PAY POLICY (GOVERNMENT SANCTIONS)

HC Deb 13 February 1978 vol 944 cc30-171

3.30 p.m.

Sir Geoffrey Howe (Surrey, East)

I beg to move, That this House 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; and calls upon the Government to withdraw its new contract clauses for public purchasing. I begin by explaining the three charges against the Government which I invite the House to examine this afternoon. The first charge is that the Government have changed fundamentally their policy as announced by the Chancellor of Exchequer on 15th July and set out in the White Paper debated on 20th July. They have moved from that to an attempt to impose a rigid 10 per cent. pay limit. That is a damaging and dishonest shift of policy and it has been done wholly without the authority of the House of Commons.

Secondly, they have been driven, in the course of implementing that, to adopt methods that are unjust, arbitrary, unlawful and unconstitutional and which do not deserve and have not received the support of the House of Commons.

Thirdly, the policy changes announced by the Secretary of State for Prices and Consumer Protection last week on a new form of Government contract, far from putting things right make matters a great deal worse and should be withdrawn forthwith.

I shall deal first of all with the policy that we thought was reasonably clear and common ground. As we understood it, in the context of steadily reducing rates in the growth of the money supply—

Mr. Frank Dooley (Sheffield, Heeley)

On a point of order, Mr. Speaker. Is it your intention to call any amendment to the motion?

Mr. Speaker

I apologise. I should have told the House that I have not selected any of the amendments.

Mr. Eric S. Heffer (Liverpool, Walton)

Why not?

Sir G. Howe

In the context of steadily reducing rates in the growth of the money supply, and in the context of cash limits on public spending, the Government were expecting that we should return to responsible collective bargaining, free from Government interference. That policy was announced by the Chancellor and it commanded general support inside and outside the House. In the context of that policy, pay was regarded as no more than one of a number of factors influencing the level of inflation. In the long run it would have been of more significance in its impact on unemployment. In that spirit we all approached the policy.

When the Chancellor was questioned by his former right hon. Friend the Member for Newham, South (Mr. Prentice) on 15th July last year he answered: I think that he will know that a return to normal collective bargaining is inevitable after two periods of strict pay policy."—[Official Report, 15th July, 1977; Vol. 935. c. 997.] The Prime Minister, when called upon to amplify what was happening, said, in opening the debate on 20th July: I propose to confine my remarks this afternoon mainly to the new situation that arises from the fact that no national pay increase will apply throughout the country during 1978. For the past two years the Government have had the great advantage of being able to operate against the relative certainty of an agreed national increase. That is no longer the case. He said later: Nevertheless, the desire to return to that freedom has been strongly expressed and cannot be gainsaid. So be it. We start from there."—[Official Report, 20th July 1977; Vol. 935, c. 1606–8.] That is how the policy was outlined by the Prime Minister. To make it even clearer I shall quote from correspondence between my right hon. Friend the Member for Lowestoft (Mr. Prior) and the Chancellor to which reference was made in the debate last week. The Chancellor wrote on 10th August—and he was quoting from my earlier description of Conservative policy—that the right course is to restore a system of responsible pay negotiations, free from direct control…. He"— that is myself— then 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. The task in the next 12 months is to complete the transition to responsible collective bargaining from two years of rigid pay restraint.… Negotiators are free to make up their wage settlements in the coming round in whatever way best suits their circumstances, but we have asked them to remember what we have said about the economy as a whole. As I said in my statement to the House, the implication is that most settlements will have to be well within single figures. But it is common ground between us that we cannot specify the level of particular settlements in this transitional period, and so it is misleading to talk of 'exceptions' as though there were a rigid imposed level of settlements". When the Chancellor then said that settlements must be in single figures the plain implication was that some would be within single figures and some would be just outside. In a radio broadcast on 24th July he explained the 10 per cent. figure in a more colloquial way as A rough figure around which settlements will move. Has that policy been abandoned? If so, does it mean that there is a rigid limit—a fixed figure beyond which there may be no exceptions? We had something like an answer from the Secretary of State for Prices and Consumer Protection last week.

Mr. J. Enoch Powell (Down, South)

Before the right hon. and learned Gentleman goes on to the shifting policy of the Government, will he refer to paragraph 16 of the July White Paper, which states that in certain circumstances where a settlement is clearly inconsistent with the polices in the White Paper the Government will take this into account in public purchasing policy and in contracts? Were the Opposition in agreement with that element of the July policy?

Sir G. Howe

The paragraph to which the right hon. Member draws attention is itself Delphic. The Chancellor may laugh, but he should look at this absurd paragraph. It is quite impossible to tell from that what is consistent with the pay policy and what is not. When this policy was first adumbrated in July 1975, we moved to reject the Remuneration, Charges and Grants Bill, which was seeking to enforce standards that would be determined by Cabinet Ministers and not by the force of law. The whole debate on that measure was directed to the way in which this policy would serve to turn the Secretary of State into a one-man Pay Board. This was repudiated by the then Secretary of State for Employment, who is now Lord President of the Council.

How far has that flexible policy, which the Chancellor welcomed and endorsed as a return to free collective bargaining, been abandoned? If it has been abandoned, what has taken its place? In last week's debate the Secretary of State for Prices and Consumer Protection said: Certainly there would have been great advantage in this pay round if there had been some flexibility within the 10 per cent. ceiling and some had got rather less than 10 per cent. thus allowing others to get more However, the way that it turned out made that impossible … [Official Report. 7th February 1978; Vol. 943, c. 1270] The Chancellor may say "Hear, hear" but he earlier endorsed the policy as originally adumbrated to the House.

The Secretary of State for Prices and Consumer Protection last week announced that that had become impossible. When did it become impossible? At what stage were wage bargainers on either side to learn that the Chancellor's interpretation of his own policy had shifted? When did the 10 per cent. average figure turn into a rigid limit, and by what authority?

Mr. Dennis Skinner (Bolsover)

After the TUC.

Sir G. Howe

The hon. Member for Bolsover (Mr. Skinner) makes a very interesting comment. In its statement before the statement by the Chancellor of the Exchequer on 15th July, the TUC rejected the proposition that it would be wise or sensible for either the TUC or the Government to give guidance about the level of specific settlements.

We find that the matter changes in a mysterious way. By their failure to explain their original policy, the Government allowed the 10 per cent. permissible figure for total national earnings which was compatible with the growth of the money supply to become first a guideline, then a norm, then a target and finally a platform. That happened because of the Government's failure to explain their policy from the outset, and the fact that that has happened has been increasingly damaging.

In recent pay settlements, we see larger increases on the grounds of productivity, genuine or bogus, being added on top of the average of 10 per cent. We find the firemen being given by the Secretary of State for Employment, overriding the negotiators in local government, a promise of a reduction in their working week to 42 hours at a cost of between an 8 per cent. and a 14 per cent. addition to the pay bill. That is to be added on top of the 10 per cent. about which we fought a great battle for weeks. That is a pay settlement increase of up to 24 per cent. In the case of the coal miners —it is difficult to discover exactly what the facts are—the victory last week in defence of 10 per cent. comes on top of productivity deals which are being paid now although output in the coal industry was lower last week than in the same week a year ago. The productivity deals range up to £35 a week for some people. That means 41 per cent. on top of 10 per cent. So the insistence on the 10 per cent. is to be thought of as an addition to whatever has emerged.

Beyond that, in relation to the firemen, the police and other services, blank cheques are being drawn on the future so that we know not where this will be taken in the end.

All this change of policy will do great damage to the prospects which we all shared last summer of a return to normal responsible collective bargaining. The imposition of and the insistence on a 10 per cent. guideline impairs all the essentials of understanding if we are to return to sensible collective bargaining. It deprives people even of the learning process. Incidentally, it leads to the Government now finding themselves in the absurd position of being obliged to purchase supplies of goods and services at a higher price rather than choosing them from efficient suppliers who may have gone beyond the 10 per cent. limit.

The whole process has reduced the scope for flexibility in pay bargaining, which we know to be desperately necessary. There are shortages of skilled labour because skill has not had the chance of having its differentials restored. Skilled workers in industry after industry are frustrated by the fact that the 10 per cent. limit is prayed against them time and time again to prevent the flexibility which the Government said was the objective.

What is more, if the Government insist on interfering in the way that they have throughout not just this stage but through stages 4, 5 or even 6, and if they insist on building their industrial strategy on this kind of interventionist partnership between Government and industry, there is no hope whatever of a sensible pattern for economic recovery.

Let us look in a little more detail at the curious things that have happened. It is ironic to cast one's mind back to what was said by the then Secretary of State for Employment—now the Lord President—on 23rd January 1975 in a debate on that less than revered document, the social contract—[HON. MEMBERS: "Where is he, and what happened to it?"] The social contract has disappeared, together with the Lord President. On that occasion the right hon. Gentleman said: If the Government said, 'Let us see whether this settlement comes within or without the guidelines', it would reintroduce some of the disadvantages of the statutory system. In the preceding column, he is reported to have said: When hon. Members ask why we do not publish in the way they have described details of this or that settlement, they still talk in terms of the told statutory system, as though the Department of Employment was some kind of undercover pay board which was dealing with these matters. We are not dealing with them in that way."—[Official Report, 23rd January 1975; Vol. 884, c. 1808–9.] That may have been so then. However, my hon. Friend the Member for Melton (Mr. Latham) was told by the Secretary of State for Employment only a few days ago: my Department at 1st January employed 69 staff who are mainly concerned with giving advice on the application of the pay guidelines to particular negotiations and who also monitor settlements in the private sector. This involves a total cost, at an annual rate, of £809,155."—[Official Report, 31st January 1978; Vol. 943, c. 86.] There is the undercover Pay Board, 69-men strong, costing £800,000 a year. So far have we travelled from the high hopes of last summer. Having set out to return to normal collective bargaining, the Government have ended up with all the rigidities of a statutory system with the added disadvantage that they are entirely lacking in partliamentary or statutory authority to do it.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Going back to what my right hon. and learned Friend was saying about the miners' 41 per cent. plus 10 per cent., may I ask whether he has noticed the amendment on the Order Paper in the names of Liberal Party Members suggesting tax penalties? In my right hon. and learned Friend's view, does that mean that the miners should have a special increase in income tax as a result of this rather excessive settlement?

Sir G. Howe

My hon. Friend has put his finger on a very interesting point, about which I have no doubt we shall have the usual explanation from the hon. Member for Cornwall, North (Mr. Pardoe). It is hard enough to grapple with the methods adopted by the present Government, let alone those proposed from below the Gangway.

If we look at the methods being adopted, the Government now make no secret of imposing sanctions for breaches of these guidelines. Indeed, the Prime Minister boasts that he is unrepentant about them. However, by the law and constitution as we have always understood them, if people are to be subjected to sanctions for offences, the offences should be defined clearly, and they are not. Those sanctions should be authorised by law, and they are not. The sanctions should be applied consistently, and they are not. People who are charged with an offence for which they are liable to sanctions are entitled to notice of that charge and they are entitled to a chance to defend themselves before an independent body. Every one of those rules of natural justice is now being violated deliberately by this Government.

I wonder how many Government supporters remember the proud boast contained in the October 1974 General Election manifesto of the Labour Party: Labour respects the rule of law. From Clay Cross to Tameside there has been precious little evidence of that. The Labour Party has replaced the rule of law with a system of uncodified coercion, and the greatest disgrace of all is that this system of jackboot justice now apparently receives the support of the Liberal Party, however reluctantly, ever ready to preach the rule of law in every country save its own.

Mr. Tam Dalyell (West Lothian)

Suppose that the right hon. and learned Gentleman were a member of a Government faced with the same problems as those which my right hon. and hon. Friends now face; do we take it from what he said that he would bring in a code of laws to deal with the situation?

Sir G. Howe

There are two proper ways of dealing with the situation. The Government should have tried to apply with more courage, candour and clarity the policies on which they embarked last summer. The Chancellor should have tried to drive home the message that his pay settlement average, around which settlements should fluctuate, was well into single figures, as he began by saying, of 5 per cent. or 6 per cent. That should have been the message instead of almost immediately the message turning into a 10 per cent. guideline. That was the damage that the Government did, and they almost destroyed the chance of getting back to sensible collective bargaining.

If the Government decided that that was impossible, their alternative was to come back to the House of Commons and get statutory authority to impose their policy by the force of law instead of scouring through the garbage can for any device or any power they could lay their hands on, proper or improper. The truth is that the Government now find themselves in a quite astonishing situation, applying a wholly arbitrary policy in an entirely unjustified manner.

Let us take the example of Ford Motor Company. It is well known that Ford settled for a figure of 12 per cent., well beyond the guidelines. On 1st December, the hon. Member for Ormskirk (Mr. Kilroy-Silk) asked the Chancellor whether Ford had broken the pay code, whether sanctions were being applied, and, if not, why not. The Chancellor said: As the Government have previously made clear, we regretted 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 no discretionary action appropriate? Is not Ford receiving aid under the Industry Act? Are not the Government still purchasing Ford motor cars for certain parts of their organisation? Why is discretionary action not appropriate in this case? Is it because of the size of the victim, or the size of the Labour majorities which might be affected? What is the economic effect of such a decision on conditions in the labour market on Merseyside, where other employers are seeking to contend with the market now set by the Ford wage rates?

I come to another extraordinary anomaly, the Otis Elevator Company, about which the Secretary of State for Prices and Consumer Protection had a word to say the other day when he was asked about it by his hon. Friend the Member for Ormskirk. The right hon. Gentleman said: the position about the Otis Elevator Company in Kirkby is open to some dispute, but in my judgment there has been a breach of pay policy. However, we granted temporary employment subsidy for three months in order that employment prospects should have paramount importance". A moment earlier, he had said: …from time to time there may be an area or a location where employment problems are so gross that the obligation to preserve employment must take priority over the obligation to hold down inflation."—[Official Report, 7th February 1978; Vol. 943, c. 1271.] That may or may not be a legitimate objective, but what an extraordinary way to apply it. How comes it that the Otis Elevator Company in that constituency, alongside Ford, is given that discretionary treatment? Will the same treatment go to Tower Hamlets, Tyneside or Perry Barr? What level of unemployment is necessary? How high does it have to be? For how long will companies remain immune from sanctions?

I take another example from the same part of the world, the firm of High Speed Turnings, also on the Burtonwood trading estate at Kirkby. This is a firm with a small number of employees, some 20 or 30, I think. This firm now finds itself placed on the black list, and in the most disgraceful circumstances. Hon. Members will recall the report about High Speed Turnings in The Times last Wednesday: No one in the company knew that it was on the black list until a week ago. 'A chap from one of the papers'"— I am quoting now from the proprietor's words, reported in The Timesߞ 'rang me up and said: "Do you know that you are on the Government's black list?". I said: "What list is that?" He replied: "It is a list of seven firms that have been blacked for breaking the pay code." We certainly had no formal notification and we still have not had'.". What is the justification for that—for imposing sanctions on a small firm employing 30 people in an area of that kind when other companies of the size of Ford and Otis go scot-free?

Is High Speed Turnings still on the black list? We do not know. Is John Lewis still on the black list? Its position remains wholly in doubt. How many more companies are there on the black list without their knowledge? How many are there on the grey list, of which we have begun to hear? How long do they stay on the list?

One has every sympathy with what John Lewis said in its letter last week: Since we have been unable to obtain from the Government either satisfactory answers or redress, we are entitled to make our own views clear. …. They are that the whole paraphernalia of secret lists and sanctions imposed through the medium of so-called advice … is a gross impropriety of Government. It is made worse by the fact that it is apparently not thought necessary to inform those concerned; that there is no appeal procedure and no attempt to relate the 'penalty' to the seriousness or otherwises of the breach. The Government…is using a form of sanctions which is…devoid of any semblance of justice…We regard the whole procedure as utterly deplorable.

Mr. Skinner

Since the right hon. and learned Gentleman is making a strong point about having all these black lists made open to the public gaze, will he agree that at least two of the areas which could well come under public scrutiny would be the lifeboat list covering the many firms, secondary banks and so on, which received large sums of taxpayers' money and private moneys in order to be bailed out at the time when that system was set up by his Government in 1973, and, second, the multitude of private sector firms which are receiving in total about £11 million or £12 million per day of taxpayers' money in various forms? Should those two areas be opened up for public scrutiny?

Sir G. Howe

They are all well known—

Mr. Skinner

They are not.

Sir G. Howe

—and that is a matter quite separate from the present issue. To call that which I have described Star Chamber justice is to cast a wicked slur on the reputation of that distinguished court.

I take another example, the Electrical Contractors Association, about which the Attorney-General made a foray last week. One electrical contractor, W. T. Parker, wrote a letter in January to its employees, and a copy was sent to my hon. Friend the Member for Burton (Mr. Lawrence). It was written in the context of the treatment being given to the firm by the Government, and it read: Should we pay the agreed wage in full, all Government work would be withdrawn from this company, which means that over 65 per cent. of the company's work would be taken away, which would inevitably lead to mass redundancies. Also the Government could take away the tax exemption certificate. This would result in our being paid for the work which we carry out, less a total of 30 per cent., which again would damage the company, and again cause mass redundancies. Is that also correct? Is it one of the Government's discretionary sanctions to try to withdraw the celebrated 714 certificate? We shall want an answer to that before the end of the debate. What is clear is that the threat of imposing sanctions in that way carries a serious risk of mass redundancies.

Hon. Members

Answer.

Sir G. Howe

I shall give the Chancellor a chance to reply. We want an answer. I certainly hope that he will answer that question, because it is a serious issue. If he does not know, he ought to.

Hon. Members

Answer now.

Sir G. Howe

Let me turn to the Attorney-General, because he has an interesting part to play. In the Financial Times last week, under the heading Silkin's Appeal Court Speech". we read what the Attorney-General quite clearly admitted: The Department's representative made certain statements concerning the possible use of the Government's discretionary powers, which I concede"— said, no doubt, with that delicacy of phrase with which we are familiar— were unfortunately worded… .. it is not now and has never been the policy of the Government that it should take any action with the intention or consequence of causing a breach of contractual or other legal obligations. In plain language, what the Attorney-General was admitting was that representatives of the Government had used improper threats to the parties to the contract in question in order to induce them to set aside their legal obligations. He had gone along to apologise for that and say that these threats could be disregarded.

The right hon. and learned Gentleman went on: there is no reason, so far as the Government is concerned, why the plaintiffs"— that is, the electrical contractor— should refrain from honouring whatever legal obligations they may owe to their employees. I take it that that means that, although companies had made agreements in breach of the so-called guidelines, no punishment was to be inflicted on them. There seems to be no reason why they should not go ahead with the full gamut of the agreements made.

I hope that the Attorney-General will confirm that such companies are not on any black list and that all members of the Electrical Contractors Association are set free by his statement to the Court of Appeal last week—free to pay the agreed sums—and that, despite the threats which were made to them, they will not be subjected to any withdrawal of Government contracts hereafter.

Unless that is the position, the Attorney-General's statement to the Court of Appeal has no significance and no meaning. That deals with the Attorney-General for the moment. [HON. MEMBERS: "Answer".] I am ready to give way to the Attorney-General. I gave him notice that I intended to refer to that matter during the debate. It will be remarkable if he cannot confirm the plain meaning of his own words—that members of the Elec- trical Contractors Association, although having been on the black list, are now, despite their compliance with an agreement which exceeds the pay limits, not to be subject to certain sanctions.

How does the position of those companies differ from that of others? Let us consider the road haulage contractors, which, apparently, are being subject to some kind of black list, grey list or twilight list throughout the West Midlands. In The Times of 7th January there was a report about the firm of T. Baker and Sons, which was to be deprived of a defence contract worth between £10,000 and £12,000. It is said to be one of an association of 800 hauliers. In another report it is 1,500. Why has it been singled out? Why not the rest of the 800 or 1,500? After all, what it is doing is complying with the agreement entered into with its employees. What is the difference between its position and the electrical contractors which the Attorney-General let off the hook last week? Is it merely that in the case of the electrical contractors Government civil servants used threats which, although they were prepared to apply them, were unlawful, while in this case they have not been found out?

If we look at the haulage case a little further, we find that the Department of Transport has decreed that until the commercial hauliers in breach of pay policy can be identified, Government business should not be placed in any areas where excessive settlements have been made. That is a novel form of black list, because it is a form of collective punishment on any road haulier in an area where it is believed on someone's say—so that an excessive pay agreement has been made.

We are in danger of getting to the stage where the only offence is to be found out. Where does this end? If these people are to be withdrawn from the right to tender for Government business, why should they not have their licences withdrawn? As the hon. Member for York (Mr. Lyon) said, why not, in the exercise of this discretion of Government power, deprive such companies of contracts because they support the Conservative Party? The Attorney-General knows perfectly well that one of the foundations of the rule of law in this country is the difference between the use of the word "discretionary" and use of the word "arbitrary". Of course, many powers are given to Ministers to exercise as a matter of discretion. But if these powers are exercised in a fashion which is not within the purposes for which they are conferred—as the right hon. and learned Gentleman has found in the Sky-train case amongst others—Ministers go wholly outside the rule of law and are acting with gross impropriety, as they are doing in this case.

