, Miss Joan	Strang, Gavin
Grant, John (Islington C)	Meacher, Michael	Strauss, Rt Hon G. R.
Grocott, Bruce	Meilish, Rt Hon Robert	Summerskill. Hon Dr Shirley
Hamilton, W. W. (Central Fife)	Mikardo, Ian	Swain, Thomas
Hardy, Peter	Millan, Rt Hon Bruce	Taylor, Mrs Ann (Bolton W)
Harrison, Rt Hon Walter	Mitchell, Austin (Grimsby)	Thomas, Jeffrey (Abertillery)
Hart, Rt Hon Judith	Moonman, Eric	Thomas, Mike (Newcastle E)
Hattersley, Rt Hon Roy	Morris, Alfred (Wythenshawe)	Thome, Stan (Preston South)
Hayman, Mrs Helene	Morris, Rt Hon Charles R.	Tierney, Sydney
Healey, Rt Hon Denis	Morris, Rt Hon J. (Aberavon)	Tilley, John
Heffer, Eric S.	Morton, George	Tinn, James
Home Robertson, John	Moyle, Rt Hon Roland	Tomlinson, John
Hooley, Frank	Mulley, Rt Hon Frederick	Tomney, Frank
Horam, John	Murray, Rt Hon Ronald King	Torney, Tom
Howell, Rt Hon Denis (B'ham, Sm H)	Newens, Stanley	Tuck, Raphael
Hoyle, Doug (Nelson)	Noble, Mike	Urwin, T. W.
Huckfield, Les	Oakes, Gordon	Varley, Rt Hon Eric G.
Hughes, Robert (Aberdeen N)	Ogden, Eric	Wainwrlght, Edwin (Dearne V)
Hunter, Adam	O'Halloran, Michael	Walker, Harold (Doncaster)
Irving, Rt Hon S. (Darftord)	Orbach, Maurice	Walker, Terry (Kingswood)
Jackson, Colin (Brighouse)	Orme, Rt Hon Stanley	Ward, Michael
Jackson, Miss Margaret (Lincoln)	Owen, Rt Hon Dr David	Watkins, David
Janner, Greville	Padley, Walter	Watkinson, John
Jay, Rt Hon Douglas	Palmer, Arthur	Weetch, Ken
Jeger, Mrs Lena	Park, George	Weitzman, David
Jenkins, Hugh (Putney)	Parker, John	Wellbeloved, James
John, Brynmor	Parry, Robert	White, Frank R. (Bury)
Johnson, James (Hull West)	Pavitt, Laurie	White, James (Pollok)
Johnston, Walter (Derby S)	Pendry, Tom	Whitehead, Phillip
Jones, Alec (Rhondda)	Perry, Ernest	Whitlock, William
Jones, Barry (East Flint)	Phipps, Dr Colin	Willey, Rt Hon Frederick
Jones, Dan (Burnley)	Price, C. (Lewisham W)	Williams, Rt Hon Alan (Swansea W)
Judd, Frank	Price, William (Rugby)	Williams, Alan Lee (Hornch'ch)
Kaufman, Rt Hon Gerald	Radice, Giles	Williams, Rt Hon Shirley (Hertford)
Kelley, Richard	Rees, Rt Hon Merlyn,(Leeds S)	Williams, Sir Thomas (Warrington)
Kilroy-Silk, Robert	Richardson, Miss Jo	Wilson, Rt Hon Sir Harold (Huyton)
Kinnock, Neil	Roberts, Albert (Normanton)	Wilson, William (Coventry SE)
Lamborn, Harry	Roberts, Gwllym (Canunock)	Wise, Mrs Audrey
Lamond, James	Robertson, George (Hamilton)	Woodall, Alec
Leadbitter, Ted	Robertson, John (Paisley)	Woof, Robert
Lee, John	Robinson, Geoffrey	Wrigglesworth, Ian
Lestor, Miss Joan (Eton & Slough)	Rodgers, George (Chorley)	Young, David (Bolton E)
Lever, Rt Hon Harold	Rodgers, Rt Hon William (Stockton)
Lewis, Arthur (Newham N)	Rooker, J. W.	TELLERS FOR THE NOES:
Lewis, Ron (Carlisle)	Roper, John	Mr. James Hamilton and
Litterick, Tom	Ross, Rt Hon W. (Kilmarnock)	Mr. Donald Coleman.