I finally want to look at one other aspect—the so-called new contract. Again without consultation, the Government in the debate last week produced the most astonishing document ever to have been placed before the House of Commons. It starts off by defining incomes policy to which contractors have to have regard as Any Command Paper presented to Parliament and having effect after 12th July, 1975. I ask hon. Members to note: Any Command Paper presented to Parliament"— not even approved by Parliament but "presented to Parliament". Presumably it will have been printed. That is the most that we can expect from this Government. This is a blank cheque for unlimited duration. Moreover, it imposes liabilities on the main contractors with regard to the activities of any sub-contractor in respect of any pay settlement with any single employee of that contractor or sub-contractor, whether or not employed by the contractor in question. The head contractor is to be placed under a total liability for any random pay deal made by any one of the sub-contractors with one employee. It is totally unbelievable.

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

What is the difference between that responsibility of the main contractor and the responsibility which already exists on the main contractor in respect of the fair wages resolutions to see that the sub-contractors pay for wages?

Sir G. Howe

The difference is fundamental, and I am grateful to the hon. Gentleman for giving me the opportunity to point it out. The fair wages resolutions which have existed from 1891 onwards have been approved by Parlia- ment and contain provisions for independent appeal and independent enforcement. None of these things is present in this case to prevent unlimited liability.

Even worse than that, this document requires a contractor to be liable in respect of any settlement entered into after 1st August 1977. That is retrospective. Is this meant to apply to the policy as originally outlined by the Chancellor last July or to the policy as outlined by the Secretary of State last week? How are these firms to know? Which incomes policy are we talking about? It is not clear.

In fact, the answer to that question is itself tyrannical because the contract says that the decision as to whether or not something is in breach of the incomes policy will come in a certificate from the Secretary of State and that any decision shall be final and conclusive.

The Secretary of State is investigator, prosecutor, judge and total tyrant. In consequence of any error on the part of the contractor, the Government have got the right to give one month's notice to reserve all their own rights under the contract but to deprive the contractor of all his. That could involve total cancellation and the risk of bankruptcy.

It is an intolerable abuse of power which this House ought not to allow for a moment. This contract comes—if the House can believe it—from a Government who put to the electorate a manifesto which devoted itself to belief in the rule of law. What total hypocrisy and cant. It has come from a Government who only in the last two or three weeks were taking pride for having placed on the statute book the Unfair Contracts Act. Yet this contract, which is the most unfair in the world, comes from a Government who in the last two years have introduced the Consumer Credit Act in order to redress the balance between the consumer and the mighty commercial organisations.

If this contract had been drawn up within the Hodge Group of companies for use by one of its hire-purchase companies, to be financed by the Commercial Bank of Wales, even the Prime Minister might have begun to blush with shame at the sight of it. But because it has been drawn up by this Government on the advice of the Attorney-General, and implemented "in the national interest", the Prime Minister remains unrepentant. He ought to be ashamed of himself.

Last week the Select Committee—the small group of members about whom the Prime Minister spoke with some lack of respect—dealt precisely with this very issue. Those members raised what they called "one issue of principle" regarding the recurring tendency of Departments to seek to bypass Parliament by omitting necessary detail from instruments (or alternatively by qualifying detailed provisions) and thus to confer wide discretion on the Minister to vary the provisions without making a further instrument. They described it quite rightly as an astonishingly casual attitude on the part of the Executive…amounting on the face of it to a cynical disregard of the rights of the subject. Those arguments apply equally to the policy that the Government have now brought before us. For the same reasons, I invite the House to reject it.

4.7 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey)

I hope that when winding up the debate, the right hon. Member for Lowestoft (Mr. Prior) will confirm the suspicion that has been growing on this side of the House that the Conservative Opposition have now decided to devote one day a week of parliamentary time to trying to undermine the nation's fight against inflation.

Three weeks ago we had a debate on the green pound, in which the Opposition succeeded in pushing up food prices. Last week we had the debate on the so-called sanctions, and now we have it again.

I must confess that for the right hon. and learned Member for Surrey, East (Sir G. Howe) to claim that the Government are by-passing Parliament in discussing the pay policy is an extraordinary way to describe what has been happening in recent weeks. The plain fact is that this House last week rejected by a great majority the Opposition's claim that this discretionary action was illegal and improper. It will reject the Opposition's claims tonight, and that rejection will be of some importance to our parliamentary democracy.

What we are having this afternoon is, in a sense, an action replay of the match that we fought last Tuesday. As so often, this time we are getting it in slow motion. Indeed, one of the newspapers described the Opposition Front Bench as "Kamikaze pilots" and said that right hon. Gentlemen seemed like large and dingy moths, blundering once again into the flame in an irresponsible compulsion for punishment.

I think there is a rather more charitable explanation of the Opposition's decision to devote yet another day this week to the subject it debated last week than the reason attributed in The Observer yesterday. The reason why we are debating sanctions again this week is an attempt by the right hon. and learned Gentleman to back away from the shameful behaviour of the right hon. Lady the Leader of the Opposition with regard to race—in a nutshell, and in more elegant words, "better a black list than a blackamoor".

Mr. Skinner

My right hon. Friend has missed the real reason why we have to have this videotape replay of last week's match. It is because the right hon. and learned Member for Surrey, East (Sir G. Howe) and the right hon. Member for Lowestoft (Mr. Prior), who are speaking today for the Opposition Front Bench, complained about the fact that their two colleagues who spoke in last week's debate were able to shine. As a result, we had the Shadow Chancellor and the Shadow Employment Secretary wanting another run because they were frightened of being outdistanced by their two colleagues who spoke last week.

Mr. Healey

That is an interesting explanation but, having listened to those two Opposition Front-Bench speakers last Tuesday, I think that "shine" is scarcely the word to use for their performance, although, judging by what I have heard, they will be found to have outshone the speeches we hear today from the Conservative Front Bench.

I propose to start, as the right hon. and learned Gentleman did, by establishing the framework within which the House and the country must judge these issues. By far the most important single issue facing Britain today is the fight against inflation. The British people are now winning that fight. The rate of inflation is falling fast.

The December retail price index figures, published last month, showed that, excluding seasonal foods, the increase in the last six months was 3.4 per cent., or 7.4 per cent., both single figures, at an annual rate. The January RPI figures, out next week, will show a year-on-year rate close to 10 per cent. The February RPI figures, out in a month or so, will show a year-on-year rate that is in single figures.

That will be the first time that we have had a single figure year-on-year rate since October 1973, well before the Conservatives left office, while in the meantime we have had a five-fold increase of oil prices. As my right hon. Friend the Chief Secretary to the Treasury said last Friday, if we continue to be as successful in the rest of the pay round as we have been to date, the RPI is likely to continue falling and to stay in single figures throughout the year.

Many factors have contributed to this success, including a responsible fiscal policy, and a monetary policy that has steadfastly renounced the profligacy of the last Conservative Government. But far the most important single factor has been the co-operation of trade unions and employers alike in adhering to sensible guidelines for pay policy. These guidelines were laid down by the Government and the trade unions together in the last two pay rounds, but, apart from the provision for a 12-month gap between settlements, by the Government alone in the present round.

There has been overwhelming adherence by employers and trade unionists alike since this pay round began last August. I may add that once again I was congratulated by my international colleagues in Paris yesterday on the success of the Government's pay policy, and I can say that they expressed some surprise at the fact that the Conservative Opposition should be attempting to undermine it.

Mr. Robert Adley (Christchurch and Lymington)

The right hon. Gentleman has referred to employers and trade unions. May we take it, therefore, that the sanctions policy will be applied to the unions as well as the employers? What action is he contemplating against the Transport and General Workers Union for its action over the petrol tanker driver's dispute?

Mr. Healey

There are many signs that that dispute may now be on the way to a solution, and I hope that hon. Members opposite will not hot it up in the way they attempted to hot up the police and firemen's disputes.

The extent to which the guidelines have been successful is unprecedented. As my right hon. Friend the Secretary of State for Employment said on Friday, out of over 32,000 settlements in the last two and a half years, only 385 have been outside the guidelines, and of them 337 were renegotiated; thus only 48 firms have been in breach in the last three rounds. There is an even smaller number of these firms whose settlements the Government have refused, and will continue to refuse, to finance with taxpayers' money by using their discretion, as they warned they would in the White Paper, to withhold types of assistance that they are under no obligation to furnish.

It is for the Government's action in this handful of cases that the Conservatives are asking the House to condemn the Government—in other words, for their decision to require an assurance from firms which seek Government contracts, and which are already required to give such an assurance, that if they have breached pay policy in the past they will not do so in the future. That, in fact, is the narrow issue on which the Conservatives are seeking to censure the Government in this debate.

Mr. Maurice Macmillan (Farnham)

I take it that the right hon. Gentleman is including in this specification the use of ECGD powers, so that, despite the judgment of the courts and the expressed opinion of jurisprudence, the discretion of Ministers under an Act of Parliament is being used for purposes other than those in the Act itself.

Mr. Healey

It has been made clear many times in recent months, since the Mackie case last August, that the type of export credit that the Government are able to refuse is that which they are not obliged by any rules to offer, and which they should plainly offer only if they are satisfied that the national interest will be served by so offering. The French Government are using precisely the same power of refusing export credit as of refusing Government contracts in seeking to persuade private firms to support their pay policy, although that policy is a great deal less clearly defined than our policy is.

I make no apology for what the Government have done in this area over the last two and half years, or for what they have decided they may do in future. The Government are not going to use public funds to subsidise firms that are breaking the guidelines, particularly when the great majority of firms and workers—whose tax payments provide these funds—are observing the guidelines. And when in many cases, the purpose of breaking the guidelines is to poach labour from others who observe them. The Government are not prepared to use money provided in taxes by firms and workers who observe the guidelines in order to finance breaches of the guidelines at their expense.

Sir G. Howe

Can the right hon. Gentleman take time, during the course of his speech and amid his trenchant observations, to explain why the Government were prepared to use money provided by taxpayers in order to help Ford breach the guidelines?

Mr. Healey

I am coming to that matter in a moment. Our policy has been absolutely clear from the beginning. It has been set out in a White Paper and approved by Parliament. The policy of using discretionary action is the same which operated in the two previous rounds. The policy operates fully within the law, both as regards the setting of conditions by the Government for their contracts and as regards the Government using their discretion concerning the national interest when giving industrial or other forms of assistance to firms.

The policy is operated in a way that gives firms every opportunity to explain their case and to renegotiate an excessive settlement at any stage. The Department of Employment—my right hon. Friend the Secretary of State will give more details later—has sent out 25,000 letters to individual firms since the pay policy began—3,000 already in the current round. The policy is a discretionary policy precisely so that employment and similar considerations may be taken fully into account. The policy is operated not in secret but on the basis of confidentiality, just as every aspect of industrial policy is conducted on the basis of confidentiality between the Government and the firms taking part.

Mr. Peter Emery (Honiton)

Is it the Government's intention to ask the nationalised industries and local authorities also to comply with the contractual terms that have been put into the Library?

Mr. Healey

Our powers are different in the case of the nationalised industries and the local authorities. We shall invite the nationalised industries to operate as the Government do. We are considering whether to invite the local authorities to do so, but we would not wish in any way to infringe the autonomy given to them by this House. I must tell the Opposition that if we were to adopt the policy towards local government which they ask us to implement, local authorities would cease to have any autonomy whatever. The Government have no intention of taking such a course and we are making our position very clear.

The policy is operated not in secret but on a basis of confidentiality between the Government and the firm concerned. That is why the Government have not named names. If the CBI and other employers' organisations decide that the interest of firms will not be harmed by the publication of their names, the Government are prepared to publish them, as my right hon. Friend the Prime Minister made clear only last week.

What the Government will not do is to allow all the benefits of moderation in pay increases—falling inflation, rising living standards and more jobs—to be thrown away by going soft when it comes to taking the action necessary to ensure that we get that moderation, particularly when the great majority of firms and workers are sticking to the guidelines.

Mr. Ridley

Is the right hon. Gentleman also intending to publish the list of names of firms which have broken the guidelines but against whom sanctions are not to be taken—namely, those on the white list?

Mr. Healey

As I have said, we shall consult employers' organisations on this matter, and those organisations take a very different attitude from that adopted by the Opposition Front Bench. The Opposition are separating themselves more and more, week by week, from the productive elements in our economy.

Mr. Michael Latham (Melton)

Will the right hon. Gentleman answer one simple question which one of his ministerial colleagues refused to answer in the House on 2nd February: did Vauxhall break the guidelines and, if so, what action will be taken against that firm?

Mr. Healey

I shall come to that matter in a moment, if the hon. Gentleman will be patient.

As the right hon. and learned Gentleman made clear, it is possible to oppose the Government's policy for any of three reasons—to oppose pay policy as such, or because they oppose the use of discretionary powers to support pay policy or because they believe that the particular instrument which the Government have available in supporting that policy is unjust or inappropriate.

It is unclear whether the Conservative Party opposes because it is against pay policy in principle. Certainly the Leader of the Opposition is strongly against any sort of pay policy. She told Scottish Conservatives in Glasgow last month: The counterpart of the withdrawal of Government from interference in prices and profits in the private sector, which we all want to see, is inevitably the withdrawal of Government from interference in wage bargaining. There can be no selective return to personal responsibility. That is what the right hon. Lady said barely a month ago, but we no longer know whether that is her party's policy. She has developed a habit, as the Financial Times pointed out last week in regard to her policy on immigration, of continuing to have it both ways. She apparently throws out remarks at random and then refines, changes and shifts her views. We had an example of that on immigration only this weekend.

I cannot help feeling that when the Shadow Cabinet accuse Her Majesty's Government of being arbitrary and despotic, they should look to the arbitrary and despotic behaviour of their own leader who, at the drop of a hatpin, changes, creates and modifies Tory policy without a word of explanation to her colleagues.

That is the impression given by the right hon. Member for Lowestoft. He had the misfortune to sit by her side when she made her remarks in Glasgow on pay policy. The right hon. Gentleman's attitude to pay policy is diametrically opposed to that of his Leader. He is still, I understand, the official spokesman on these matters, and indeed he will be winding up this debate tonight. As always, the Tory Party is trying to have it both ways. They have an opponent of pay policy opening the debate and a supporter to close it. Therefore, whatever happens, they can always claim that one of their spokesmen got it right.

The right hon. Member for Lowestoft told his television audience before Christmas that This country will always have to have an incomes policy of a sort. He went on to make clear that it should be only in the public sector. He wanted a fully structured policy in the public sector with a permanent review body, but for some reason he totally rejected incomes policy for the private sector, although he admitted that when the Conservatives were last in power the public sector was discriminated against. His words were: They really suffered and the private sector did not. But in that case any Government must have a policy for the private sector, too, otherwise there will be an intolerable strain on policy in the public sector. That is why the Government must have some means of achieving their objectives in the private sector, however limited those means may be in comparison with their power as employer or paymaster in the public sector.

The Conservative Party are accusing us in this debate of behaviour that is high-handed, unjust and tyrannical. But the fact remains, and cannot be gainsaid, that in present circumstances wherein both statutory wage control and genuinely free collective bargaining are not at present practical politics, such practices may well be an indispensable tactical part of any counter-inflationary strategy, since no Government could get away with holding down wages in the public sector while allowing them to rise in the private. How could the Government twist the miners' arms, for example, without being seen to be doing the same across the board? Indeed, it may well be that the latest cries of pain from private firms could have been one of the crucial factors in persuading the miners to accept their fate. I read that extract from a newspaper article which appeared on the editorial page of yesterday's Sunday Telegraph. The article was written by the leading intellectual guru of the Conservative Party, Mr. Peregrine Worsthorne.

This is the crux of the issue. The overwhelming majority of the country believes that pay policy is necessary and believes that it will be a success. Indeed, people can see that it has been a success, but its success depends on its being evenhanded.

There is no chance of powerful trade unions in the public sector accepting guidelines when employers and workers in the private sector are free to do as they like. Mr. Gormley made that very clear last week. There is no chance whatever of miners settling for 10 per cent., or firemen settling for the same figure, if some workers in the private sector burst the guidelines with impunity.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

Will the right hon. Gentleman give us the true figure—not the 10 per cent. that is said to have been settled for, but the actual average increase in wages as a percentage which the miners will receive? What sanctions will the Government take against them for settling outside the guidelines and in seeking alternative energy methods?

Mr. Healey

We always welcome the bizarre eruptions of the hon. and learned Gentleman. He should know that the miners made a productivity agreement with the National Coal Board area by area.

Mr. Adley

The figure has gone down.

Mr. Healey

No. Output has already increased by 10 per cent. since the productivity deal. This will be more than sufficient to finance extra earnings, becaus the miners are keen to increase their productivity.

Mr. Fairbairn

What about John Lewis's productivity?

Mr. Healey

I always welcome the hon. and learned Gentleman's interventions, but he would be taken more seriously if he took the trouble to acquaint himself with the facts. He does not seem to be aware that there is scope for self-financing productivity deals within the guidelines laid down by the Government and the policies pursued in the House.

The view that one must have reasonable parity between the public and private sectors is held not just by trade unions and public opinion but by major employers' organisations. The CBI has made no objection to the Government using their discretionary powers, including the power to withhold contracts. The Engineering Employers Federation made it clear in writing to me last week that: It recognises the right of the Government to implement sanctions against companies that break the guidelines. Its complaint against the contract clauses is not the Opposition's complaint that they are illegal, arbitrary or despotic, but simply that, in the Federation's view, they are unlikely to achieve their objective. I shall be coming to that point later.

Those most directly concerned on both sides of industry, who support the pay policy, do not object to the Government's use of discretionary powers to support it, even if the use of discretionary powers is, by definition, liable to lead to different treatment of some cases in the light of all the considerations that are relevant to the particular cases concerned. The fact is that in many cases where governments in the democratic world have operated pay and incomes policies, they have supported them by withdrawing aid from those who break the policy and have used their power with discretion. That was true of the United States when it had an incomes policy and it is true of France today.

I see that the Leader of the Opposition, whose absence we regret, said in York last week that a policy of relying on sanctions was turning us into an East European-style State. I note that Conservative Members are cheering that. They do not know very much about Eastern Europe if they think that the withdrawal of Government contracts is the way in which pay policy is enforced in Eastern Europe.

In the past 12 months the French Government have been using the denial of Government contracts and export credit to persuade firms to adhere to a pay policy that is far less clearly and rigidly defined than is ours. The French Government reserve the right to apply or not to apply such sanctions according to their view of the total national interest in each case.

I suppose that the Leader of the Opposition, who believes that the policies of democratic Socialist governments are more Communist than those of her Communist friends in Yugoslavia and other parts of Europe, will be supporting M. Marchais against M. Barre in the current elections.

Mr. Heffer

Is my right hon. Friend aware that the present French Government are telling the people of France not to vote Communist or Socialist because they will end up with an East European-style State?

Mr. Healey

My hon. Friend reminds us that the right hon. Lady's ignorance of geography is almost as abysmal as her ignorance of politics.

The experience of the Conservative Party when it supported pay policy strongly demonstrates the advantages of having discretionary powers and of using them when it is sensible to do so. The Counter-Inflation Act 1973 introduced by the right hon. Member for Sidcup (Mr. Heath) set up an independent body called the Pay Board to interpret and police the Pay Code, but buried in Schedule 2 was a power for Ministers to reverse a Pay Board order in exceptional circumstances or even to relieve employers or employees of their obligations under the code. As far as I know, they never used that discretionary power and the consequences were disastrous. The mistake they made was in not using with commonsense the powers and the machinery which they set up. They set up a Relativities Board but did not refer the miners' claim to it until the country had been plunged into chaos. It was only after the three-day week and after irreparable damage had been caused to our economy that the Relativities Board found that the Government's rigid application of the Pay Board order to the miners had not been necessary at all. The way in which the then Government used their statutory powers led to one of the most tragi-comic humiliations that any Government in this country have ever known.

The notorious Official Solicitor case involved non-compliance not with the Counter-Inflation Act 1973 but with the Industrial Relations Act 1971. It involved the committal to prison of the Dagenham dockers for contempt of court for defying an order of the National Industrial Relations Court. Surely even the right hon. Member for Sidcup accepts now that that was a good example of the dangers of leaving such matters to independent bodies which are unable to exercise discretion and are liable to adopt a rigid stance which the Executive cannot moderate.