Question accordingly agreed to.

Main Question, as amended, put:—

Division No. 25]	AYES	[10.19 p.m.
Adley, Robert	Baker, Kenneth	Biffen, John
Aitken, Jonathan	Banks, Robert	Biggs-Davison, John
Alison, Michael	Beith, A. J.	Blaker, Peter
Amery, Rt Hon Julian	Bell, Ronald	Body, Richard
Arnold, Tom	Bendall, Vivian	Boscawen, Hon Robert
Atkins, Rt Hon H. (Spelthorno)	Bennett, Sir Frederic (Torbay)	Bottomley, Peter
Atkinson, David (B'moulh, East)	Bennett, Dr Reginald (Fareham)	Bowden, A. (Brighton, Kemptown)
Awdry, Daniel	Benyon, W.	Boyson, Dr Rhodes (Brent)
Bain, Mrs Margaret	Berry, Hon Anthony	Bradford, Rev Robert

The House divided: Ayes 285, Noes 283.

Braine, Sir Bernard	Hayhoe, Barney	Oppenheim, Mrs Sally
Brittan, Leon	Heath, Rt Hon Edward	Page, John (Harrow West)
Brocklebank-Fowler, C.	Henderson, Douglas	Page, Rt Hon R. Graham (Crosby)
Brooke, Hon Peter	Heseltine, Michael	Page, Richard (Workington)
Brotherton, Michael	Hicks, Robert	Paisley, Rev Ian
Brown, Sir Edward (Bath)	Higgins, Terence L.	Pardoe, John
Bryan, Sir Paul	Hodgson, Robin	Parkinson, Cecil
Buchanan-Smith, Alick	Holland, Philip	Pattle, Geoflrey
Buck, Antony	Hooson, Emlyn	Penhaligon, David
Budgen, Nick	Hordern, Peter	Perclval, Ian
Bulmer, Esmond	Howe, Rt Hon Sir Geoffrey	Peyton, Rt Hon John
Burden. F. A.	Howell, David (Guildford)	Pink, R. Bonner
Butler, Adam (Bosworth)	Howells, Geraint (Cardigan)	Powell, Rt Hon J. Enoch
Carlisle, Mark	Hunt, David (Wirral)	Prentice, Rt Hon Reg
Chalker, Mrs Lynda	Hunt, John (Ravensbourne)	Price, David (Eastleigh)
Channon, Paul	Hurd, Douglas	Prior, Rt Hon James
Churchill, W. S.	Hutchison, Michael Clark	Pym, Rt Hon Francis
Clark, Alan (Plymouth, Sutton)	Irving, Charles (Cheltenham)	Raison, Timothy
Clarke, Kenneth (Rushclifle)	James, David	Rees, Peter (Dover & Deal)
Clegg, Walter	Jenkin, Rt Hon P. (Wanst'd&W'df'd)	Rees-Davies, W. R.
Cockcroft, John	Jessel, Toby	Reid, Georgo
Cooke, Robert (Bristol W)	Johnson Smith, G. (E Grinstead)	Renton, Rt Hon Sir D. (Hunts)
Cope, John	Johnston, Russell (Inverness)	Renton, Tim (Mid-Sussex)
Cormack, Patrick	Jones, Arthur (Daventry)	Rhodes James, R.
Costain, A. P.	Jopling, Michael	Ridley, Hon Nicholas
Craig, Rt Hon W. (Belfast E)	Joseph, Rt Hon Sir Keith	Ridsdale, Julian
Crawford, Douglas	Kaberry, Sir Donald	Rifkind, Malcolm
Critchley, Julian	Kershaw, Anthony	Roberts, Wyn (Conway)
Crouch, David	Kilfedder, James	Rodgers, Sir John (Sevenoaks)
Crowder, F. P.	Kimball, Marcus	Ross, Stephen (Isle of Wight)
Dean, Paul (N Somerset)	King, Evelyn (South Dorset)	Royle, Sir Anthony
Dodsworth, Geoffrey	King, Tom (Bridgwater)	Sainsbury, Tim
Douglas-Hamilton, Lord James	Kitson, Sir Timothy	St. John-Stevas, Norman
Drayson, Burnaby	Knight, Mrs Jill	Scott, Nicholas
du Cann, Rt Hon Edward	Knox, David	Shaw, Giles (Pudsey)
Dunlop, John		Shelton, William (Streatham)
Durant, Tony	Lamont, Norman	Shepherd, Colin