Even the right hon. and learned Member for Surrey, East agrees with us in this matter as far as industrial relations are concerned. He agrees that the 1971 Act soured and sullied industrial relations, as the Director General of the CBI said at the time. To attempt to deal with any sort of pay policy in a similar way, as the right hon. and learned Member seemed to suggest we should, would be equally disastrous.

Mr. Hugh Dykes (Harrow, East)

Will the right hon. Gentleman stop trying to divert himself or the House and answer the specific questions about Vauxhall and Ford that have been put from this side of the House?

Mr. Healey

I have told the House that I shall answer those questions in my own time. It is no good hon. Members popping up all over the Opposition Benches and trying to interrupt. I shall come to the point in due course.

The Government have learned from the bitter experiences of their predecessors. That is why we have decided that the policy should not be applied rigidly and that only the Executive is in a position to make a proper appreciation of all the considerations that are relevant in determining whether to give statutory assistance, where the legislation requires the Executive to exercise the judgments or to make contracts. That is why we have decided not to set up a separate independent body to interpret the pay policy but to make the Secretary of State for Employment responsible for interpretation, both in general and under the new contract clauses.

I come now to the powers that we are able to use under the present pay policy and why we proposed last week to strengthen them. Let me say to the Liberal Party that I would be ready to use tax powers to influence pay settlements if the Liberals could show me any means of doing so that is fair and feasible. I have studied this matter for many years and I do not believe that it is possible to adapt the tax structure to achieve the objective that I know the Liberal Party and we have in common.

Mr. Ridley

On a point of order, Mr. Deputy Speaker. Mr. Speaker told the House that he was not prepared to call the Liberal amendment, but in view of what the Chancellor of the Exchequer has said, the relevance of the amendment has totally changed because there is an open, bleeding rift between the Labour and Liberal Parties on the question whether tax penalties should be used against those who get excessive wages. Would it not be possible for you to decide to call the Liberal amendment so that we may debate this important political development?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

No doubt the hon. Gentleman will not be inhibited from debating exactly what he feels disposed to debate when his opportunity comes.

Mr. Healey

Let me remind the House that we are using fewer powers in this round than in phases 1 and 2. We had a price code then which disallowed excessive settlements for purposes of price increases, but now that power is restricted to breaches of the 12-month rule. The only other formal power left is the Conservative Government's Counter-Inflation Act 1973, and the right hon. and learned Gentleman played a prominent part in persuading the House to accept that Act. However, we have made it clear from the word go, in all three White Papers, that we intended also to use discretionary means to influence settlements in the private sector as well as in the public sector.

The right hon. and learned Gentleman has had drawn to his attention paragraph 16 of Cmnd. 6882, which states: Where a firm has reached a settlement which is quite clearly inconsistent with the policies set out in this White Paper, the Government will take this into account in public purchasing policy and the placing of contracts, and also in the consideration of industrial assistance. That surely is right and proper. No one could conceivably justify the Government's turning a blind eye to excessive settlements that forced up prices and then spending public money on giving contracts or industrial assistance to firms that made such settlements, especially when the great majority of firms and workers, whose tax payments provide the public money, are observing the guidelines.

The whole subject of discretionary action was discussed fully in the House last Tuesday. The Government's view was supported and the Opposition's rejected. However, the Opposition have returned to the attack, and it is not my fault that I am compelled once again to wheel out the artillery which pounded their ranks last Tuesday.

The way that we have applied our policy has been attacked by the Opposition as lawless, secret and arbitrary. That is nonsense. Our policy is operated strictly within the law—no one has disputed that—both as regards our setting conditions for our contracts and as regards using our discretion in the national interest when giving industrial or other forms of assistance.

As for secrecy, we have operated hitherto on a basis of confidentiality, as we do in all these industrial matters, between the Government and the firm itself. As the Prime Minister said, we are consulting the CBI and others about whether we should stop doing so. We have always tried to make ourselves quite clear to firms themselves, even if we have not always succeeded. As soon as we have heard of a prospective pay settlement that is likely to breach the guidelines, we have talked to the firm, warned it of the consequences and tried to persuade it to renegotiate within the guidelines. The firms or associations have ample opportunities to explain their case, and to renegotiate.

In the vast majority of cases we have been successful. As everyone knows, the number of firms against which we have finally taken action is tiny in relation to the number of complaints, and even there our hope is that they will renegotiate their settlements. Many of the firms that have had this action taken against them have already renegotiated.

There is a claim that the policy is arbitrary. Many different Government policies are operated on the basis of judgment rather than rigid rules. They have to be. Many of the policies of the right hon. Member for Sidcup were operated on that basis. It is necessary because one criterion is not necessarily overriding in all cases. As regards pay policy, the need to keep inflation under control is usually paramount, but we have to keep employment and other considerations in our minds. As one of the most important aims of reducing inflation is to enable us to reduce unemployment, it would be absurd if that were not so.

I have been asked many questions about Ford and Vauxhall. The Vauxhall settlement was made very early in the pay round. The Ford settlement was reached only a week or two later, at a time when we still believed that we could have much more flexibility than has turned out to be the case—[HON. MEMBERS: "Why?"] If the House wants to know the answer, perhaps it will listen to what I have to say. We never warned Ford of the possibility of action being taken against it, as I believe it would have been right to do if we were later to have taken action. That is because at that time we had not decided whether we would take action. Employment might have been badly affected.

Sir G. Howe

Will the Chancellor acknowledge that what he has just said makes it clear to the House that when the Ford settlement was considered by the Government they were operating the policy then approved by the House and that they have since changed their policy into one of rigid guidelines without the authority of the House?

Mr. Healey

Not at all. I have made it clear on many occasions that when the Government introduced the policy in the White Paper their hope was that the 10 per cent. would be a focus around which settlements would cluster. In fact, it became impossible to achieve the central objective laid down in the White Paper of seeking to keep the total increase in national earnings down to 10 per cent. and to allow settlements significantly above 10 per cent. as there were no—or very few—settlements significantly below that level. There has, nevertheless, been significant flexibility within the policy. The Ford settlement, for example, comprised increases for some groups within the company of just over 8 per cent. while in other cases there were increases of nearly 13 per cent.

In many instances the composition of the 10 per cent. earnings increase involves a basic wage rate increase of 6 per cent. or 7 per cent., plus consolidation, plus drift. There is an enormous variety of flexibility within the guidelines. On top of that, we have the flexibility that comes from the right of firms to adopt productivity agreements provided that they are self-financing and do not raise prices.

However, the Government have a duty to ensure, as far as is humanly possible, that the national earnings increase does not rise above 10 per cent. As the months have passed—I do not dispute this for a moment—we have had to adopt the 10 per cent. limit with increased rigidity. I do not dispute that, and I do not think that the House or the country would blame us for doing so. If we had followed the advice of the Opposition, we would have had the sort of wage explosion of which they warned us when we adopted the pay policy in phases 1 and 2.

As I have made clear, Ford is not the only case in which we exercised our discretion. The Otis Elevator Company, to which the right hon. and learned Gentleman referred, was a small firm that needed temporary employment subsidy to keep up its employment. Despite a settlement that may prove to be excessive, we have given the temporary employment subsidy for the time being. There are a handful of other cases where we held off taking action that might have been called for if pay policy had been the only issue—for example, Church of England parsons and Methodist ministers.

The Conservative Party is already on record as wishing to go much further than that—and in the public sector, too. The right hon. Lady the Leader of the Opposition said on television on 18th September that the Conservative Government should have treated the miners as a special case. The right hon. Member for Penrith and The Border (Mr. Whitelaw) said at the Tory Party Conference that Conservatives would treat the police as a special case. The bending of the guidelines could easily have gone further. Of course, when the Conseravtive Party was in power its Government were happy to discriminate, as we do still, in their contracting procedures in favour of firms in development areas, sheltered workshops and other special cases.

I now turn specifically to the one remaining issue on which we have been challenged by the Conservative Party—namely, the flexibility included in future Government contracts.

Sir G. Howe

Will the right hon. Gentleman answer a question that the Attorney-General did not answer? Are members of the Electrical Contractors Association, who are not now being discriminated against, complying with the agreement that they arrived at, and are they still receiving Government contracts? That seems to follow from what the right hon. and learned Gentleman said. If that is the position, why are road hauliers in the West Midlands discriminated against on a quite different basis?

Mr. Healey

There is no discrimination. We are seeking to persuade the contractors to renegotiate their agreement. In the case of the firm on whose affairs my right hon. and learned Friend was testifying in the courts recently, the question that arose was not whether the Government had the right to impose sanctions on a firm that breached the pay policy, but whether they should go beyond seeking to get contracts renegotiated and go as far as seeking to get the firm to break a contract. My right hon. and learned Friend made it clear that the latter is not our intention. If it were thought to be so, my right hon. and learned Friend made it clear that the Government apologised on that particular and narrow issue.

We made it clear in our White Paper last July and in our behaviour since then that we propose to take account of our incomes policy in our public purchasing activities. Let me say in passing, since the Opposition have made it their business to attack even that fundamental proposal, that there is nothing startling or new about it, and certainly nothing unconstitutional. I would remind Conservative Members of the Fair Wages Resolutions ever since 1891. They have featured in Government contracts ever since a Conservative Government introduced them nearly 90 years ago.

But, as I have said, the House has already rejected the Opposition's attack on the general point, and the special point at issue today is whether the clauses which we propose to introduce into Government contracts are a further cause for complaint about the arbitrary and heavy-handed use of Government powers.

Let us look at the point in its simplest terms and in the light of common sense. The Government decide not to buy from one firm because it has made an inflationary pay settlement contrary to the national interest. They buy from another firm instead. Can the Government be totally indifferent if on the following day the second firm makes just such another inflationary settlement? Should the Government go further and allow the second firm to raise the contract price after the bargain has been struck to ensure that we finance its settlement? The question only needs asking to demonstrate its absurdity. The answer can only be "No".

So the contract clauses can be seen as part and parcel of the policy notified in Command 6882. The initial decision about the eligibility for contracts and the subsequent use of appropriate clauses are linked; they were so linked during the first and second year of the pay policy; they are to be similarly linked this year, and no other course would make sense.

The key point is that we have had pay clauses in Government contracts for the last two and a half years. There is nothing new or surprising about that. And there are clauses of other kinds. I have already mentioned the Fair Wages Resolution which obliges Government contractors not to pay less than a fair wage.

The existing clauses have simply referred to the Remuneration Charges and Grants Act of 1975, and that covers only the 12 months rule in the present round. So we had to extend the clauses to cover the whole of the present pay guidelines, 10 per cent., self-financing productivity deals, and all. That meant we had to stop referring to the 1975 Act and refer to the White Paper instead. We also had to bring in the Secretary of State's judgement about pay settlements, because, as the Opposition are only too fond of saying, the White Paper did not lay down a fixed norm, because we had hoped to get away from rigidities. But the rules are really very straightforward, and if a firm is in any doubt about its own case it can always ask the Department of Employment for guidance. Thousands of firms already do, just as they did in the last two rounds when the rules were even simpler.

Mr. Rooker

In view of the present inordinate length of time—up to 12 or 18 months—taken to settle Fair Wage Resolution claims, and given the speed with which the Government operate on the employers' side, will my right hon. Friend take steps somehow to get the Department of Employment to speed up the resolution of those claims that are currently in the pipeline?

Mr. Healey

My right hon. Friend the Secretary of State for Employment will be very glad to deal with that because it is within his direct sphere of responsibility.

Mr. Michael Grylls (Surrey, North-West)

The new contract refers to "undertaking", and the contractor is to be asked to comply with the guidance set out in the Command Paper. As my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said, this is a blank cheque for the future. Does the Chancellor think that that is right? Is the TUC prepared to agree with that, because if it is, it means that it is prepared to agree with a permanent incomes policy?

Mr. Healey

It does not mean that there will be a permanent incomes policy, but if a future Government have an incomes policy embodied in a White Paper and approved by Parliament, those clauses will apply to it. Many contracts—I was concerned with hundreds of them when I was Secretary of State for Defence—often cover a long period of years, sometimes as long as 10 or 15 years. It would be ridiculous to confine the operation of the pay clause to the year in which the contract was originally signed. That was why we had to change the clauses.

Mr. Dalyell

I do not ask for an off-the-cuff reply, but in the whole question of public purchasing what will the consequences be for a subordinate Parliament in Edinburgh? After all, it would do most of the public purchasing in Scotland, and it might not take very happily to diktats which go out, however rightly, from the Treasury in London.

Mr. Healey

I understand that we shall be debating that subject tomorrow, but let me assure my hon. Friend that the devolution implications of anything the Government do is never out of our minds.

What I have said, therefore, explains why we had to change the clauses. The new clauses require a contractor to sign an undertaking of compliance with the pay guidelines on behalf of himself and any sub-contractors. But the smallest firms will not be affected because the clauses do not apply to contracts or subcontracts worth less than £5,000.

The contractor and his sub-contractors have to notify any new settlement after that to the Department of Employment. He must be ready to provide the Department of Employment with any further information necessary for it to check on his assurances. We would hope that that was the end of the matter. We do not want to have to enforce the clauses. We have had to enforce the existing clauses very few times indeed. If anything does go wrong, and the contractor or one of his sub-contractors seems to have breached the guidelines, the Department of Employment will as usual carry out an exhaustive discussion with the firm about its settlement and try either to satisfy itself that there is no breach or to persuade the firm to renegotiate. If that fails, a formal notice of warning will be issued to the contractor, and from that moment any variation of price payments he might otherwise receive could be withheld. But he still has plenty of opportunities then either to persuade the Government that he is not in breach or to renegotiate.

Unless the Secretary of State for Employment isues a certificate within two months of the notice, saying that he considers that the contractor is in breach, all the contractor's rights are restored retrospectively. If a certificate is issued, then the contractor may lose all further variation of price payments, or the contract might be terminated. But we would regard any such outcome as a failure on our part. We do not want it. We want the great success story of the last two pay rounds to continue.

I think that when the people concerned have had a chance to consider what is involved and to consider the possible alternatives they will see that our policy makes sense. The Investors' Chronicle came to that conclusion on Saturday. It said: The pay policy is proving generally effective and must be upheld. The London Chamber of Commerce was reported in The Times the other day as saying that employers in London and the South-East were by and large not too concerned about the black list and sanctions, believing, as they did, that everything possible had to be done to bring down inflation. I am also mildly encouraged by a letter from the President of the Association of British Chambers of Commerce. He said that the Association supports our objective in controlling inflation, and I am grateful for that. But, he says, they are worried on many aspects of the announcement by my right hon. Friend the Secretary of State for Prices on Tuesday. That suggests a constructive approach. We will meet him and I hope allay his fears on the points which concern him. It contrasts very agreeably with the ridiculous rodomontade that we heard from the Opposition Front Bench on Tuesday.

I hope that the CBI will take a sensible view of these matters. I know that it supports pay policy and accepts the need for sanctions to reinforce the policy. It should be possible to satisfy the CBI that our use of these clauses will not be oppressive or unreasonable. Many employers and trade unionists, and many of my hon. Friends, and perhaps one or two of my right hon. Friends who are longer in Government, have some misgivings about some aspects of the new clauses. But I am sure that we shall be able to allay those misgivings because we are dealing here with men and organisations who have the country's welfare at heart, who want to beat inflation and know that the pay policy, with all its imperfections, is an indispensable weapon in the fight against inflation. They know, too, that the pay policy is producing results. In fact, we have a common purpose and a common understanding of the problem.

I wish I could say the same about the Conservative Party. I think that my hon. Friend the Member for Paddington (Mr. Latham) and his hon. Friends have got it right in condemning the Leader of the Conservative Party for irresponsible and desperate political opportunism. We saw that opportunism in its ugliest form in the coldly calculated carelessness of her words about immigration on television a week or two ago. They are words that will haunt the conscience of her more decent supporters for many years to come.

We see that opportunism again today, as we have repeatedly seen it in recent months, in her attempt to undermine the nation's fight against inflation by all means, fair and foul. She must know in her heart that her behaviour is an affront to all those in industry and commerce who have made such efforts to get inflation down in recent years.

I make no complaint of the fact that the right hon. Lady is alienating herself by her behaviour from her natural constituency, but I ask the House to reject her motion and that of her right hon. Friends with the disgust that it deserves.

5 p.m.

Mr. Reginald Maudling (Chipping Barnet)

My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) produced a massive and documented criticism of the Government's policies showing with a weight of evidence how their actions have been arbitrary and secretive. If anything were needed to add to the conviction of his speech, it was the speech that we have just heard. There is no doubt that the Government have been arbitrary. There is no doubt that they have been secretive. They have used powers given to Government for one purpose for wholly different purposes, in particular the granting of the export credit guarantees. The Chancellor's defence of doing that was wholly unconvincing. The Government have power to use their discretion on the basis of whether a particular export order is in the national interest. That is a different matter.

In addition to the arbitrariness and secretiveness of the Government's policies, some Ministers have, by their arrogant and insensitive speeches, made the whole situation much worse. There could be no better example of that than certain passages in the Chancellor of the Exchequer's speech this afternoon, particularly his concluding remarks about my right hon. Friend the Leader of the Opposition.

Mr. Neville Sandelson (Hayes and Harlington)

The right hon. Lady is an outrageous person.

Mr. Maudling

It is peculiar how people on the Government Benches regard success as an outrage.

I do not need to try to add to the case put forward by my right hon. and learned Friend the Member for Surrey, East against the Government, because he has done it more than adequately and others will do the same. I should like to take a rather different line and to make a positive suggestion. Would it not be a good thing if, apart from the charges made rightly by Conservative Members against the Government and the counter charges made by the Government, we spent some time seeing whether we could reach some common ground on some factors in the problem? It is a problem of immense importance for the nation.

We have certainly a common purpose throughout the House to try to deal with the problem of inflation. This problem, after all, has baffled succeeding Governments of both major political parties for more than a quarter of a century. The search for a solution must go on for two reasons. First, until inflation has been contained there can be no real future prosperity for our people and no hope of justice in our society unless the value of our money can better be protected.

Secondly, until we have found some degree of solution to the problem of inflation we cannot deal with the even more fundamental problem of the British economy, which is a wholly inadequate, deplorable level of productivity. It is not even yet realised that we have now reached the stage at which the average English employee produces about half as much from the same machinery as the average German. So long as that is so we cannot expect to have a standard of living better than half of that enjoyed by the Germans.

The truth is that productivity will not rise if there is a permanent policy of deflation of demand. Equally, productivity increases cannot be sustained if they result in a wage explosion—an explosion of excessive wage settlements. Succeeding Governments have tried, with varying degrees of success, a whole range of policies to deal with this. There was Lord Thorneycroft's Council on Productivity, Prices and Incomes, Mr. Harold Macmillan's open-air cure, George Brown's declaration of intent, and there was N—1. All of them have been tried. None has entirely succeeded. But the search for a solution must go on.

Surely we have a common interest, apart from the battles that we rightly build up, in trying to make a contribution to the prosperity of the nation as a whole. Where do we stand? Both sides of the House are against a permanent, statutory incomes policy, but both sides also recognise that there are times and circumstances in which a freeze may be necessary. Both sides of the House profess to believe in a return to free collective bargaining. Free collective bargaining is a dangerous phrase in modern conditions. I doubt whether free collective bargaining makes any sense in modern conditions. It has been described by the Prime Minister as free collective chaos, but it has been described by other people as free collective blackmail.

It is hard to have a free collective bargain with people who can turn out one's lights in a few hours' time. It is not the old concept at all. Things have changed enormously in recent decades. What is called free collective bargaining is really a power conflict between two powerful, organised sides each seeking to use the industrial muscle that it has to obtain more for its own people. The difference is that whereas in the old days the employees tried to put sanctions on the employers and the employers tried to put sanctions on the employees in the course of their struggle, now it is the public who suffer every time. All the modern industrial disputes are being fought by blackmailing the public and the consumer at large. This has changed the morality, ethics and circumstances of industrial bargaining in this country.

There is no real disagreement that any Government must express a view of the acceptable, general level of wage settlements in the economy. The trouble is in deciding what action a Government should take if such a level in practice is exceeded. In the public sector the Government have the ultimate authority and can control what settlements are made. We tried this in the past. It was called using the public tail to wag the private dog. It was not a very great success. It would not be a very great success now.

There must be some way in which Governments can influence the general level of settlements in the private sector also if the overall policy of restraint is to be achieved. Many of the things that the Government have been doing are highly objectionable for reasons which have been given. We should examine with care the use of public contracts and examine it as impartially as possible.

I was—and have been for some days—impressed by the analogy with the Fair Wages Clause. I remember the debate in October 1946, listening to it from below the Gallery. The argument was that it was in the national interest that Governments should not place contracts with firms which underpaid their employees even if it meant the Government paying more than they would otherwise pay for the products that they were buying. That was at a time when the main concern was about the exploitation of the employees by employers. The main concern now is very often about the exploitation of the public by the organised power of the unions. In those circumstances there is no reason why a similar principle should not apply. There is no reason why the Government should not say that they will not place contracts with firms which are acting in their pay arrangements against the national interest.

The snag is, as my right hon. and learned Friend pointed out this afternoon in answer to an intervention from below the Gangway on the other side, that in the Fair Wages Clause there is provision for arbitration. It is not the word of the Minister alone. If there are arguments the particular cases are always referred to the Central Arbitration Committee. This is a wholly different matter from that which the Government are now proposing.

I shall now mention the other difference. In October 1946 the House debated the actual words of the Fair Wages Clause. The House could put forward and discuss amendments and the House approved verbatim the Fair Wages Clause. If the Government should get the House to approve verbatim a new statement of principle for inserting in their contracts, and when they had been approved by Parliament individual cases could be brought before independent arbitration, the whole situation would be entirely different.

I began by saying that I wanted to be positive and to make a suggestion that I hoped would be of value. In the difficult problem of inflation and how to get a policy that works in the private sector, combining a proper degree of freedom with adequate concern for the containment of inflation, a suggestion along those lines might be considered. I hope that the House will give a little time at any rate to thinking about that today.

5.10 p.m.

Mr. Doug Hoyle (Nelson and Colne)

I want to start by making a declaration of interest, in that I am the President of the Association of Scientific, Technical and Managerial Staff. I hope that when Opposition Members speak, they will also declare their interests.

I do not think that my right hon. Friend the Chancellor of the Exchequer will be at all surprised when I make it clear that I am in favour of free collective bargaining. However, I agree that he was right to ask the Opposition just where they stood on the matter. At least we had a statesmanlike speech from the right hon. Member for Chipping Barnet (Mr. Maudling). Even though there was a great deal in it with which I did not agree, at least the right hon. Gentleman made his position very clear.

We do not know where the Conservative Front Bench stands. There are different strands within the Conservative Party. Some Conservative Members are for an incomes policy. Some appear to be against an incomes policy. I only say "appear" because I predict that within six to eight months of their gaining office again, if they ever did, they would introduce some form of incomes policy.

We certainly know that if the Conservatives gained power there would be very strict cash limits on the public sector. They would screw down the public sector. I do not think that any Conservative Member can deny that that would be their policy. They would hope as a result to lean on the private sector as well.

The Conservatives should come clean. They are not the friends of the workers. It is wrong of them to pose in false clothes as they have done today. If ever I heard a synthetic argument, it was that of the right hon. and learned Member for Surrey, East (Sir G. Howe). I could not believe that his heart was in what he was saying. He was speaking for today, knowing full well that he would have withdrawn what he positions had been reversed and he had been speaking from the Government Dispatch Box.

I do not think that the public want the sort of thing we have heard today. I suggest to the Conservatives that instead of using up their Supply Days in this way they should give an opportunity for the Leader of the Opposition to debate in the House her views on immigration. Why is she not debating here whether this country is being swamped? Those are issues that we want to debate with her. We do not want to hear the right hon. Lady on television or talking to the Young Conservatives at Harrogate. Let us have a chance to examine her views in the House. As far as I can make them out at present, they are racist views. That needs to be said.

Many Conservative Members, those who are more liberal in their views on the matter, must feel very uncomfortable whenever the right hon. Lady opens her mouth. But she has not retreated in any way from the views she has expressed. At the time she said that she had made a slip on television, but it cannot be said that she made a slip in a prepared speech at the Young Conservatives' conference.

Having made it clear that I do not agree at all with the Opposition, I must tell my right hon. Friend that what I fear is that, far from our making an orderly return to collective bargaining, we have a framework for what could be a permanent form of incomes policy. Although we are talking at present about a guideline of 10 per cent., it could easily be 5 per cent. in the future. The hon. Member for Cornwall, North (Mr. Pardoe) nods agreement, and I see a broad smile on his face. At least the Liberals are quite clear where they stand. They stand for a statutory incomes policy.

I am also very clear where I stand. I must ask a few questions, because it seems to me that we are going into a blind alley, and I am very sorry about that. We talk about a company with a Government contract for more than £5,000 having the contract withdrawn if it exceeds a Government guideline or if a sub-contractor for which it is deemed responsible exceeds a Government guideline. I believe that such contracts will have been awarded on the basis of the firms concerned charging the least. Shall we in effect be supporting inefficient firms? If a firm remains competitive when it gives larger pay increases to its staff, are we to reward inefficiency by taking its contract away?

I turn to the case of James Mackie and Sons. The Government are calling for increased exports, and I agree with them completely. Yet Mackie had a valuable export contract and was in danger of losing it through the withdrawal of the export credit guarantee. That is not the way in which I want to see my Government behaving.

I wish to draw attention to another matter that affects my union. We were invited to give evidence to the Price Commission on United Glass, Metal Box and Allied Breweries. In each case we asked for specific assurances that if we gave evidence it would not be used to challenge any existing wage settlement. I must admit that we were not told that it would be used, but we received nothing more than a general assurance, which caused us to decline to attend.

I come next to the matter of the Furniture Timber Training Board. The members of ASTMS in the board negotiated a cost-of-living escalator clause in October 1972, and the money was paid throughout both the Conservative and Labour Governments' statutory incomes policies. But a letter from my hon. Friend the Minister of State, Department of Employment, was sent to the chairman of the board on 24th January this year. It said, amongst other things: I must confirm that for the future the necessary ministerial approval of the terms and conditions of your staff will depend on the steps which are taken to end the agreement". I am not an expert in the law, but I should have thought that that was clear coercion to break a contract of employment. I see my right hon. and learned Friend the Attorney-General shaking his head. But does not that letter conflict with what he said in court? He said: It is not now and has never been the policy of the Government that it should take any action with the intention of consequence of causing a breach of contractual or other legal obligations.

The Attorney-General (Mr. S. C. Silkin)

That is precisely the position. It is not the intention. The difficulty in the Holiday Hall case was that the language used was construed, I think with some justice, as conveying that that was the intention. I made it quite clear in court that the Government had no such intention, that any such construction was therefore to be completely withdrawn. But I also made clear that there is a complete difference between threatening that which is unlawful and giving a warning that one will do something which is completely lawful.

Mr. Hoyle

I am indebted to my right hon. and learned Friend for that explanation, but I believe that the Furniture and Timber Training Board cost of living escalator clause is perfectly lawful, as it was negotiated in October 1972. We have no intention of renegotiating that contract.

At the Department of Employment, in Rex House, we unfortunately have staff who are making Rex House in many ways as famous as Baker Street was when Sherlock Holmes was alive—if I may so put it. By one means and another, by telephoning employers and leaning on people, they are investigating all kinds of pay deals. Rather than being like Sherlock Holmes, they seem to me to be more like a lot of double-breasted-suited Dr. Watsons. The intention is to bring in the heavy mob from the Tresaury incomes department if they are needed.

I am worried about the way that we are beginning to lean on companies because many of them are awash with money. Do we want that money to go to the employers or in profits? I should have thought that we should be intent on getting a fair return for those who produce the goods. That should be the Government's intention. The Government appear to be getting us into an "Alice in Wonderland" situation. People are being trapped in mazes. In the case to which I referred there is an agreement. Guidelines have been broken a thousand times before and yet there is only one investigation. Why is there this discrimination?

The Government are bound to get us into a situation which neither they nor Labour Members want. It would be far better to get away from this type of blind instrument which is used with all the subtlety of an elephant in a Treasury tea shop. It is not a sophisticated way in which to go about our business and it is time to scrap it.

I am not against the use of Government powers in different directions. But I cannot understand why it is always thought that only pay causes inflation. There are many other causes. Joining the Common Market, high interest rates and allowing the pound to float downwards are greater reasons for inflation than pay increases.

I like to see the Government use their power but they should use it to achieve planning agreements, for example. Why are they not doing that in support of the manifesto on which we fought the election? The Government should use power to stimulate investment and to give Government grants to companies that are prepared to invest. The Government are using their powers in the wrong direction.

I make no excuse for being in favour of a return to free collective bargaining. That is also the view of the Labour Party and the TUC. If we continue to follow the present Government line we shall not do our supporters any good. All we are doing is kicking them in the teeth. We should be stimulating the economy by increasing wages rather than decreasing them. We are already the poor relations of Europe. Our wage rates are amongst the lowest in the EEC. That is no way to go on. We should be putting more purchasing power into the economy. We are going the wrong way about it.

I could not agree more with the Government when they talk about the fight against inflation, but I also want to see from these Benches a fight against unemployment. We shall not reduce unemployment unless a lot more money is pumped into the economy. About £4,000 million is needed for a meaningful attack on unemployment. I know that that will not suit the Opposition because they are interested only in scoring party political points on bogus issues.

I ask the Government to reconsider their attitude and to begin to move back to free collective bargaining. We should be preparing a national plan and using powers to ensure that companies make the investment that we need, either by coercing them or by a real intervention by the NEB.

I am certain that we shall not succeed if we continue in this way. To continue talking about a 10 per cent. guideline and follow it up with a 5 per cent. guideline can lead nowhere. It will cause annoyance to the trade unions. There will be a defeat for this policy in the Trades Union Congress and at the Labour Party Conference. It will be rightly defeated because such a policy has been tried so often. The right hon. Member for Chipping Barnet said that successive Governments had tried for 25 years to grapple with the problem of inflation. But they have never tried to do it with an interventionist policy based on Socialist principles. This is what we want the Government to do. We want them to go back to the policy in our manifesto. We believed that that policy was right then. It is the only policy that will succeed. I urge the Government to think again and to operate an interventionist and Socialist policy. That is the only way in which we can solve the problems.

5.25 p.m.

Mr. J. Enoch Powell (Down, South)

I fear that the apprehensions of the hon. Member for Nelson and Come (Mr. Hoyle) will prove to be all too well founded and that the policy of the Government which we are examining in this debate will not lead in the direction of a return to freedom of bargaining but will turn round about and take us back to some form of increasingly precise and increasingly ineffective imposed wages policy.

This debate is not about the causes of inflation or about whether the Government are right or wrong in including amongst their assessment of these causes the consequences of wage increases. It is probably not unknown that for some 20 years I have argued that increases in wages are a symptom and not a cause of inflation and that, therefore, the attempt to operate upon inflation by operating upon wage increases is foredoomed to failure.

However, it is not on the ground that their present actions are based upon a false assessment and analysis of the nature of inflation that my hon. Friends and I regard the proposed censure on the Government as largely justified. In our view, that censure is justified irrespective of the analysis of the causes of inflation. In producing my argument, I am therefore prepared to concede what in reality I do not for a moment accept—that the Government are right in saying that one of the factors in causing inflation is an undue increase in negotiated wage settlements. Let us assume, for the purposes of this argument, that that is correct and not, as I believe it to be, false. If that is so, the Government are of course justified in saying that it is in the national interest that excessive wage increases, thus defined, should not take place. Moreover, they have not merely a right but a duty to try, by all lawful and constitutional means, to prevent if they can such wage increases which, in their view, would contribute to inflation. So I deliberately create for the purposes of the argument a common basis and a common ideological ground with the Government which does not exist. On that hypothesis, we have to inquire whether they are justified in the proceedings which are the subject of today's debate.

We were invited by the right hon. and learned Member for Surrey, East (Sir G. Howe) to recur to the Command Paper which holds the field at the moment, Cmnd. 6882, "The Attack on Inflation after 31st July 1977". There, in paragraph 12, the Government are found urging that the general level of pay settlements should be moderate enough to secure that the national earnings increase is no more than 10 per cent. In that paragraph, therefore, the object of their policy is to secure an average result—not to secure certain precise alterations in individual wages but to secure such a course of events that when we looked back and struck an average retrospectively we should find that that average did not exceed 10 per cent.

Naturally, the Government were envisaging that some settlements would be above and others would be below the target figure of 10 per cent.; and I understand their reasoning, I think, when they state in paragraph 11 that the general level"— that is, the majority— of settlements must be well within single figures. Since they are talking about pay settlements but aiming at a target increase in earnings, it must follow that the average of pay settlements would need to be somewhat below the intended average of the increase of earnings. So far so good.

The Government also went on to say, one would have thought entirely correctly—this was something that the Chancellor of the Exchequer, in his letter to the right hon. Member for Lowestoft (Mr. Prior), emphasised again—that, in the words of that letter, We cannot specify the level of particular settlements. If we have learnt nothing more in the vale of sorrows through which successive governments have passed under the signpost "Incomes policy" in the last 20 years, it is that there is no mechanism whereby in advance one can, as it were, plot the spread around one's intended target increase of earnings in detail.

Indeed, there is no single wage increase, no single wage settlement, of which one could say "This is manifestly inconsistent with the object of a general level of earnings increase of no more than 10 per cent."; for an increase of 20 per cent., 30 per cent. or 40 per cent. in a particular case might well be consistent with the general result aimed at overall. It all depends upon the total pattern.

I would therefore be prepared to agree that the description "Delphic", applied to paragraph 16, by the right hon. and learned Member for Surrey, East, following an intervention I made in his speech, was justified; for paragraph 16 says: Where a firm has reached a settlement which is quite clearly inconsistent with the policies set out in this White Paper". As I have said, there is no settlement which is "quite clearly inconsistent" with the ultimate overall average of a 10 per cent. increase in earnings. Nevertheless, it might be thought to be the natural meaning of paragraph 16 on a casual interpretation that there could be imagined pay settlements which were so far out of line with the 10 per cent.—so many times higher than the 10 per cent. norm—that, on a reasonable probability, they were out of line with the general result intended.

It was in those cases, and in those cases only, however Delphic the definition, that, back in July last year, the Government envisaged the use of sanctions. But there has been a change. It was not only the right hon. and learned Member for Surrey, East who detected the change. The Secretary of State for Prices and Consumer Protection very candidly acknowledged it in last Tuesday's debate. Talking about the flexibility which had been implicit in the formulation in the July White Paper, he said: Certainly there would have been great advantage in this pay round if there had been some flexibility within the 10 per cent. ceiling and some had got rather less than 10 per cent., thus allowing others to get more. However, the way that it turned out made that impossible… So the Government, some time between July last year and the beginning of this year, discovered that it was "impossible" to have the flexibility whereby an average would be produced by some being above the average and others being below it. In other words, they found that they had to revert to the concept of a fixed figure, at any rate a maximum figure which could not be exceeded. That is the natural meaning of the confession made by the Secretary of State, though I thought that it was mean-spirited and illogical of him to go on to blame the Opposition for it, when he said that the reason was not least because the Opposition have always been prepared to nominate candidates for getting more than 10 per cent., but not for getting less."—[Official Report, 7th February 1978; Vol. 943, c. 1270.] If that be the fault of the Opposition, it is one they share with all mankind. Throughout the whole story of prices and incomes policies, there have been many to come forward to be special cases for getting more, but few indeed—and why should politicians hasten to be amongst them?—for proposing cases for a less than normal increase, or even, in some cases—why not?—for a negative figure. So the Secretary of State was really only blaming the world as it is for the Government's discovery that they could not manage a flexible wages policy with a spread above and below the target of earnings increase of 10 per cent. and would therefore have to go for a rigid maximum.

It is in these circumstances that the Government make an extraordinary claim. They say "We are pledged to secure this rigid maximum, which turns out to be implicit in our policy, by imposing sanctions upon a selection of those who exceed that maximum. We are not prepared to define by how much the maximum has to be exceeded, if at all, in order to incur the sanctions. We are not prepared to indicate in advance the exceptions which are to be made or to render those exceptions the subject of debate in this House. We simply say that, in order to maintain this policy, in order to secure what we regard as essential in the national interest, a maximum 10 per cent. increase in earnings all round, we have to apply arbitrary sanctions to individual firms which negotiate with the unions certain settlements which we shall regard as inconsistent with the policy."

Yet there was nothing at all in their policy which would have prevented the Government, if they were willing to do so, from proceeding in an entirely lawful and constitutional manner. If they have discovered that they cannot manage flexibility, it is surely all the easier to prescribe the maximum figure, so that the citizen will know what he must do or what he must not do, and what will be the circumstances in which he will incur the threatened penalties.

The Government say they must be allowed to make exceptions; they explain that there are cases in certain parts of the country where, in their view, permission to negotiate a higher-than-target increase in wages would be beneficial to employment. I have never quite understood how employment is preserved by higher wages being payable than the going rate. That does not see mto be quite in accord with normal economic theory. Still, let us suppose that that is the Government's view and that they genuinely wish, for reasons which appear to them good and sufficient, to make exceptions. What difficulty would there be in providing that, where exceptions were to be made, the Secretary of State would come before this House and, as in previous legislation, lay an order embodying the exemption?

Instead, we are confronted with a course of action which the House refused to accept some 300 years ago, that is, a suspensory power in Government—the power of Government as Government to abandon the application of the general law in favour of this or that individual. It is not easy to see what has altered over the last 300 years to make the use of that power more acceptable today.

Whether the Government's object be to constitute a narrower band, with a maximum of 10 per cent. plus X per cent., or to constitute a rigid upper figure or maximum of 10 per cent., or to allow for discretionary exceptions—discretionary application of the general law—they have it in their power to do so by entirely constitutional methods which give the House the power to protect the citizen, to debate the subject, and to provide publicity for what is going on and for the manner in which the policy is being implemented.

The right hon. Member for Chipping Barnet (Mr. Maudling) was entirely right in the comparison which he drew with the fair wages clause. That in itself is defined, and it is also justiciable by prescribed methods. Nothing in the Government's present policy is incapable of being thus defined and rendered justiciable.

I do not go so far as some, who have suggested that, provided a policy is placed before the House of Commons and a vote approving a White Paper is obtained, that makes it the law of the land. I am not prepared to accept that a resolution of this House, even upon the basis of a detailed White Paper, makes law. I do not believe that it is the duty of the citizen to read the debates in this House in order to discover what he lawfully may or may not do. There is one way and one way only of changing the law in this realm, and that is by legislation. But in the area to which the right hon. Member for Chipping Barnet was referring we are not concerned with the law as it applies to the generality of citizens. We are concerned only with the terms on which this House agrees to the Government placing contracts and the way in which that method of placing contracts is to be policed in the interests of fairness and in the interests of public policy.

I am not suggesting, therefore, that it was necessary for the fair wages clause to be embodied in legislation. In that case, a resolution performs all that is necessary. But if other Acts of Parliament, not intended for the purpose, and other powers of Government from quite different spheres are to be brought in to inflict sanctions—that is the word which has been over and over used—then that against which the citizen has offended must be laid down by the law of the land, and his offence must be proved as his offence against other aspects of the law of the land has to be proved.

Out of their own mouths and by their very confession of the manner in which the policy has developed and changed, the Government have admitted that they could perfectly well do this in the way that it ought to be done and that their policy which they claim to be in the national interest could be secured, as the national interest ought to be secured, by proper legal and constitutional means.

So one is led finally to ask why it is that the Government do not proceed in that way. There may, of course, after they have disclaimed publicly the intention to exercise statutory powers and have apparently turned their backs upon a statutory incomes policy, be a certain shame attaching to being seen to be obliged to make enactments in order that their policy should stick. But I am afraid I think there is another reason, too, and an even less creditable reason. In my view, the Government want to be able to make up their policy as they go along from day to day. They are not prepared to embody their incomes policy in a precise justiciable statement because they have not got an incomes policy which is capable of being so embodied. This flexibility, this discretion, this right of the Secretary of State to pick and choose is simply the symptom that they are thinking it out as they go along and endeavouring to muddle through this next phase in the hope that something will turn up, even if that something is simply a General Election.

This is not good enough. It is not good enough for any Government. It is not good enough for the House of Commons. I hope that the House of Commons will make it clear tonight that it is not.

5.45 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

The right hon. Member for Down, South (Mr. Powell), as usual made a very interesting speech. However, he should bear in mind that we are not discussing this matter in the abstract. This is not some theoretical question. We are dealing with the political realities which exist in this House and in the country.

I draw the attention of the right hon. Member for Down, South not only to paragraph 16 of the White Paper but to paragraph 31. Paragraph 31 reads: For 1977–78 the cash limits have already been fixed and published in Cmnd. 6767. No general changes are planned in the limits. For 1978–79 the assumptions used for the cash limits will reflect the Government's policy on pay. Spending authorities will not be able to rely on supplementary provision beyond the cash limits. That is quite clear, and it applies to the public sector.

I do not disagree with much of what the right hon. Member for Down, South said. The right hon. Gentleman's arguments have always been logical and totally honest. But I find it very strange that the official Opposition suddenly decide that it is had when sanctions are applied to the private sector, although they have nothing to say other than words of support for cash limits in the public sector. I find that quite untenable.