Dykes, Hugh	Latham, Michael (Melton)	Shersby, Michael
Eden, Rt Hon Sir John	Lawson, Nigel	Silvester, Fred
Edwards, Nicholas (Pembroke)	Lewis, Kenneth (Rutland)	Sims, Roger
Emery, Peter	Lloyd, Ian	Sinclair, Sir George
Ewing, Mrs Winifred (Moray)	Loveridge, John	Skeet, T. H. H.
Eyre, Reginald	Luce, Richard	Smith, Cyril (Rochdale)
Fairbairn, Nicholas	McAdden, Sir Stephen	Smith, Dudley (Warwick)
Fairgrieve, Russell	MacCormick, Iain	Smith, Timothy John (Ashfield)
Farr, John	McCrindle, Robert	Speed, Keith
Fell, Anthony	Macfarlane, Nell	Spence, John
Fisher, Sir Nigel	MacGregor, John	Spicer, Michael (S Worcester)
Fletcher, Alex (Edinburgh N)	MacKay, Andrew (Slechford)	Sproat, Iain
Forman, Nigel	Macmlllan, Rt Hon M. (Fornham)	Stainton, Keith
Fowler, Norman (Sutton C'f'd)	McNair-Wilson, M. (Newbury)	Stanbrook, Ivor
Fox, Marcus	McNalr-Wilson, P. (New Forest)	Stanley, John
Fraser, Rt Hon H. (Stafford & St)	Madel, David	Steel, Rt Hon David
Freud, Clement	Marshall, Michael (Arundel)	Steen, Anthony (Wavertree)
Fry, Peter	Marten, Neil	Stewart, Rt Hon Donald
Galbralth, Hon T. G. D.	Mates, Michael	Stewart, Ian (Hitchin)
Gardiner, George (Reigate)	Mather, Carol	Stokes, John
Gardner, Edward (S Fyide)	Maude, Angus	Stradling, Thomas J.
Gilmour, Rt Hon Sir Ian (Chesham)	Maudling, Rt Hon Reginald	Tapsell, Peter
Gilmour, Sir John (East Fife)	Mawby, Ray	Taylor, R. (Croydon NW)
Glyn, Dr Alan	Maxwell-Hyslop, Robin	Taylor, Teddy (Cathcart)
Godber, Rt Hon Joseph	Mayhew, Patrick	Tebbit, Norman
Goodhart, Philip	Meyer, Sir Anthony	Temple-Morris, Peter
Goodhew, Victor	Miller, Hal (Bromsgrove)	Thatcher, Rt Won Margaret
Goodlad, Alastair	Mills, Peter	Thompson, George
Gorst, John	Miscampbell, Norman	Townsend, Cyril D.
Gower, Sir Raymond (Barry)	Mitchell, David (Basingstoke)	Trottor Neville
Grant, Anthony (Harrow C)	Moate, Roger	van Straubenzee, W. R.
Gray, Hamish	Moiyneaux, James	Veughan, Dr Gerard
Grieve, Percy	Monro, Hector	Viggers, Peter
Griffiths, Eldon	Montgomery, Fergus	Wainwright, Richard (Coine V)
Grimond, Rt Hon J.	Moore, John (Croydon C)	Wakeham, John
Grist, Ian	More, Jasper (Ludlow)	Walker, Rt Hon P. (Worcester)
Gryils, Michael	Morgan, Geraint	Walker-Smith, Rt Hon Sir Derek
Hall-Davis, A. G. F.	Morgan-Giles, Rear-Admiral	Wall, Patrick
Hamilton, Archibald (Epsom & Ewell)	Morris, Michael (Northampton S)	Walters, Dennis
Hamilton, Michael (Salisbury)	Morrison, Hon Charles (Devizes)	Warren, Kenneth
Hampson, Dr Keith	Morrison, Peter (Chester)	Watt, Hamish
Hannam, John	Mudd, David	Weatherill, Bernard
Harrison, Col Sir Harwood (Eye)	Neave, Airey	Wells, John
Harvie Anderson, Rt Hon Miss	Nelson, Anthony	Weish, Andrew
Haselhurst, Alan	Neubert, Michael	Whitelaw, Rt Hon William
Hastings, Stephen	Newton, Tony	Whitney, Raymond
Havers, Rt Hon Sir Michael	Nott, John	Wiggin, Jerry
Hawkins, Paul	Onslow, Cranley	Wilson, Gordon (Dundee E)