In this House we have had innumerable debates and discussions about firemen's pay. I made my position quite clear. I did not agree with my right hon. and hon. Friends about firemen's pay. I said that I thought that the firemen should have an increase now of more than 10 per cent. My right hon. and hon. Friends said "No", and they were not opposed in any meaningful sense by the official Opposition. In fact, Opposition Members told us constantly that the Government had to stand firm. On issue after issue, when it came to the public sector we were told by the official Opposition that the Government had to stand firm in relation to the public sector.

That sort of attitude on the part of the official Opposition demonstrates their hypocrisy. I do not put the right hon. Member for Down, South in the same category. Like me, he has never been in favour of incomes policies. Like me, he has never accepted that wages were basically the cause of inflation, although, of course, they have some secondary effect.

Mr. Powell

Does the hon. Gentleman agree—I think that he does—that the counterpart to pay limits in the public sector is necessarily limitation of the money supply in the private sector?

Mr. Heffer

I understand the right hon. Gentleman's argument very well. The point I am making is that the official Opposition have said to the Government that they must stand firm in the public sector but then, when they discover that the Government, in order to deal with pay increases in the public sector, have decided that they will, if necessary, have to apply some sanctions against employers in the private sector, all hell is let loose. Until then, it is perfectly all right, but the moment that private companies, private employers and private profits may be affected, back comes the reaction from the official Opposition as we have heard it today. It is that which I find untenable and unacceptable.

Mr. James Prior (Lowestoft)

I think that the hon. Gentleman is aiming at the wrong target. The target at which the Opposition are aiming, and the target at which he should be aiming, is not the use of Government purchasing powers against the private sector; it is the use of arbitrary powers and discretionary powers, without reference to the House of Commons and for purposes for which they were not created. That is the Opposition's target, and I should have expected it to be the hon. Gentleman's target, too.

Mr. Heffer

The right hon. Gentleman has gone slightly ahead of my argument, because I was coming to that. The truth is that he and his right hon. and hon. Friends are not really arguing the question of incomes policy. They are not all that bothered about it. They are happy to have control of incomes at a given moment if they feel that it is the right thing to do. They have done it in the past. They did it under the Government headed by the right hon. Member for Sidcup (Mr. Heath). They were quite prepared to bring in legislation, against my opposition, be it said, just as the previous Labour Government were. I recall that we used to be here night after night fighting and arguing about the various orders and so on coming before us in relation to incomes policy. But that is not the Opposition's concern today.

What the right hon. Member for Lowestoft (Mr. Prior) and his right hon. and hon. Friends are concerned to do is to prove that the Labour Government are really an adjunct of the Soviet Government and the East Europeans. That is what they are trying to put across to the general public—that the Labour Government are an anti-democratic, bureaucratic Government who will bring in an East European society. They think that if they say it often enough, consistently enough, for long enough, eventually the people will believe it. [An hon. Member: "They believe it already."] Yes, some already believe it. Some people are gullible, and, so long as the Press says it day after day, there will be those who will believe it, just as people believed things in Hitler's Germany when the propaganda was poured out. Some will believe that it is the truth.

The official Opposition, however, know that it is not the truth, whatever else may be said. I mention at this point the article in this weekend's Sunday Express written by the hon. Member for Stratford-on-Avon (Mr. Maude). I am sorry that the hon. Gentleman is not here; I had hoped that he would be. This is what he wrote: It is freedom—your freedom—and my freedom—which is in danger … The truth is that Labour politicians have no respect at all for the spirit of the Constitution. They want their own way by hook or by crook.

Hon. Members

Hear, hear.

Mr. Heffer

Hon. Members cry "Hear, hear". If I may say so, that is very much what Mr. Churchill said immediately after the war—that we were trying to bring in a Gestapo society. Really, they protest too much. They go too far.

Mr. Tim Sainsbury (Hove)

So does the hon. Gentleman.

Mr. Heffer

They know that it is absolutely untrue, but, if they keep on saying that sort of thing, some people will believe it.

No one upholds the constitution and the rights and freedom of individuals more than the Labour Government and the Labour Party do. If I thought that that was not so, I should be the first on my feet in the House to attack my right hon. Friends for any basic infringement of freedom and democracy. I passionately believe in freedom and democracy, more than I believe in anything else.

Let us be quite clear on the Opposition's strategy and argument. It is not about incomes policy. I do not include the right hon. Member for Down, South here, since his argument is and always has been about that. But it is not the concern of the Opposition Front Bench.

The truth is that the official Opposition are conducting their argument with a view to electoral strategy. They think that an election is coming later this year or at the beginning or middle of next year, so their whole strategy has to be directed to that. I want the House to take on board that that is the essence of the matter before us.

Mr. Stan Thorne (Preston, South)

I wonder whether my hon. Friend is aware of the statement by the right hon. Member for Sidcup (Mr. Heath), now reported on the tapes, in which he is obviously aiming a blow in terms of the next election. The right hon. Gentleman has strongly repudiated the statements of the Leader of the Opposition on the question of race. It is clear, therefore, that there are different strategies within the Conservative Party in relation to the next election.

Mr. Heffer

I could not agree more. Plainly there are differences within the Conservative Party, and I am pleased to note that there are some in the Conservative Party who are taking—if I may use the term—a much more liberalist attitude than that taken by their Front Bench, who, in my opinion, are every day becoming increasingly shrill and more extreme. Coming from me, that may seem an amazing statement, but I believe it to be true.

Mr. Hoyle

My hon. Friend cannot be called extreme.

Mr. Heffer

I am not extreme, though I am accused of it by the Press. I am merely pointing out that right hon. and hon. Members on the Opposition Front Bench are every day moving increasingly to a Right-wing and basically antidemocratic position.

Sir Frederic Bennett (Torbay)

Rubbish.

Mr. Heffer

The hon. Gentleman may say that, but what is their strategy except to talk in terms which I have described in order to frighten the public?

I do not wish to make a long speech, but I put this point to my own Front Bench. I have carefully read the amendment in the names of my hon. Friend the Member for Paddington (Mr. Latham) and others of my hon. Friends. I do not disagree with it. Had we had the opportunity to vote on it, I should have voted 100 per cent. for it because it expresses my view and the basic view of the Labour Party and trade union movement.

We want to get back to collective bargaining. We do not agree with any type of cash limits controlling wages in the public sector or with the sort of sanctions being applied in the private sector. We believe in free collective bargaining; or, alternatively, if we are not to have that, we say "Let us have the legislation and argue the matter out". That is the logical position. I wish to make clear, therefore, that if we had a vote on it I should vote for my hon. Friend's amendment.

However, I shall vote against the Opposition because, as I say, they are, basically, not concerned with the real issue before us. They want to get some of my hon. Friends to abstain in order to gain a victory over the Government, to embarrass the Government. That is why they put down a motion on this occasion and did not put down a motion last Monday. The Conservative Opposition have met a requirement of the right hon. Member for Down, South, who did not vote last time because there was no motion. They have now put down a motion hoping to get some of my hon. Friends to abstain. I hope that they will not abstain but will vote with me solidly against the Opposition—not for a wages policy or an incomes policy—rather than fall into the political trap set by the Opposition.

The Conservative Opposition have been totally hypocritical and politically dishonest on this whole question. I hope that my hon. Friends will support the Government while at the same time arguing our case for a different wages strategy within the trade union and labour movement. We have plenty of opportunity, and in my opioion that is the place to do it.

6.1 p.m.

Mr. John Pardoe (Cornwall, North)

Sabotaging one another's incomes policies is a familiar part of the two party game. Today's debate is, therefore, neither new nor surprising. The house has lost count of the number of debates we have had on this issue. Nothing new has been said today. We have heard all the arguments before.

I take a point from the speech of the right hon. Member for Chipping Barnet (Mr. Maudling). Let us try to see where we all stand now. The Government, when in opposition, believed that incomes policy was not necessary. Now they believe that it is essential. They apparently accept that there must be an enforceable incomes policy. Previously, the Government hoped it would be enforced by the trade union leaders. Since the trade union leaders will not do that job, the Government must do it themselves.

The Conservative Party, when in office, believed that an incomes policy was essential—I am sure the right hon. Member for Lowestoft (Mr. Prior) did then and still does—but now believes that an incomes policy is not necessary.

Since 1967 my right hon. and hon. Friends and myself have believed that an incomes policy is an essential price that one must pay for full employment and stable prices.

I should like to try to answer a question that may be in the minds of some hon. Members. In an article in the Financial Times this morning, Mr. Samuel Brittan, for whom I have a high respect and whose criticisms I take seriously, said: If there is an illiberal motion in economic policy it is the interference with people's rights to contract with others to sell their labour or cervices". We do not believe in an incomes policy because we believe in intervention for intervention's sake, and certainly not because we do not recognise the difficulties of having an incomes policy. All one can say about the difficulties of having an incomes policy is that they are outweighed by the difficulties—nay, the sheer impossibilities—of not having an incomes policy.

I want to put some questions to Conservative Members and Shadow Ministers, because both the Conservative Party and the Liberal Party prefer the operation of market forces which are generally more efficient and certainly far more decentralised than Government diktat or administrative decision. Why, therefore, in our opinion, cannot the market be left to decide the whole question of pay? The first question I must ask in answer to that is whether a monopoly forces up prices. I think that the answer which the Conservative and Liberal Parties would give clearly is "Yes." [HON. MEMBERS: "No."] What should Government do about that? They must work to end the monopoly. But in the meantime they must control the price that monopoly charges. That seems to have been a perfectly proper view right across party boundaries for at least 200 years.

Governments have not only the right but a duty to control the prices that monopolies can charge. Is there a monopoly element in the British labour market or is it a free market? I believe that it is clearly a partial monopoly. We therefore have some monopoly in the supply of labour. That monopoly can force up the price of labour and, more important, force down the output of labour to the detriment of the consumer.

Governments must end that monopoly, or control the price of labour. What policies does the Conservative Party have to end the monopoly element in the British labour market? It certainly had such policies in 1970. It believed then in bringing the law into the industrial relations arena in the form of the Industrial Relations Act. Part of its defence of this position was that it would attack the monopoly element in the labour market.

I believe that that policy was mistaken but at least it allowed the Conservative Party then to claim that it was tackling monopoly. At the same time, it gave the Conservative Party some excuse for not proposing to control the monopoly price of labour. Now the Conservative Party proposes neither one thing nor the other.

What can be done to control the monopoly in the labour market? Mr. Peter Jay, our Ambassador in Washington, in his former position as economics editor of The Times gave a fascinating lecture under the auspices of the Institute of Economic Affairs in which he argued for a massive expansion of what we have always believed was Liberal industrial democracy policy. Basically, he suggested that the whole economy should be made up of small competing co-operatives and that, because they would be competing one with another, the monopoly element would be removed from the labour market.

But apart from the other problems that would exist, even if all the coal faces individually in Britain were to become actual mining co-operatives, how would we ensure that they did not get together to fix the price of coal? The answer is the law on restrictive practices. One has to ask whether the miners would co-operate with that law any more than they would co-operate with a statutory incomes policy.

It is no good hon. Members on either side bleating about their support for free collective bagaining. I do not support free collective bargaining in any shape or form. Free collective bargaining is the licensed exercise of monopoly power. It is all too often a bargain struck between two groups of producers whereby one group undertakes to pay the other group a higher than free market price for his labour which often means an additional cost to the customer—the consumer. It is, indeed, a conspiracy of two parties to contract to pass on their monopoly-induced price increases to their customers. The customer has no say in free collective bargaining. Until such time as he has that say, and is a party to that bargain, free collective bargaining is not at all what it sounds or what the trade unions would have us believe it to be.

One can illustrate that by asking what our position is with regard to a collective bargain in the product market. The right hon. Member for Lowestoft is a farmer. He has a great interest in agriculture. Why cannot farmers become part of a collective bargain to limit the area which they will plough, or to limit the amount of milk that they will put on the market, or to fix the price that they will charge for the output of their labour? They cannot, because that would fall foul of restrictive practices legislation.

If the National Farmers' Union even so much as puts out a recommendation to farmers that they should limit the amount of land they plough and sow, then it falls foul of restrictive practices.

Mr. Powell

What about potatoes?

Mr. Pardoe

The right hon. Member for Down, South (Mr. Powell) asks about potatoes. No one played a more active part in abolishing the Egg Marketing Board than I did, and I am proud to have done it. It may be said that employers are not allowed to get together to fix the price of their products. But if labour is an important element in that price, and if the employers have already got together to fix a price to pay for labour, they do not need to enter into a price fixing arrangement. They are able to pass it on collectively to their customers. That is the main reason why Britain needs an incomes policy and why the Government must control the price of labour in the labour market.

I know that some will say—and the right hon. Member for Lowestoft may be one of those who says it—that this may be true of the public sector but it is not true in the private sector. That is not so. The labour market cannot be divided between private and public sectors. It is one market. Prices in one sector affect prices in another.

There is, too, the question of fairness. We have a great purple passage from the right hon. and learned Member for Surrey, East (Sir G. Howe) in his speech about unfairness—the unfairness of not clobbering Ford or Vauxhalls while someone else is penalised, the unfairness of not knowing whether it is size, geographical location or political allegiance that counts. It is true that there is unfairness between one firm and another at present, but the Conservatives would replace one unfairness with another. They would have the unfairness of the public sector being clobbered while the private sector was allowed to go free.

However, the two sectors are, in fact, bound up, especially when private contractors supply public sector industries. For example, in the coal industry outside contractors do almost the same work as some miners. If the miners are limited by cash limits and other bureaucratic diktats—let us face it, that is all these are—and the contractors outside doing exactly the same work as the miners are allowed to get any increase that the employers can give, there will be a most appalling sense of unfairness, and the whole pay policy will come crashing down around the Government's ears. No Government can allow a free-for-all in the private sector while rigidly controlling the public sector.

Mr. F. A. Burden (Gillingham)

Is the hon. Member suggesting that outside contractors are working at the coal face in the same way as miners in the mines?

Mr. Pardoe

No, I am not suggesting that, but not all miners work at the coal face, as the hon. Member would know if he visited a pit.

Sir Frederic Bennett

The hon. Member mentioned Ford and Vauxhalls and one form of unfairness that was bound to arise. Presumably he heard Labour Members say that there was no unfairness; it was simply a question of timing. When Ford and Vauxhalls made their deals, the Government were not feeling as rigid as they were later on. It was simply a case of policy being changed. Does the hon. Member accept that?

Mr. Pardoe

I accept that the Ford deal was made when the Government were not nearly rigid enough. The major Liberal criticism of the progress of pay policy has been the fact that the Government were not hard enough in the earlier stages. They have become much tougher in the intervening weeks and months. We welcome the change, and we hope that we had some effect in bringing it about.

On the question of the rule of law, we must ask whether these sanctions are illegal. It seems that they will be challenged in the courts. It seems to me that they are within the law. The sanctions relating to public contracts are clearly spelt out in the White Paper, but the Opposition did not vote against it. They had a perfectly good chance to do so, but they did not vote against the specific words in the White Paper. It is perfectly proper for the Government to use public contracts as a sanction on pay policy, and to take account of such an overriding matter of public interest as the rate of inflation. I welcome the fact that this will now be stated formally in such contracts because this is much better than the ad hoc situation that existed before.

On price control, this is not the first Government to use price control as a means of enforcing pay policy. We had the consultative document in 1973 and in paragraph 16 under the heading "Allowable Cost Increases" it says: Enterprises may not increase prices in the domestic market, except to reflect increases in allowable costs per unit of output". One of these costs was labour. In paragraph 19 it says: In order to ensure that the benefits of increased productivity are passed on to the consumer not more than 50 per cent. of allowable cost increases arising from pay increases may be passed on as price increases. What was that if not a means of using price control to enforce pay policy? Clearly in fact it did.

If we look at insurance companies we see that they provide one of the richer veins of lunacy to mine and here the hypocrisy of the Opposition is clearly seen. New Clause No. 1 which was discussed during the passage of the Counter-Inflation Bill on 27th February 1973 said: The Secretary of State shall have the power to restrict insurance premiums. The right hon. and learned Member for Surrey, East, in moving the clause said: Lest any hon. Member should think that this change can have or is intended to have the effect of letting off insurance companies with any less stringent policy for price control than is applied to other prices, I can asssure him that that would be quite untrue. In advancing his reasons for putting forward the clause to allow the Government to control insurance premiums, the right hon. and learned Member said that insurance company charges are an element forming part of the total panoply of prices in relation to which control should be exercised."—[Official Report, 27th February 1977; Vol. 851, columns 1288–9 and 1305.] We could not have it any clearer. To tell us this undermines the rule of law simply because the insurance company of which he is a director is being clobbered is a load of old poppycock.

The Attorney-General

The hon. Member for Cornwall, North (Mr. Pardoe) has obviously studied that section of the Act. Is it not a fact that this power is exerciseable by unappealable ministerial notice?

Mr. Pardoe

That is absolutely true. That particular point was picked up by many Labour Members at the time who castigated it as a desperate attempt to undermine the rule of law. Such is the hypocrisy of both sides of the House. The only consistent speeches that are made on pay policy come from these Benches—perhaps because I make most of them.

On the question of the refusal of Government subsidy, we should look at the temporary employment subsidy. Is anyone suggesting that the Government should give TES to a firm which then pays more than the Government's guidelines? That is absolutely ludicrous. This is taxpayer's money. The Government are perfectly entitled to use these subsidies to enforce their guidelines.

The Conservative attack must be on the basis that the guidelines are either too rigid or too flexible. They are right to point out that the guidelines should not be 10 per cent. but 5 per cent. or 6 per cent. Ten per cent. is far too lax. This has been a major criticism of Government policy since the agreement with the Liberal Party. It is not a question of the Government's being too tough; it is a question of their being not tough enough.

There is great flexibility in this policy. Nor is there any reason why any firm needs to take a public service contract. Moreover productivity in British industry is so low that if any contractor cannot increase the productivity of his work force by the few per cent. necessary to enable him to pay more than the 10 per cent. guidelines he should not be a public service contractor at all.

I do not believe that we can do without an incomes policy. We certainly cannot enforce an incomes policy without sanctions. The Government's sanctions are not by any means the best. The Chancellor challenged me to say what others were available. The best sanction of all would be a surcharge on the tax of those companies and their employees which break the Government's pay policy. That cannot be limited rigidly to a figure of 10 per cent. or 5 per cent., or whatever it may be, of a firm's labour costs per work force. It must be a tax on the relation between pay and value added, because if the value added increases a pay increase can be made without causing inflation. The best sanction would be a tax linked to that very relationship—in other words, a tax surcharge applying only when pay increases are disproportionate to value added.

I hope that it will not be necessary to have that sort of incomes policy or, indeed, any incomes policy for ever. However, the control of the monopoly price for labour must continue for as long as that monopoly exists. The Government have great support in the country, as the opinion polls indicate, for their 10 per cent. guidelines. People recognise that these are reasonable and that the Government must enforce them.

I am not arguing that the end justifies the means, but we are engaged in a battle between inflation and democracy. That is the fact. We must show that a democratic Government and democratic institutions can win the battle against inflation. If democratic government does not win the battle against inflation, there will be massive demands for something other than democratic government to do the job which democrats have failed to do.

Mr. Emery

Therefore, the end justifies the means.

Mr. Pardoe

I am not, as Samuel Brittan said in his article today, a mere apologist for the Government. We are not even mere supporters or spectators at this battle against inflation. The single most important reason for the agreement between the Liberal Party and the Labour Government is that Britain should beat inflation. We urge the Government to stand firm.

6.22 p.m.

Mr. Tam Dalyell (West Lothian)

I seem to be the first full-hearted and unqualified friend of the Government in this matter on the Government Back Benches. Perhaps by the time that I have finished my right hon. Friend the Secretary of State will be saying sotto voce "Heaven preserve us from our friends."

The first crude question that many of my colleagues and I ask is: how can we say to the firemen or water engineers "We cannot even attempt to restrain private industry"? In our day-to-day constituency work we know that such an attitude is just not on. I think that the Government can place contracts where they think fit in accordance with their view of the national interest.

I speak on just one point which I believe to be a serious and substantial one. When I interrupted my right hon. Friend the Chancellor of the Exchequer I asked him about public purchasing policy and how the policy that my right hon. Friends are now attempting to operate could be carried out if there was a subordinate Parliament in Edinburgh. The Chancellor said, gloomily and wearily, "The devolution implications of what we do are never out of our minds." The resigned tone in which my right hon. Friend said it did not lead me to believe that this policy had been properly thought out, as it could be affected by an Edinburgh Assembly.

Of course, if we are to take my right hon. Friend literally and the devolution implications of this policy are never out of the Government's minds, they should indeed be able to answer such questions as to how such a policy would operate if there were to be a subordinate Parliament in a devolved Assembly at Edinburgh.

Later tonight, on the Ways and Means motion, we are to discuss Section 19(4) of the Finance Act 1972 which involves the trading activities of Ministers of a Scottish Assembly.

The truth is that as regards the situation north of the border the overwhelming number of Government contracts will be placed not by Ministers responsible to the House of Commons but by Ministers responsible to the Assembly. That situation is not akin to what happens with local authorities. I understand that the Government have admitted—quite rightly—that there is a problem with local authority contracts.

In relation to a subordinate Parliament, the situation is much more complicated. Local authorities, although they can often lay claim to some sort of allegiance, are indubitably subordinate bodies without legislative powers. Therefore, Parliament has no difficulty in asserting its authority against a local council. Thus, the Greater London Council, although administering the affairs of a larger population than that of Scotland, constitutes no challenge to parliamentary authority, both because its powers are more limited than those proposed for Scotland and Wales and because the Assemblies will derive their prestige from the idea of nationality. It is for these reasons that the GLC is not believed by the vast majority of electors—one may reasonably conjecture—to represent London as the Assemblies will represent Scotland and Wales.

The question therefore arises how to understand devolution in a unitary State such as the United Kingdom whose cen- tral constitutional principle is that Parliament is supreme. The Government's aim has been to reconcile the supposed desire for autonomy in Scotland and Wales with the requirement that the Assemblies be strictly subordinate to Westminster so that they will not be able to act in ways opposed to the economic interests of the United Kingdom as a whole, or undermine common standards.

This brings us precisely to the question that arises in the debate—how in these circumstances does my right hon. Friend, or whoever replaces my right hon. Friend from whichever party in his job in the future, require a Scottish Assembly and the Ministers responsible to a Scottish Assembly to operate such a policy, right or wrong? One can agree with the policy. One can disagree with the policy. However, the fact is that it will be very difficult for this Government or any Government in the future to operate such a policy concerning subsidy or public purchasing throughout the United Kingdom if the Assemblies come into being.

For example, the Chancellor said that Government contracts should not be placed where excessive pay agreements have been arrived at. However, a Scottish Assembly would be able to place contracts precisely where there have been excessive pay agreements. In present circumstances, what would a non-Labour Government in Edinburgh do? What are the chances of a non-Labour Government in Edinburgh saying to my right hon. Friends the Secretary of State for Employment and the Chancellor of the Exchequer "Yes, we will co-operate fully with you in the implementation of the policies we are discussing this afternoon"? The truth is that there is absolutely no chance of a non-Labour Government in Edinburgh doing anything of the sort.

I go further and question whether a Labour Government in control of the Assembly would be very keen to blacklist any firms in Scotland. The odium for so doing would almost certainly be transferred to the Treasury in Whitehall or to my right hon. Friend the Secretary of State for Employment.

This raises the basic question of how a British Government—on my right hon. Friend's assumption—could fight inflation throughout the United Kingdom. Let us not imagine that a Scottish Government would co-operate with a United Kingdom Government in the blacklisting of firms in Scotland. They might secretly and clandestinely welcome the results of fighting inflation, but in no imaginable circumstances would they fail to pass the buck if Scottish firms broke the guidelines. The castigation and the odium arising from doing what had to be done in blacklisting Scottish firms would be passed firmly elsewhere, namely, to this House and to Ministers responsible to this House and it would not be placed on the doorstep in Edinburgh. This is a very understandable human reaction.

I ask my right hon. Friend the Secretary of State to reflect on these matters. If the Chancellor was right in saying that the devolution implications of everything that we do are never far from the minds of economic Ministers, perhaps he will tell me whether I am right or wrong in that supposition.

We hear that the Government are not to give subsidies from taxpayers' money to firms which break the guidelines. My right hon. Friend the Chancellor of the Exchequer, in my view rightly, said that those firms which break the guidelines to poach labour from other firms which are fighting inflation are doing some, thing totally wrong and that we would be put in the position of paying rogue elephant firms from the taxes paid by those companies which abide by the guidelines.

I strongly agree with that passage in the Chancellor's speech, not out of loyalty but out of conviction, but would a Scottish Assembly do anything of this kind?

Let me ask another specific question. On the subject of Mackie's involvement, had Stormont been in existence, and in view of Section 19(4) of the Finance Act 1972, could the Government have attempted to deal with Mackie? I am prepared for the answer that it would be a matter for the Department of Trade being responsible for ECGD, and the Attorney-General, and I shall also be told that Stormont does not come into the matter. However, I wish to know the precise legal position. But, whatever the legal position of Mackie's, imagine the outcry from Stormont! I know that the Attorney-General has taken a great deal of interest in Northern Ireland. I do not expect him to answer impromptu, but I believe that it is a proper question which should be considered in the reply this evening.

The present Prime Minister, who was Home Secretary at that time, has described how in order to influence the situation in Northern Ireland he had to appoint a civil servant whose task was—and I quote from page 66 of "A House Divided", the Prime Minister's book on the subject— to sit in a room next to Chichester-Clark's at Stormont Castle and that his job would be to explain British policy to Chichester-Clark and warn him where he was likely to get into difficulties with us. He would also be able to tell us what was going on. If there were a similar problem to Stormont as described by the Prime Minister, which was committed to the idea of the union, what would be the position if there were a Scottish Assembly, a substantial part of which may agree with the policies of the SNP and may not desire the continuance of the union? In those circumstances, the operation of this policy would, in my opinion, be much more difficult than in the case of Northern Ireland with Stormont in existence.

Any Government must have a policy in the private sector, otherwise the strains on the public sector become intolerable. My right hon. Friend the Chancellor said that success depended on policies being even-handed. However, given a sub-ordinate Parliament in Edinburgh, there is no chance of any policy being even-handed in relation to Scotland. There would be accusations of bias and it would be difficult to operate.

Since other hon. Members wish to take part in the debate, I shall conclude my remarks. I merely wish to underline the fact that in the economic interface between Scotland and the Scottish Assembly and Great George St.—

Mr. Deputy Speaker (Sir Myer Galpern)

The hon. Member for West Lothian (Mr. Dalyell) appears to be bringing a quite different slant to the debate. What he has been saying during my occupancy of the Chair would better be raised in regard to a discussion on Scottish devolution, not on Government pay policy.

Mr. Dalyell

I shall bring my remarks to a close, but I thought that I was entitled to bring a different slant into the debate because the Chancellor of the Exchequer is on record as saying that devolution was never far from Ministers' minds. If that is the case, I am sure that I deserve an answer to the proper questions which I have put.

6.35 p.m.

Mr. Peter Emery (Honiton)

I congratulate the hon. Member for West Lothian (Mr. Dalyell) on managing to inject into this debate a Scottish element. However, he will not be surprised if I do not follow his line of argument.

I wish to deal specifically with the latter part of the motion which calls on the Government to withdraw the new contract clauses in respect of public purchasing. I hope to analyse the difficulties which those clauses will cause for British industry.

In view of the remarks made by the right hon. Member for Down, South (Mr. Powell), may I comment that I believe that the Government can take whatever legal action they wish to take, and that they should retain the support of the country in trying to bring down inflation. But I take a much stronger view than that adopted by the Liberal Party. The Liberal Party spokesman, the hon. Member for Cornwall, North (Mr. Pardoe), attempted to suggest that he and his colleagues did not agree that the end justified the means. However, he immediately went on to produce an example which showed precisely the opposite.

I do not believe that the Government should act in a manner that is unconstitutional or illegal or in a manner which in specific areas has not received the absolute approval of this House.

The Labour Government have gone a long way to assist in upgrading levels of procurement in public purchasing. All Governments in the last 17 years have spent a great deal of time in seeking to save money for the nation by having an efficient and able procurement policy. I do not completely accept the statement made by the Secretary of State for Prices and Consure Protection that the Government have the right to place contracts where they wish. I believe that what has come out of the Government's approach to public purchasing is that it is the responsibility of the Government to place contracts in such a way as to obtain the "best buy" for the taxpayer and the country as a whole. We have rightly argued that certain elements that are not an absolutely objective aspect of commercial contracts have been allowed to creep into contractual obligations. The fair wages clauses are an example, but these are backed by law. There have also been provisions about the employment of war disabled people, but, again, these are backed up by law.

I suppose that I should declare a slight interest as probably I am the only hon. Member who is a Fellow of the Institute of Purchasing and Supply. The Institute has always attempted to ensure that judgments on purchasing are as objective as possible and that subjective judgments, such as buying from the chairman's friend, or not buying because one does not like the suppliers, should be done away with. In all purchasing only proper and professional judgments should be made.

Mr. Burden

Open tendering.

Mr. Emery

Open tendering is part of it, but it goes much further than that in negotiated prices and all that goes with it.

It has been particularly important for the Government to take an objective view on overseas contracts because some overseas Governments have attempted to include matters that have nothing to do with the commerciality of the supply of goods, such as requiring certain investment that has nothing to do with the industry associated with the contract or seeking payments into certain funds or to political parties. It has been proper to reject such demands and the Government have backed up my institute in this matter.

However, now we have counter-inflation conditions which are to be imposed in Government contracts and, even more serious, as the Chancellor indicated to me during his speech, imposed, if possible, by nationalised industries and local authorities which at present do not realise that fact.

Wherever bureaucratic influence by Ministers and civil servants is introduced, it is always to be deprecated, and when it is introduced in highly complicated, commercial and practical aspects of procurement contracts it becomes a nonsense. When such intervention is made by people with only a passing understanding of the complexities of procurement, who believe that it is possible to find a simple solution to the intricacies of counter-inflation policy, we have created an absolutely impossible situation.

I accuse the Government and Ministers of being blandly ignorant and of not caring about it. They believe that they will muddle through with these contractual obligations. They do not understand the damage which can be done in modern procurement.

Mr. Ridley

Can my hon. Friend imagine what would have happened if the contractors who made Spitfire aircraft between 1936 and 1938 had broken the guidelines and we had been denied the opportunity to buy the only aircraft that could have won the war?

Mr. Emery

I thank my hon. Friend for his example. There are so many examples, and I shall limit myself to just one towards the end of my speech.

It is not widely understood in industry that if a company accepts paragraph 1 of the conditions laid down by the Government it will, for the length of that contract, whether five, seven or 10 years, have to abide by any future White Paper dealing with incomes policy, even if it suggests only a 5 per cent. or 2½ per cent. increase in wages. Companies will be going into a contractual obligation without knowing whether they will be able to sustain delivery, run their plant or sustain the co-operation of their trade unions if such a policy were introduced.

We must also look at the provisions concerning sub-contractors. The Government are requiring that not only shall the main company contract, but that its sub-contractors should abide by the provisions. Paragraph 3 refers to sub-contractors, whether or not they are direct sub-contractors under the contract. It could go on and apply to sub-contractors of sub-contractors of sub-contractors ad infinitum. The main contractor signing the contract may have no relationship, legally or in any other way, with the secondary sub-contractor, but could still be in breach, having signed the document provided by the Government, by discovering that one of the secondary subcontractors was not complying with the conditions.

The sub-contractor may know that one of the secondary sub-contractors is not complying with the incomes policy, but may be aware that if he does not get the items which that sub-contractor is supplying he will be late with his delivery. The secondary sub-contractor may be supplying the copper wire to go into the dynamo which is to go into the engine which is to be sent to the main contractor.

Suppose that I am the main contractor and that I have no knowledge that the supplier of copper wire has broken the incomes policy. The supplier may be part of a large group and the Government have to highlight that that large group has broken the guidelines. I would also be to blame and my contract could be made null and void because of something over which I had not knowledge or control. This is a position which must be explained and not retained by the Government.

Mr. Arthur Lewis (Newham, North-West)

The hon. Gentleman has got it wrong because it has been proved that if a firm is part of a big organisation, such as Ford, it will get away with anything. The Government do not stop that sort of company.

Mr. Emery

The hon. Gentleman's point is not irrelevant in the overall context, but it is not the point that I was making and I do not believe that every large organisation will be allowed to get away.

There is also the question of liability. How will a company with a contract to supply services concerned with safety be affected? If the Government withdraw a major contract, which may represent halt that firm's business, it may not be able to continue its contractual obligations with third parties. What right will I have? I may have it all spelt out in law against the company. I may seek redress because it has had to break its contract with me, the third party. But as it is unable to continue as a result of Government action in withdrawing the contract which they, the Government, have given to my supplier, what redress have I? I believe that a number of purchasing officers in the nationalised industries are most concerned with that problem.

There is the retrospective position whereby companies will have to have complied with all aspects of Government policy since 1975. As a contractor I might find myself in business with someone who has unwittingly broken part of an earlier stage, or even worse, planned to break part of stage 2. It may be that I have a three-year contract with that party to continue supplying spares. What is my position when I have to give an assurance to the Government that I am not dealing with anyone who is at present in breach of any part of the incomes policy?

I am sorry if these questions relate to involved matters, but they illustrate why the whole of the contract document is a nonsense. It is a document that has been produced by those who have next to no practical knowledge of the way in which business is operated.

I turn to a problem that may face management. It is not unknow for trade unions to take advantage of the best time for them to bring pressure on a company. When a timescale is involved, it is not unusual for the union at some time shortly before the deadline, and even before known delivery dates, to press for something further from the company. An example that will be in everyone's memory is the Motor Show. On a number of occasions electricians or contractors have come out on strike a few days or a week before the show was due to open so as to force something out of the organisers of that event. It is equally well known for similar action to take place when there are specific delivery schedules in a contract that if broken will be detrimental to a company delivering goods overseas.

What happens when I as a manufacturer have signed a contract with the Government that states that I shall do nothing to break the incomes clause, but I suddenly find that I am having to meet the trade unions and face their demands for extra money? In that position I know that to accept their demands will breach the Government contract that I have been given. I also know that if I do not meet their demands I either go bust or miss the delivery dates of a major export order, thereby falling in breach of the contract. What does management do in those circumstances? I hope that the Government would say in that situa- tion that the company must meet the trade union's demands so that it might meet the contract. If that is so, any lawyer will understand that the Government are openly allowing their stipulated contractual obligations to be overcome.

There has been little or no publicity given to Clauses 6, 7 and 8 of the special contract that the Government are demanding. The Government have the right to demand specific information and to demand that sub-contractors provide the same information. There will be a great deal of extra paperwork. Industry, and especially small businesses, wish to get away from the enormous amount of Government bumf with which it is flooded. It seems that there is to be more paperwork for the benefit of the Government. It is to be carried out at whose expense? Are companies to be reimbursed? It is clear that companies will have to meet the cost. This is yet another cost that is to be thrown back on industry. It will be a particularly heavy burden for small businesses.

In addition to meeting that cost, a company will have to agree in its contract with the Government that it will allow Government inspectors to examine the books to ascertain whether the information that is being provided is accurate. That means that we shall have yet another host of bureaucrats. They will be given specific powers to go into the commercial area to examine what a firm or its subcontractors have done. How can I contract with Government, or Government buyers, that I will allow them to have powers to examine the books of subcontractors when there is no legal relationship? I hope that I shall be given an explanation.

Mr. Sainsbury

Will my hon. Friend draw attention to the fact that the contractor shall at his expense furnish such particulars as the Secretary of State may demand, or that he shall have to allow in his contract for a totally uncertain expense in providing totally uncertain particulars that the Secretary of State may wish to demand?

Mr. Emery

I thank my hon. Friend. Obviously I did not explain that point clearly enough when a moment ago I was referring to companies having to meet the expense of supplying whatever the Government may want or demand.

It is the secondary aspect of contract that concerns many in business and in government. The Director-General of the CBI talked about the special allowance given to the tea lady. That may seem to be a little far-fetched, but within an organisation a deal could be done with a wholly different factory that was thought at one time to be within the incomes policy and which is later found to be outside it. What effect will that have on Government action, or in terms of the contract that the Government have granted?

Where there is disagreement about any form of purchasing contract the issue is normally settled by the courth or by an arbitrator. Is that to continue to be the practice? The answer is "No". Strangely enough, the only person who can decide on any sort of appeal is the Minister of State, Department of Employment, the Minister winding up this debate. It will be for the hon. Gentleman to decide whether there have been irregularities in the past. That cannot be a principle that makes for justice. Certainly it is not a practice that should be furthered. Industry wishes to ensure that there is a course of appeal to an independent person.

In dealing with defence contracts it may be that there is a monopoly supplier. It may be that there is only one industrial source for obtaining certain goods and services. If that is so, and if during the life of a contract it is decided that the supplying firm, in negotiations with the trade unions, has to increase its wages, from where do the Government think they will obtain other supplies?

It seems to be thought that a contract can be brought to an end and that supplies can be obtained elsewhere. However, that takes time. It means that the Government will have to turn to something that is second best and to the supplier who did not get the contract in the initial stages, often at an increased price.

Therefore, the cost of substitution is something which the Government will have to take into account. What has worried me, again talking to purchasing people, is that they have said "Of course, you know that the only safe way of dealing with this problem is to buy overseas. If you get your supplies from overseas none of this applies." There will, therefore, be a direct influence upon people to obtain goods from overseas, thus putting up our import bill, which is, presumably, the last thing the Government intend.

The major danger which I see in this policy is that we are allowing, for the first time, an action of Government to inject into the commercial buying activities of government matters which have nothing to do with the commerciality of the deal. I ask hon. Members on the Labour Benches who have trade union interests—whether they are awake or asleep—to take account of one of the possible aspects of this policy.

Some hon. Members are not very keen on a closed shop. Such people would like to see industry operating without the closed shop. With this policy now set out by this Government it would be within the power of any future Government to put it into contracts that no business will be done with companies operating a closed shop. It could be said that no sub-contractor should operate a closed shop either. Labour Members may say that that is far-fetched. But my example is exactly the type of action which is being taken by the Government in putting into contractual terms affecting commercial undertakings matters which have no relevance to the contract. That cannot be an advance in making procurement more efficient. Such a move is a retrogressive step for the whole country. If the Government pursue this policy, they will regret it.

7.2 p.m.

Mr. Arthur Latham (Paddington)

This has been something of a hypocritical debate. There has been a good deal of synthetic indignation and spurious righteousness. I am tempted by arguments about constitutional propriety. Indeed, I am a member of the Select Committee that has just produced a report about the tendency of the Executive to misuse subordinate legislation. I entirely subscribe to the views of that report. The House ought to be reminded that these deviations by the Executive were not begun under a Labour Government. This tendency has existed for many years. I should like to see a Labour Government arrest the trend.

What I basically question is whether the Conservative Party is the party of constitutional propriety, as it has sought to establish during today's debate and during the debate we held last week on the subject of blacklisting. On the available evidence, I do not find that the case is proved. The attitude of Conservative Members towards the unconstitutional regime in Rhodesia is a case in point. I have never noticed that there were those on the Conservative Benches clamouring in support of the constitutional rights of this House when in conflict with the House of Lords. I found no champions of the constitution or of civil liberty joining the few of us who voted against the Prevention of Terrorism (Temporary Provisions) Act because of its denial of habeas corpus. I have never found that any of these issues attracted substantive allies from the Conservative Benches.

When some of us have sought to establish that judges should be independent, non-political and impartial, my experience has been that Conservative Members have been prepared to defend partiality and political attitudes from the Bench under the general refuge of so-called independence.

When we are told that the Government have embarked upon some new savaging of the constitution, I cast my mind back to the Parliament before last, the one which ran from 1970 to 1974. In a period of no longer than three and a half years, we had as many as seven states of emergency declared by the then Conservative Government. I can recall the then Leader of the House, the present Lord Carr, telling me, in reply to a criticism I made, that we lived in difficult times and must consequently expect states of emergency on that scale. It is in that situation, when the Government are ruling by proclamation, that we have to worry about government by decree.

Having expressed my doubts about whether the motion is genuine, I still have some reservations about the use of powers in this way. I well understand that when, for example, the states of emergency were introduced, the then Conservative Government had an automatic majority upon which they could regularly rely. We now have something of a novelty within this Parliament whereby the Government cannot always depend upon a majority in the Lobby. It is understandable, therefore, that the Government feel that they must pursue their policies in this way.

When the Chancellor spoke earlier in the debate, he fairly listed three reasons why someone might object to the policy of the Government. First, he said that a person might dispute pay policy. Second, a person might reject sanctions, or, third, it might be felt that sanctions were being applied unjustly in a particular instance. From the Conservative Front Bench there has been no indication which would make it clear to the House what position is taken by the Opposition. Do they support pay limits? For my part, I do not.

I have never believed it to be the task of a Labour Government to prevent workers from achieving wage increases. I was in a minority during the previous two phases of pay policy. I felt then that it was not the role of the Government to act in that way and that it was certainly not the role of a Labour Government. I was faced with the fact at that time that the trade union movement as a whole had accepted the Government's policy. I had doubts about how long it might hold. I had reservations about the extent to which the rank and the file in the trade unions understood and supported the policy. None the less, it was on record that the trade union movement went along with the Government.