Winterton, Nicholas	Young, Sir G. (Ealing, Acton)	TELLERS FOR THE AYES:
Wood, Rt Hon Richard	Younger, Kon George	Mr. Spencer le Marchant and
		Mr. Michael Roberts.

NOES
Abse, Leo	Evans Gwynfor (Carmarthen)	McGuire, Michael (Ince)
Allaun, Frank	Evans, loan (Aberdare)	McKay, Allen (Penistone)
Anderson, Donald	Evans, John (Newton)	MacKenzie, Rt Hon Gregor
Archer, Rt Hon Peter	Ewing, Harry (Stirling)	Maclennan, Robert
Armstrong, Ernest	Faulds, Andrew	McMillan, Tom (Glasgow C)
Ashley, Jack	Fernyhough, Rt Hon E.	McNamara, Kevin
Ashton, Joe	Flannery, Martin	Madden, Max
Atkins, Ronald (Preston N)	Fletcher, L. R. (Ilkeston)	Magee, Bryan
Atkinson, Norman (H'gey, Tott'ham)	Foot, Rt Hon Michael	Mahon, Simon
Bagier, Gordon A. T.	Ford, Ben	Mallalieu, J. P. W.
Barnett, Guy (Greenwich)	Forrester, John	Marks, Kenneth
Barnett, Rt Hon Joel (Heywood)	Fraser, John (Lambeth, N'w'd)	Marshall, Dr Edmund (Goole)
Bales, Alf	Freeson, Rt Hon Reginald	Marshall, Jim (Leicester S)
Bean, R. E.	Garrett, John (Norwich S)	Mason, Rt Hon Roy
Benn, Rt Hon Anthony Wedgwood	Garrett, W. E. (Wallsend)	Maynard, Miss Joan
Bennett, Andrew (Stockport N)	George, Bruce	Meacher, Michael
Bidwell, Sydney	Gilbert, Rt Hon Dr John	Mellish, Rt Hon Robert
Bishop, Rt Hon Edward	Ginsburg, David	Mikardo, Ian
Blenkinsop, Arthur	Golding, John	Millan, Rt Hon Bruce
Boardman, H.	Gould, Bryan	Mitchell, Austin (Grlmsby)
Booth, Rt Hon Albert	Gourlay, Harry	Moonman, Eric
Boothroyd, Miss Betty	Graham, Ted	Morris, Alfred (Wythenshawe)
Bottomley, Rt Hon Arthur	Grant, George (Morpeth)	Morris, Rt Hon Charles R.
Boyden, James (Bish Auck)	Grant, John (Islington C)	Morris, Rt Hon J. (Aberavon)
Bradley, Tom	Grocott, Bruce	Morton, George
Bray, Dr Jeremy	Hamilton, W. W. (Central Fife)	Moyle, Rt Hon Roland
Broughton, Sir Alfred	Hardy, Peter	Mulley, Rt Hon Frederick
Brown, Hugh D. (Provan)	Harrison, Rt Hon Walter	Murray, Rt Hon Ronald King
Brown, Robert C. (Newcastle W)	Hart, Rt Hon Judith	Newens, Stanley
Buchan, Norman	Hattersley, Rt Hon Roy	Noble, Mike
Buchanan, Richard	Hayman, Mrs Helene	Oakes, Gordon
Butler, Mrs Joyce (Wood Green)	Healey, Rt Hon Denis	Ogden, Eric
Callaghan, Rt Hon J. (Cardiff SE)	Heffer, Eric S.	O'Halloran, Michael
Callaghan, Jim (Middlelon & P)	Home Robertson, John	Orbach, Maurice
Campbell, Ian	Hooley, Frank	Orme, Rt Hon Stanley
Canavan, Dennis	Horam, John	Owen, Rt Hon Dr David
Cant, R. B.	Howell, Rt Hon Denis (B'ham, Sm H)	Padley, Walter
Carmichael, Neil	Hoyle, Doug (Nelson)	Palmer, Arthur