In that situation, those of us who were critical of the Government's policies and felt that they were not leading in a fruitful direction were understandably inhibited in our comments. The position has very much changed. More and more, people are asking why it is that limits can be applied to wage increases when they do not appear to apply to price rises. A manufacturer is able to seek to justify to the Price Commission a price increase which may go well beyond 10 per cent. No wage earner is permitted under the guidelines to establish a case as to why his wage increase should go beyond 10 per cent. We do not seem to be applying the same standards to incomes as to profits.

The situation on dividends seems to be going even wider, and I understand that my right hon. Friend the Chancellor may be making an announcement on this which will be even more discouraging to the opponents of the statutory or near-statutory pay policy than to those who accept it.

In my constituency, people are faced with rent increases phased over three years and rising by £300 the first year, £600 the next year and £900 the next. That increase is added to a rent which might already be around the £1,200 a year mark, and my constituents naturally ask why a 10 per cent. limit can be applied to their income when it cannot similarly be applied to the income of landlords. The rent increases are allowed to exceed 10 per cent. Many of my constituents who are faced with the first step of that phased increase—£300—are likely to find their additional outgoing in rent exceeding any increase they can get in wages in one year even before tax is applied. I have never yet been able to obtain from any Minister an explanation or justification of that situation.

Given that the 10 per cent. limit does not apply in these areas, and given that wages are singled out, I find it very difficult as a Labour Member with my type of constituency, and given the manifesto upon which I was elected, to support the Government in pursuing phase 3 of their pay policy. The Opposition position seems quite equivocal. I shall be interested to hear from the Opposition Front Bench whether it is prepared to enter into any degree of commitment. However, it seems basically that the Opposition's position is that they want to appear to support pay policy where that may gain popular accord and equally to use it as a weapon against the Government. If they support pay policy, there would appear to be some kind of logic about the path that the Government are following—but I stress that I am not a supporter of pay policy.

One cannot take an absolute stand against the use of sanctions. The view about the fair wages clauses has been cited earlier in the debate. If trade union recognition were to become very much an enforced part of Government contracts, that might be welcome. If we were to insist that many lower-paid workers had their incomes raised, some use of sanctions to achieve that end might be approved. Many of my hon. Friends—and I am sympathetic to this point of view—believe that the use of selective placing of contracts in order to achieve the signing of planning agreements, even more than occurs at the moment, might be an acceptable course to pursue.

Therefore, I do not reject entirely, although I have some doubts about it, the use of sanctions in the way that the Government are using them. The fundamental issue is whether one accepts the policy. I was disappointed that the amendment that I and a number of my hon. Friends had tabled was not called, because it would have given us the opportunity to express distinctively where we stand in this matter.

Certainly the charge of irresponsible opportunism against the Opposition is self-evident, but far more important than that is that many of us can understand the difficulties that the Government face in coming out of a period of pay policy and embarking upon full-scale collective bargaining. The fact that a brake which was applied has been lifted produces difficulties and anomalies. We did not at any stage accept the concept of pay policy as we have had it, but we could have shown some understanding for the Government if they had attempted to build a bridge between the position as it was and the position as we hoped it would become. It is, therefore, extremely disappointing to witness the tightening to which my right hon. Friend the Chancellor referred earlier, which indicates that phase 3 is not a bridge to free collective bargaining which many of us support but a bridge to phases 4 and 5 of pay policy. If a Labour Government are to continue along that road, it will be an unsuccessful and unfruitful policy for them to pursue in the future.

In these circumstances, and for the reasons I have indicated, I cannot find it in myself to support the Opposition motion. In the circumstances, however, I feel that a vote in the Government Lobby would be a vote for pay policy with which I fundamentally disagree—

Mr. Skinner

I, too, have a long record of voting against pay policy, and I take great exception to the fact that my hon. Friend the Member for Paddington (Mr. Latham) can simply state that a vote in the Government Lobby tonight would be a vote for pay policy. I have never voted for pay policy yet, and if the Government sought to introduce a measure to bring in phase 4 or 5 over the next few days I would vote against it. That is the way to answer that question. My hon. Friend is taking a liberty to suggest that those who will be voting against the Tories tonight, which vote would happen to be for the Government, and against Tory hypocrisy are prepared to support pay policy. I am not guilty of that and never will be. It is just conceivable that I might still be against it when my hon. Friend is nowhere to be found. I do not adopt that stance in the way that many people in this House do in trying to look for a job from the Government. I do it from opposing the kind of hypocrisy we are hearing on these matters.

My hon. Friend is almost suggesting that if the Tories introduced a motion—

Mr. Deputy Speaker

Order. The hon. Member for Bolsover (Mr. Skinner) has just walked into the Chamber. He did not hear the whole of the argument advanced by the hon. Member for Paddington (Mr. Latham). It is grossly unfair for him to indulge in that kind of behaviour.

Mr. Latham

I had virtually concluded my remarks, Mr. Deputy Speaker, but I think I had better take on board what my hon. Friend said. I shall read my words in the Official Report with extra care to see whether they justify the sensitive reaction that comes from my hon. Friend. Maybe they do, but it would be a ludicrous development in this debate if he and I and people like us were to end up in a dispute.

Mr. Skinner

You are playing the Tories' game.

Mr. Latham

I hope that my hon. Friend, having made a very lengthy intervention, will be good enough to listen to my response which he may find is far less out of sympathy with him that he might suppose in his present condition of hypersensitivity. It would be wrong for those of us who take a different view on pay policy to engage in the kind of conflict that his remarks have just conveyed. To some extent the debate between the Opposition and the Government is false in that the Government are pursuing a pay policy which privately I suspect the Conservatives strongly applaud. They would like to see that pay policy imposed, but they would deny the Government the legislation to do it. I would certainly vote against such legislation, but from a completely different standpoint. So there is this element of difference between the Government and the Opposition. To add to this the kind of difference which exists between my hon. Friend and myself would be compounding the absurdity.

If I have suggested that anyone who takes a different view from me on this situation is being completely inconsistent and is in favour of pay policy, let me make clear that that is not my opinion. But each of us must make his own decision. Certainly, I would not accept any charge that in the future my hon. Friend the Member for Bolsover (Mr. Skinner) will find me supporting a pay policy when he is opposing it.

I am aware of what is before the House tonight. It is a device to embarrass the Government. It is a motion which is founded on humbug, as I indicated at the beginning of my remarks. In order to try to overcome that situation, some of my hon. Friends have tabled an amendment which, I thought, stated our position from below the Gangway very clearly.

The Attorney-General

I entirely agree with my hon. Friend's last observation, but would he not be compounding that humbug if, as a result of his abstaining from voting tonight, the Opposition motion were passed?

Mr. Latham

If the motion is passed, the Government and the House will have to consider what alternative they may take. This is the real difference between my hon. Friend the Member for Bolsover and others and myself. Some of us will abstain. Some will feel that they have to vote for the Tory motion. But the difference of view is not about the policy which will be followed. It is about how we should approach the matter and attempt to bring about different policies.

I take the view that a Government listen to their Back Benchers when that Government are satisfied that they can no longer in all circumstances take their Back Benchers for granted. If it is possible for a Government to enter into discussions, if not negotiations, with 13 hon. Members sitting on the Opposition Benches, there may be occasions when Government hon. Members, who might number considerably more than 13, might be considered.

Before my right hon. and learned Friend the Attorney-General intervened, I attempted to provide a way of expressing a distinctive opinion without being tied up with the Tory humbug and without being assumed to support the Government's pay policy. Whatever the Attorney-General may wish to say is the interpretation of the way in which some of us vote in the Government Lobby tonight, I remind him that I have met and heard the Chancellor of the Exchequer on previous occasions and I have no illusions about the interpretations that he and others will place on it if the Government have a very substantial majority in the Lobby. The interpretation will be not only a rejection of the Tory motion but an endorsement of the Government pay policy and all that goes with it. That would be the interpretation not of my hon. Friend the Member for Bolsover but of the Chancellor of the Exchequer and many members of the Government. I am not prepared to give them the opportunity to place that interpretation upon it.

7.23 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I almost hesitate to intervene in the internecine struggle between Labour Members and between them and their Front Bench. However, I pay one compliment to the speech of the hon. Member for Paddington (Mr. Latham). It has become commonplace in the debate to say at the beginning that one does not believe that the end justifies the means and then to go on to make a 20-minute speech in which one argues that it does. That is the only conceivable way in which the motion could be defeated.

The hon. Member for Paddington, quite rightly in my opinion, was doubtful about the end, although he was quite happy with the means. It is there that I, too, wish to start. It is not accepted by the whole House—as my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) and the hon. Member for Cornwall, North (Mr. Pardoe), who, unfortunately, have both left—would have us believe, that we are all agreed that this sort of policy is necessary to deal with inflation.

According to the inflation figures, during stages 1 and 2 of the pay policy the rate of inflation increased and went on climbing with the very rigid pay ceilings. The Governor of the Bank of England, in his speech which was reported last Saturday, insisted on the importance of the monetary targets being met. The Chancellor of the Exchequer goes on and on telling us that it is paramount in his policy that the monetary targets should be met. They have been met for last year, and the rate of inflation is coming down. Therefore, I have to ask myself why the Government put so much stress on the monetary policy if they do not believe, as I suspect they do, that this is the cause of the decline in the rate of inflation. If that be so, what is the point of the guidelines?

I do not want to spend long on this matter, except to pick up a point made by the hon. Member for Cornwall, North. He said that there was a connection between pay policy and productivity. He said that if a tender was received by the Government, even if the company submitting the cheapest and best tender had breached the guidelines, this demonstrated that that firm had greater productivity. The Government propose in this policy to negate that idea by not accepting the tender.

There is a real connection which is of great importance between productivity and incomes policy. We all agree that our productivity is rotten and that it ought to be increased. If, every time a man or a firm does better, produces more cheaply, uses less labour or employs its assets more effectively, he is prevented from passing on to his employees more than the firm which uses its assets badly is able to do, there is no incentive to productivity.

I accept the productivity guidelines in this policy because I am quite clear that those who can achieve proper productivity increases in addition to the 10 per cent. do so because they are skilled at presenting figures to the Department of Employment rather than skilled at good management in industry. The self-financing clauses are fine for those who know how to argue economics with civil servants, but they are in no sense related to the increase in productivity that may or may not take place.

I believe that the evil which is caused by this policy is inhibiting productivity. The whole tone of the debate has made the House restless on this point. Even those numskulls who call themselves extreme Left wing, some of whom have have spoken today, have begun to rumble that this may be true, and underneath all their support for the Government there is perhaps a feeling that the pay policy is beginning to do harm to the standard of living of the workers.

We have an extraordinary situation in which the Left wing of the Labour Party—indeed, the whole of the Labour Party—which purports to represent the interests of the industrial workers will vote solidly, with the exception of one hon. Member, in order to stop those workers getting more than 10 per cent. What is to happen to the support for those Members in the country when this gets out? Do they not realise that people actually want more than 10 per cent. and are prepared to work for it and to employ the increased productivity techniques, machinery, investment and all the things that are necessary to get it? But it is their own party that is stopping them. I am sad that the hon. Member for Coventry, South-West (Mrs. Wise) has left the Chamber. I think that she begins to understand.

The hon. Member for Paddington is almost getting there, slowly, because he also wants to condemn the motion, yet he has not quite had the courage to come and vote with us, which I understand. But the hon. Lady said that she would support the Conservative Party last week if we had tabled a motion that she had on the Order Paper. We have virtually done so. It is almost exactly the same as the hon. Lady's motion last week, so will she be with us tonight?

I turn from a brief discussion of the ends to a discussion of the means. I do not accept the ends. I have never accepted that incomes policy is a proper end, not even when it was a Conservative Government's policy, so I think that I can claim, with the hon. Member for Cornwall, North, consistency in this matter, though consistency in the opposite direction.

But let us discuss the means. The use of these various powers is ridiculous in many cases. The least offensive is the use of the powers contained in the Counter-Inflation Act against insurance companies, which can be made to reduce their premiums. The withdrawal of grants and subsidies and the refusal of export credits are both powers which were given to the Government to exercise on totally different discretionary rounds.

The reason for giving Ministers discretion over whether to grant export credits was that some countries to which exports might be sent might not be creditworthy. Therefore, the Minister had the right not to grant credits. But there was no suspicion in the debates during the passage of the relevant legislation that those powers would be used for totally extraneous objectives. It is utterly repugnant to me that that should be done now.

As my hon. Friend the Member for Honiton (Mr. Emery) said in an excellent speech, it is as if companies that refused to impose the closed shop could be penalised by withdrawal of support, subsidy or export credit. This principle can be carried much further. It is quite possible for the Government to say "We do not like firms which make subscriptions to the Conservative Party", "We do not like firms which do not employ 20 per cent. immigrants" or "We do not like firms which do not introduce a closed shop."

Goodness knows, the powers that the Government have chosen under export credit and the industrial subsidies are wide enough, but why should they not use the Prevention of Terrorism Act to put boards of directors in prison if they give money to the Conservative Party? I believe that the Mutiny Act is still on the statute book. Why should they not use that Act to deal with boards of directors which give money to their political enemies? There is nothing in those questions that is fanciful compared with what has been done. In his speech last week, the hon. Member for York (Mr. Lyon) made it clear as a lawyer that in his opinion arbitrary and ridiculous actions of that sort were possible.

I turn to the powers to deal with Government purchasing and the new form of contract. Luckily, I can spare the House having to go through many of the detailed points because my hon. Friend the Member for Honiton has done such an excellent demolition job on the new form of contract. I would add only one further question: what happens if the sub-contractor who is supposed to be kept under control by the main contractor is foreign-based or a foreign company? Presumably, it cannot be disciplined. But that will mean that the encouragement of foreign sub-contractors is very great compared with that of home sub-contractors, and we shall have an absurd position.

There are so many loopholes in the contract that one suddenly tumbles to the fact that it is all bluff, all huff and puff. We have here a real piece of bluff by the Government, whether in the form of the contracts, regional grants or export credits. The whole edifice is one of using ministerial discretion without proper power in the hope that the Government will somehow get away with it.

I took down the words of the Chancellor of the Exchequer in his speech today, words which, to tell you the truth, Mr. Deputy Speaker, shocked me deeply and to the core. I may not have the words quite right, but I think that this is the sense of what he said: "It is unwise to leave to independent bodies decisions of this sort which operate inflexibly. Discretionary action is better, and only the Executive is in a proper position to exercise this discretionary power." There we have it. The legal basis is bluff, the detail is wrong and unworkable, and there is no longer any disguise that it is the discretionary power of the Executive that will decide whether some firms will be penalised and others will not.

Moreover, the Executive is not merely to decide that. It will decide whether some firms which have broken the guidelines beyond doubt will not be penalised—the white list. As we know, there are just about as many firms on the black list as there are on the white list.

It is this arbitrary exercise of the discretionary power of the Executive that is the really terrifying thing about this sorry, sordid story. After all, that is what General Amin has done. After all, it is what Hitler did. They were roundly and properly condemned for saying "It is the Executive's discretion that matters, and nothing else matters at all."

This Government have long ceased to believe that they should govern by making clear to the citizens what is right and what is wrong. They govern by pressure, by huff and by puff, by a system of secret blacklisting. They have become a Government of cheats, whether it be cheating over Boundary Commissions, broken pairs or "No" Lobbies. The policy that is put before the House on this occasion is nothing short of a cheat.

I hope that the Government will not press ahead with a policy of this sort, because the next step is always so obvious, so easy to take. It is the next step on from here that will take away the next of our liberties and bring this country to the verge of the sort of situation that the Government themselves would have condemned had they not been involved in the progress thereto. It is always in this manner of progress that arbitrary and dictatorial Governments make progress.

I therefore believe that the Government should cease to try to brazen it out by sitting on their Front Bench and not listening, hoping that they can drown the Opposition with the hectoring, bullying sort of speech that the Chancellor made this afternoon. They should go away and think out whether they really have the right to behave with such gross impropriety.

7.39 p.m.

Mr. Stan Thorne (Preston, South)

We are considering not the overall pay policy of the Government but the motion of the Leader of the Conservative Party and her colleagues. The motion says nothing to suggest that the Conservative Party is opposed to an incomes policy. It merely indicates a rejection of certain measures that are being pursued by the Government.

I am certain that if ordinary working people had the opportunity of reading the motion and studying today's debate, particularly the speech by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), they would be under no illusions that the Tory Party acts in defence of its class interests and at no time addresses itself to the real problems of pay and prices within a capitalist society. That is something that people have come to understand over the years.

The arrogance of the hon. Member for Cirencester and Tewkesbury was illustrated when he suggested that some Labour Members who oppose the Government's pay policy should have the courage to vote for the motion. Why is courage needed to vote for a motion of this kind? It could be argued—as I believe my hon. Friend the Member for Bolsover (Mr. Skinner) has argued—that there may be an essence of irresponsibility in some of our hon. Friends who even feel tempted to abstain. Having listened to the hon. Member for Cirencester and Tewkesbury, I find that my hon. Friend's suggestion is more tenable.

It is necessary to make clear that a number of Labour Members have been consistent opponents of the Government's pay policy throughout phase 1, phase 2 and the present phase 3. It must be admitted that there has been a certain element of support for the 10 per cent. guideline in various sections of British industry. It is a paradox that some of us oppose the Government's pay policy because we believe that it would contribute to unemployment and that reduced demand in the economy would have that effect. We are now in a situation where, because of the pool of unemployment, workers who seek to act in defence of their economic interests are in even more difficulty than before.

Against that background, we had an extraordinary situation earlier today when the hon. Member for Cornwall, North (Mr. Pardoe) said that since there was a monopoly in the labour market, in common with every Government activity to control monopoly prices, they should be controlling the price of labour. One cannot be surprised at that type of argument when one looks at the Liberal amendment.

It is interesting to look back to only a few weeks ago. Had the firemen a monopoly? Did that prevent them from having to accept a certain level of earnings? Have those who work in catering, electricians, building workers, teachers, Health Service workers and Government employees generally a monopoly in the labour market? That argument is totally unacceptable. It is absurd.

There is a monopoly within the labour-capital relationships in British society. Very few workers own factories. Very few of them influence decisions in the ICI boardroom. Very few of them have access to the Unilever board room. A few major firms control a large part of British industry. I argue that it is big business in Britain today which has the monopoly and is capable of determining the level of earnings by a variety of methods and which can shelter under Government diktat if it is faced, following industrial action, with the need to increase earnings.

I have always argued that within a capitalist society it is impossible to accept the notion of control of wages while prices remain free. In spite of—and sometimes because of—Government action, we have had price increases in food, essential goods, rates, rents and electricity. We have had price increases for a whole range of goods which the average worker is forced to purchase. In that situation, workers must argue and struggle for increased wages, since their standard of living is diminished.

The Government have been able to say that phases 1 and 2 had a measure of support from the Labour movement because negotiations took place between them and the TUC. I suggest that there is no TUC acceptance of a statutory wages policy. The Government may argue that this is not a statutory wages policy, but any policy which is backed by legal sanctions against firms which, following negotiations with trade unions, are prevented from paying increased wages must be seen by the majority of people to be a statutory wages policy.

The TUC has made it clear—although it could be argued that it has not made it as clear as it might, because some of the comments by the General Secretary have been a little muted—that it is dissatisfied with a policy which relies upon sanctions. I abstained in the vote last week because of some of the reasons which I have explained today. It is not without significance that the Tory Party should decide on a Supply Day which follows that debate to raise the question again. It occurs to me that the Tories might have been doing some arithmetic about the numbers who go into the two Lobbies. They may have taken into account the speech by my hon. Friend the Member for Coventry, South-West (Mrs. Wise), who suggested that if the Conservatives had tabled a motion with a positive approach to the future she might have found it possible to support it. Perhaps the Tories are now clutching at a straw and believe that some of the 10 hon. Members who abstained last week might be persuaded to vote in favour of their motion. I am sure that none of the 10 will do so.

But this poses for me personally—I can speak only for myself—the question of what the debate is really about. It is not about the Government's pay policy; it is not about the sanctions that the Government are applying. It is about the fact that the Conservatives would like to create in this House circumstances whereby they could get a victory in a situation in which they believe that a General Election cannot be far away.

I must admit to having been influenced by my hon. Friend the Member for Bolsover, who has presented some very forthright arguments to me during the past few hours, and I have decided to support the Government tonight for no other reason than that the motion is a tactic employed by the Tory Party for no other purpose than to try to discredit the Labour Government. I believe that the Government have a lot to answer for in a variety of ways, I have been critical of them on a number of occasions, but I am not prepared to be used as a tool by the Tories in order to criticise that Government.

7.52 p.m.