Carter, Ray	Huckfield, Les	Park, George
Carter-Jones, Lewis	Hughes, Robert (Aberdeen N)	Parker, John
Cartwright, John	Hughes, Roy (Newport)	Parry, Robert
Castle, Rt Hon Barbara	Hunter, Adam	Pavitt, Laurie
Cocks, Rt Hon Michael (Bristol S)	Irving, Rt Hon S. (Dartford)	Pendry, Tom
Cohen, Stanley	Jackson, Colin (Brighouse)	Perry, Ernest
Colquhoun, Ms Maureen	Jackson, Miss Margaret (Lincoln)	Phipps, Dr Colin
Concannon, Rt Hon John	Janner, Greville	Price, C. (Lewisham W)
Conian, Bernard	Jay, Rt Hon Douglas	Price, William (Rugby)
Cook, Robin F. (Edin C)	Jeger, Mrs Lena	Radice, Giles
Corbett, Robin	Jenkins, Hugh (Putney)	Rees, Rt Hon Merlyn (Leeds S)
Cowans, Harry	John, Brynmor	Richardson, Miss Jo
Cox, Thomas (Tooting)	Johnson, James (Hull West)	Roberts, Albert (Normanton)
Cralgen, Jim (Maryhill)	Johnston, Walter (Derby S)	Roberts, Gwlym (Cannock)
Crawshaw, Richard	Jones, Alec (Rhondda)	Robertson, George (Hamilton)
Cronin, John	Jones, Barry (East Flint)	Robertson, John (Paisley)
Crowther, Stan (Rotherham)	Jones, Dan (Burnley)	Robinson, Geoffrey
Cryer, Bob	Judd, Frank	Rodgers, Geo'e (Chorley)
Cunningham, Dr J (Whiteh)	Kaufman, Rt Hon Gerald	Rodgers, Rt Hon William (Stockton)
Davidson, Arthur	Kelley, Richard	Rooker, J. W.
Davies, Bryan (Enfield N)	Kerr, Russell	Roper, John
Davies, Rt Hon Denzil	Kilroy-Silk, Robert	Ross, Rt Hon W. (Kilmarnock)
Davies, Ifor (Gower)	Kinnock, Neil	Rowlands, Ted
Davis, Clinton (Hackney C)	Lamborn, Harry	Ryman, John
Deakins, Eric	Lamond, James	Sandelson, Neville
Dean, Joseph (Leeds West)	Leadbitter, Ted	Sedgemore, Brian
Dell, Rt Hon Edmund	Lee, John	Selby, Harry
Dempsey, James	Lestor, Miss Joan (Eton & Slough)	Shaw, Arnold (Ilford South)
Dewar, Donald	Lever, Rt Hon Harold	Sheldon, Rt Hon Robert
Doig, Peter	Lewis, Arthur (Newham N)	Shore, Rt Hon Peter
Dormand, J. D.	Lewis, Ron (Carlisle)	Shore, Mrs Renée (Wolv NE)
Dougias-Mann, Bruce	Litterick, Tom	Silkin, Rt Hon John (Deptford)
Duffy, A. E. P.	Lofthouse, Geoffrey	Silkin, Rt Hon S. C. (Dulwich)
Dunn, James A,	Lomas, Kenneth	Sillars, James
Dunnett, Jack	Loyden, Eddie	Silverman, Julius
Eadie, Alex	Luard, Evan	Skinner, Dennis
Edge, Geoff	Lyon, Alexander (York)	Smith, Rt Hon John (N Lanarkshire)
Ellis, John (Brigg & Scun)	Lyons, Edward (Bradford W)	Snape, Peter
English, Michael	Mabon, Rt Hon Dr J. Dickson	Spearing, Nigel
Ennais, Rt Kon David	McElhone, Frank	Spriggs, Leslie
Evans, Fred (Caershillly)	MacFarquhar, Roderick	Stailard, A. W.

Stewart, Rt Hon M. (Fulham)	Torney, Tom	Willley, Rt Kon Frederick
Stoddart, David	Tuck, Raphael	Williams, Rt Hon Alan (Swansea W)
Stott, Roger	Urwln, T. W.	Williams, Alan Lee (Hornch'ch)
Strang, Gavin	Varley, Rt Hon Eric G.	Williams, Rt Hon Shirley (Hertford)
Strauss, Rt Hon G. R.	Wainwright, Edwin (Dearne V)	Williams, Sir Thomas (Warrington)
Summerskill, Hon Dr Shirley	Walker, Harold (Doncaster)	Wilson, Rt Hon Sir Harold (Huyton)
Swain, Thomas	Walker, Terry (Kingswood)	Wilson, Willam (Coventry SE)
Taylor, Mrs Ann (Button W)	Ward, Michael	Wise, Mrs Audrey
Thomas, Jeffrey (Abertillery)	Watkins, David	Woodall, Alec
Thomas, Mike (Newcastle E)	Watkinson, John	Woof, Robert
Thomas, Ron (Bristol NW)	Weetch, Ken	Wrigglesworth, Ian
Thome, Stan (Preston South)	Weitzman, David	Young, David (Bolton E)
Tierney, Sydney	Wellbeloved, James
Tilley, John	White, Frank R. (Bury)	TELLERS FOR THE NOES:
Tinn, James	White, James (Pollok)	Mr. James Hamilton and
Tomlinson, John	Whitehead, Phillip	Mr. Donald Coleman.
Tomney, Frank	Whitlock, William

Question accordingly agreed to.

Resolved,

That this House, while stressing the need to achieve a further reduction in the present high rate of inflation, declines to support the Government's arbitrary use of economic sanctions against firms and workers who have negotiated pay settlements beyond a rigid limit which Parliament has not approved.

10.38 p.m.

The Prime Minister

Mr. Speaker, the House has just carried a motion declining to support the Government's arbitrary use of economic sanctions against films and workers who have negotiated pay settlements beyond a rigid limit — [An HON. MEMBER:" Speak up."] I shall speak up, and my voice will be heard throughout the country.

Clearly a motion of this kind carried in this way involves a reconsideration by the Government of their present policy. I do not disguise from you, Mr. Speaker, and from the House that, in my view, this represents a serious defeat for the country's and the Government's light against inflation. Nevertheless, we shall accept the view of the House as it has been expressed and reconsider our policy. But I do not think that we should leave the matter there.

It is important that there should be no uncertainty about the future. We need to make a statement about our future policy on these matters, and what I now propose is that the Government should put their future in the hands of the House. It seems to me important that the Government should know whether or not they have the support of the House on a motion of confidence. Therefore, the Government intend to table forthwithtonight—a motion of confidence. The House will be asked to vote upon it tomorrow. The Government will accept the verdict of the House, and if we are defeated we shall ask the country to choose.