Sir Frederic Bennett (Torbay)

I think that the hon. Member for Preston, South (Mr. Thorne) will, on reflection, see nothing discreditable about an Opposition trying to defeat a Government with whose policies they profoundly disagree. Indeed, they would be a strange Opposition who did not try to defeat a Government with whose policies and entire social outlook they profoundly disagreed.

The hon. Gentleman spoke of conservative tactics, whatever he meant by that. For my part, I do not think that we should ever obtain a significant victory in this House by trying to divide the Labour Party between those above the Gangway atnd those below it, because I know from long experience that, while those below the Gangway may huff and puff and be very courageous as long as there is no risk of an election that they might lose, when there is the risk of an election they troop quietly into the Lobby with the Government. I would never expect the hon. Gentleman to do anything other than that.

Mr. Thorne

In what regard do the Opposition differ from the Government on this issue?

Sir F. Bennett

Had the hon. Gentleman been listening to the long succession of speeches, he would have heard some very substantial points of difference emerge about the use of sanctions. But he says that we are not debating the use of sanctions. If he reads the motion, he will see that that is what we are doing.

The Chancellor of the Exchequer largely justified the use of sanctions by saying "It is worth-while in order to fight inflation." With his customary modesty, he said that he had been patted on the back in Paris for the success that Britain had achieved. He gave some figures. But it is rather like the tortoise and the hare. If one starts with an inflation figure of 25 per cent. or more, as we did, it is a good advance to get it down to 13 per cent. What the right hon. Gentleman did not tell us was the situation in our trading competitors, rivals and partners overseas. Their inflation of course, never reached such a high figure in the first place. It is no good speaking of this country alone, we have to consider rates of inflation elsewhere.

After the Chancellor's speech, therefore, I obtained from the Library the latest complete figures, which are those for the end of November. They gave Britain a figure of 13 per cent. inflation, a considerable advance on 25 per cent. But let us look at the other industrial nations of Europe—including France, which is against my case, but the right hon. Gentleman expressly mentioned it—the United States and Japan. The Government are boasting of having brought inflation down to 13 per cent. in Britain, but the average for these other countries is 5.3 per cent., according to his own criteria. Before the right hon. Gentleman pats himself on the back for his success compared with other Governments of different political shades, he should also mention those other countries' figures.

My main reason for speaking is my serious worry about the effect of these sanctions, if enforced, on our defence industries. The Chancellor mentioned, although in a different context, how long-term defence contracts are. They are indeed—stretching over many years. Few British firms can make all the sophisticated equipment necessary to maintain our defences. That is why we have to buy some of it from abroad. It is not, therefore, a matter in which the Government can say to a defence industry firm "If you do not behave yourself we will give the contract to someone else." Very few firms in this country can carry out such contracts. My hon. Friend the Member for Honiton (Mr. Emery) gave a number of examples.

Let us assume that there is a vital defence contract which both sides of the House agree should be carried out in this country and should not be placed abroad. Are these sanctions to be exercised against such British firms at a critical moment? Would they not be permitted to continue with the contract when there were no alternative British firms to take on the work? This is not a daydream. Ministers perfectly well realise how it could happen. I would have gone into greater detail on the matter had not my hon. Friends the Members for Honiton and Cirencester and Tewkesbury (Mr. Ridley) made the position so clear, so that there is no need to give example after example.

These sanctions are so ludicrous that the Government know that they will never be able to enforce them. This policy is one big bluff. I do not often agree with the hon. Member for Bolsover (Mr. Skinner), but I agree with him that the Government cannot do what they say. Supposing there is a contractor here with sub-contractors abroad, or vice versa? What about sub-contractor to sub-contractor? The Government would need more civil servants than there are altogether already to enforce such a policy, even through the first two brackets.

The Government are trying to do what they all too often do—bluff and bully. They are trying to get firms to agree by threatening sanctions which they know they cannot enforce over any period. The effect is meant to be psychological by saying to small firms in particular "You are not to do this, because otherwise something unpleasant will happen to you." Experience shows that, under such threat, many small firms, and middle sized firms, whatever the difficulties with their unions, try to abide by the guide- lines because they are so frightened of sanctions.

I say to such firms "Do not be frightened to challenge the Government. The Government will never be able, legally, physically or otherwise, to carry out these threats over a period of years. For one thing they will not even be in office." If we are really honest, every one of us in this Chamber knows that we are trying to frighten industries and the unions into complying with Government policy. It is for that reason, and not because the Executive wish to be dictators, that arbitration and the courts have been kept out. Ministers know that if they were to put some of this ludicrous rubbish before the courts they would be defeated over and over again.

Ministers have what they refer to as "flexibility" in enforcing these sanctions. If they once introduced a legal quotient, they would have to abide by the court's decision. That is what we are really debating today.

The hon. Member for Preston, South described the Opposition's motion as "a tactic". However, I think that I am entitled to remind him and those of his hon. Friends who sit below the Gangway what was said in last week's debate. Then the hon. Member for Coventry, South-West (Mrs. Wise), speaking on behalf of a number of her hon. Friends, said: It is our principle to stick to the attitudes and words that we have used. If the Opposition had cared to table a motion that said something, they might have been able to invite us to make note of the words on the Order Paper. However, they have deliberately chosen to table a motion which is meaningless…. Our motion stated"— I wish only that the hon. Lady had moved it— 'That this House condemns the use by the Government of economic sanctions against those firms and workers who have negotiated pay settlements above the guidelines.' Those are the words with which I agree. Those are the words which embody a principle. …. Our motion consists of two and a half perfectly clear lines. Whoever had tabled it, I should have supported it."—[Official Report, 7th February 1978; Vol. 943, c. 1288–9.] The hon. Member for Preston, South says that it is a tactic on the part of the Opposition if we take the hon. Member for Coventry, South-West at her word. However, to all intents and purposes, that is the motion which the Opposition tabled for today's debate. Only last week the hon. Lady said that she would have supported it. Why is it wrong now to believe the hon. Lady's sincerity? Indeed, this was my reason for putting down my amendment. It accords exactly with the hon. Lady's words, and I wrote to her suggesting that in the circumstances she would no doubt feel inclined to support my amendment. However, she did not reply.

It has come to a strange pass in this Chamber when a so-called Government supporter actually says that if a motion had been worded in a certain way she would have given it her support, but then decides, after all, that it is politically too dangerous to do so and, as a consequence, the Opposition are accused of trickery. That is not the way in which this House deserves to be treated.

8.4 p.m.

Mr. Dennis Skinner (Bolsover)

I am pleased that the hon. Member for Torbay (Sir F. Bennett) referred to the Government's bullying and the way in which they dealt with small firms as opposed to some of the large combines. It gives me an opportunity to remind the House that that is exactly what the Tories did after passing the Housing Finance Act, when they decided to pick on an authority with a population of about 9,000 and, through the Housing Finance Act, to use the instrument known as the Commissioner, resulting finally in the 11 people at Clay Cross being made bankrupt, having their possessions towed away and being thrown out of public office.

I feel a bit sick when I hear constant remarks about "the Clay Cross law". It was a very brutal law, and I am still waiting to hear from the Tories what the people at Clay Cross got away with. Certainly some of the larger councils got away with it. Some very large authorities had as many as 30 and 40 councillors who, as a result of the passage of that legislation, managed to evade bankruptcy and being hounded out of public office. I can well understand the remarks of the hon. Member for Torbay about the use of the bullying technique which successive Governments have operated.

It is being done in this instance as well. But the only pleasing feature of this whole episode is that we have got to the tether end of the incomes policy when the Government have arrived at a position where they can no longer control the incomes policy along smooth lines, whether it be voluntary or statutory, and, as always, the ragged element of it has begun to show.

Previously the Government had a £6 policy which was supposed to apply to everyone but really did not. Even that had a lot of arbitrary power in its usage. I well remember the number of people who did not get £6 when the £6 flat pay policy was supposed to be paid to everyone. We know, too, that, as in every incomes policy, a lot of people did not get involved at all. It may be laid down by the Government that certain people must abide by the rules. But every incomes policy since I have been in this House and before I came here has been got round by the professional classes, in the main—lawyers, accountants and business people. The number of perks which have arisen with each successive incomes policy has been greater than that in its predecessor, as has the number of accountants who have been able to find ways round the law as each incomes policy has been introduced.

The fact that we have sanctions which are supposed to affect a minority of people is no different from what it has always been. The people always hounded by incomes policies are those who are to be found in groups. They are easily identified. They include miners, the police, nurses, local government workers and railwaymen. All these people can be identified as groups of people around whom an incomes policy fence can be built. That has always happened.

But there have always been groups of people who have managed to escape. The present case is no different, except that now a few people are managing to get away with it because they are not prepared to be bluffed by the Government. What is more, because the TUC in its policy statement at its congress last September said nothing about percentages but spoke only about 12-month rules, there is greater freedom to get round the policy.

My guess is that the number of people being caught by the so-called 10 per cent. rule in this bluff and counter-bluff method that the Government are using is very small, apart from those who are settling, anyway. I do not want to give the impression that not many are settling. Some of them believe that they are bringing down inflation. Some are goaded on by members of their union executives in their posh cars into believing that if they do so they may get the Labour Party re-elected. Some of them believe that they will bring down unemployment. Some believe that it will bring down prices at a tremendous rate. I accept that it may have that effect temporarily. Long term, it will not, but temporarily it seems to have the effect of helping partly to reduce prices. Successive Governments have given the impression that it is the only way to bring down prices.

So some trade unionists and their leaders have settled for a variety of reasons. When we had the last incomes policy, some believed that the money which had been forgone in wages could be put into the pockets of our old-age pensioners. That was daft. Some believed that it could be taken away from the miners and put into the pockets of the agricultural workers. Well, they tell me that the agricultural workers are still at the bottom of the pile. These were the arguments used constantly and, unfortunately, some of these myths continue.

What I say to my right hon. Friend, in particular, as I said at the outset, is that we are now witnessing the last throes of the present round of incomes policy. That is why I do not get carried away or go into agonies about what happens here tonight. I know that the present incomes policy is on its way out. Of course, there will be an attempt by some in the trade union movement who want to see the Labour Party returned to office to give a little more than they really ought to give, and I can well understand those feelings. That sort of thing often happens. But at the end of the day the trade unionists outside this place, who are fed up to the back teeth with the control of their wages, will decide the issue.

I suggest to my right hon. Friend that, whatever the result of the vote tonight, he ought to be pressing the view in the Cabinet that it is time that we stopped intervening or attempting to intervene in the wages arena. It has been proved time and again that, at the end of the day, there is a very difficult period when we have to try to re-enter free collective bargaining.

If my right hon. Friend wants to resume his job on the Treasury Bench in the next Labour Government, he should impress upon his colleagues that the sooner we get back to free collective bargaining, the better. Let him not listen to the siren voices of Socialist Commentary and various other sections—the Fabian Society and all the intellectual groups—but let him go and talk to some of the people in Barrow. I know that they will say "You are doing a great job, Mr. Booth". No doubt some of them will say that and actually believe that he is helping to bring down inflation by holding down wages. But most of those people will take the view that they should be getting a bit more to spend at the same time. Their union representatives, if they are to do the job which they are supposed to do, that is, to get better wages and conditions for their members, do not want the Government standing in the way every time they put in for a wage increase.

As a result of opinion outside the House, the Government have managed to carry the day so far, but my right hon. Friend and his colleagues should not have any idea of taking the thing on to stage 4 and stage 5. There is no doubt about what will happen at the TUC this year. Whereas the argument in 1977 took place over the 12-months rule, the argument at this year's Trades Union Congress will be on the basis of getting away from all that and back to free collective bargaining. Let us hope that we do not have another Labour Government who attempt to enter this arena.

We have heard a lot about a black list. God Almighty—a black list! We know that there are a number of firms on the so-called list which, so I am told, have been on the list for about 18 months, but, for some reason or other, the Tories have done little or nothing about it. The only time they seemed to get excited was when the right hon. and learned Member for Surrey, East (Sir G. Howe), one of the directors of Sun Alliance, suddenly found out that his firm was involved.

That is the basis on which the Tories are working. They are trying to find any stick to beat the Government with. They will pick up any stick. I shall not refer to them now, but the Leader of the Opposition has picked up several others in recent weeks. The Tories will pick up some more.

What is all this talk about black lists operated by the Government? We have only to think of the money which is doled out to all manner of companies under the various aid schemes operated not just by this Government but by the previous Government under the Industry Act. Many of us are not privy to the amounts of money which are paid out. True, we might get to know if we did a little research, but my guess is that there are many firms which, for some reason or other, do not get the aids which a company in an adjoining area or even within the same area and industry may get.

The same is true of the lifeboat scheme. How many firms have been involved in that? Let any hon. Member go to the Table Office—never mind the Government—about that. He will not get near that black list. We do not know where the £1,300 million has gone. I know where most of it has gone.

Mr. Thorne

Tell us.

Mr. Skinner

There are plenty of firms with Members of Parliament serving as directors—plenty of them—and not only on the Opposition Benches, either. But the point I am trying to establish is that the Tories have now decided to use any stick with which to beat the Government.

I do not get carried away with the idea that the vote tonight will determine whether I or my hon. Friend the Member for Preston, South (Mr. Thorne) is a supporter or non-supporter of an incomes policy. I demonstrated my attitude last July when just two of us voted against the 12-month rule. I do not want to accuse those of my hon. Friends who took a different view last Monday and say that they should take a different attitude to incomes policy now because there has been a little blurring of black or white—or perhaps a lot of grey in the middle.

But let my right hon. Friend understand what is happening. I can visualise another Opposition motion being put down in a few weeks, perhaps, after the Budget. When the Tories find that they do not have much ammunition with which to attack the Government they may even put a down a motion after the Budget urging that more public expenditure should be directed to a whole range of social services. What will my hon. Friends do with that?

Mr. Arthur Latham

What will my hon. Friend do?

Mr. Skinner

I know what I shall do. I shall acknowledge it for what it is—another blatant piece of hypocrisy. Strange as it may seem—the right hon. Member for Down, South (Mr. Powell) may be interested in this—a little nearer the election, with a massive weight of opinion against the Common Market, I can imagine a motion going down on the Order Paper attacking the Common Market and inviting the right hon. Gentleman and me to join forces. I have a shrewd idea what he will tell his colleagues in the UUU—or whatever it is—and I know what I shall do. I shall not join that hypocritical band.

I understand what is taking place, and I know that the pay policy is in its last throes. It will die. It will not be killed by Members from Paddington and Bolsover. It will be thrashed to the ground by the trade unionists outside who are fed up to the back teeth with it.

The fellow members of my hon. Friend the Member for Preston, South in ASTMS are secretly burying—and, in some cases, not secretly but publicly burying—this last phase of incomes policy. Many of us will be doing the same in the forth-coming months.

That is how the policy will be got rid of—not in this "phoney" debate tonight. For what it is worth, I tell my right hon. Friend that I shall be opposing that crowd on the Opposition Benches tonight. I shall do it not because I have any hang-up about the Government and not because I am after a job—I thought that I had better emphasise that, in view of several references to me—

The Secretary of State for Employment (Mr. Albert Booth)

I believe my hon. Friend.

Mr. Skinner

—not for those reasons but because, when I see the Opposition coming up the hill like some cunning fox to try to capture the few old grey sheep at the top, I do not stand in the way. I shall get out of the way. It is a load of baloney, and the debate has been conducted in those terms. For that reason, I shall oppose the Opposition in the Lobby and, if it gives the impression that I have actually come down in support of the pay policy, I do not care. I hope that those who write their columns in the Press will fully understand what I am doing and why.

8.18 p.m.

Mr. Giles Shaw (Pudsey)

It is always a pleasure to speak after the hon. Member for Bolsover (Mr. Skinner), with his extravagant gesturing and his free interpretation of pay policy. I am glad that he is against any form of sanctions—he is right in that—and I am glad that he believes that there is a lot of baloney attached to pay policy.

I confess that I thought that the hon. Gentleman was a little rash in his statements about the Lifeboat and the City. If he had looked up the record to see what the Governor of the Bank of England had said to the Select Committee, he would have found all the information he needed. Not a penny of taxpayers' money was spent as he suggests. But, of course, the hon. Gentleman is not really interested in the basic facts. A bit of truth, or a half-truth—like a half-brick—if thrown hard enough and long enough will do for him.

We are concerned with a fundamental issue tonight, with the way in which these powers or clauses will operate and with the principles behind them. There has been many an argument to the effect that the national interest is paramount. It all depends on who defines the national interest and on the time when he chooses to define it. As some of my hon. Friends have said, there can be times when the definition of national interest will be very different from its definition at other times.

Some would define the national interest as the Government's battle against inflation. That is the Chancellor's view, and we heard him give tongue to it this afternoon. Some would definite it as a battle for law and order, which might be an equally important battle to win. Some say that it is the battle again to establish free collective bargaining. That is where the hon. Member for Bolsolver fits in. He would regard that as a battle to end all battles. Some would say that it is perhaps the battle to preserve the unity of the United Kingdom. The hon. Member for West Lothian (Mr. Dalyell) is present. I trust that he will agree with that. That seems to be a battle worth winning. All of these might be described as battles in the national interest.

It becomes a little cheap when we start getting the assumption that at any moment godliness and steadfastness rest on the Labour Benches—particularly the Government Front Bench—to define what is really the national interest. That is the national interest as the Government acknowledge it. The difficulty of interpretation is one of the reasons why on two separate days we have had to start exposing that difficulty of interpretation and the hypocrisy that it contains.

The most important battle we should all be concerned about is whether the democratic institutions of this country can survive this kind of extension of governmental or pseudo-governmental powers. There is also the maintenance of the sovereignty of Parliament.

Mr. Tom Litterick (Birmingham, Selly Oak)

Does the hon. Gentleman think that the democratic institutions of society can survive rampant inflation?

Mr. Shaw

I am quite sure that the democratic institutions of society cannot survive rampant inflation. That is one reason why we are amazed that a Government who have presided over rampant inflation for two years should now be trying to seek to impose their will by devious methods. If the hon. Member for Birmingham, Selly Oak (Mr. Litterick) wants to get involved in this argument, he should have been in this debate a little longer so that we might have had the benefit of his contribution.

Mr. Litterick

I have been involved in this debate for years.

Mr. Shaw

When we come to the question of control over the Executive we have rather more important grounds for concern. Taking these clauses at their face value, there are two or three aspects that I should like to ask the Secretary of State for Employment to comment upon.

First, presumably none of these clauses would apply to purchasing between Government Departments. Let us assume that under the fifth clause statements of agreement might apply if the Central Electricity Generating Board was to put down a contract for the purchase of coal from the National Coal Board. I assume that the CEGB would have to satisfy itself that any remuneration which the NCB was in the process of concluding included any benefit, facility or advantage, whether in money or otherwise.

It must assume that under the present wage round within the coal industry—not withstanding the welcome settlement of 10 per cent. which the miners have agreed—there are no other aspects of the productivity deals or arrangements that have been made on a pit-to-pit basis which possibly infringe the 10 per cent. remuneration which the Government have in mind. It would seem to be incumbent on the CEGB to find that out before it could legitimately sign a contract between two contracting parties both of which are under the aegis of the Departments of Industry and Energy.

I should like to turn to the question of sub-contractors. Much has been made about how possible it is to follow through the conditions of the contract to the nth degree. What is quite clear is that sub-contractors must disclose their individual arrangements to the final contractor so that he can sign the clause that the Government have placed before him. If that is so, how does it comply with the Restirctive Practices Act 1964?

When it comes to offering the sub-contracting for tender, he is in an extremely privileged position indeed. But any proposal for wage arrangements which has been made might not allow him to carry on sub-contracting. I suggest that there might be some detailed point on the application of these clauses which run rather wider than the original remit.

Mr. Arthur Lewis

The hon. Gentleman has spoken about the enforcement of the guidelines. Is he aware that the Government have already allowed two right hon. Members to evade all the controls over the years? Two of the wealthiest Members of this House have had more than the 10 per cent. permitted and in future they will get more in the form of tax-free cars supplied, insurance, drivers' upkeep and all the rest. If petrol prices increase I am sure that those two right hon. Gentlemen will get some sort of allowance. Yet the Government have taken no action against them.

Mr. Shaw

I am sure that the hon. Gentleman is well able to pursue his case, but I suspect that it is not within the intellectual argument that I have been developing.

Let me turn to another aspect which is causing some worry. Of course, some publicity has been given to the report of the Joint Committee on Statutory Instruments and its expression of view about extramural funds. Para 12 of that report—[Interruption.] Does the hon. Member for Newham, North-West (Mr. Lewis) wish to intervene on another point of great intellectual substance?

Mr. Arthur Lewis

I must apologise, but I do not think the hon. Gentleman understood the point I was making. The two right hon. Members—the right hon.—Member for Huyton (Sir H. Wilson) and the right hon. Member for Sidcup (Mr. Heath)—were initiators and the most vigorous pursuers of wage freezes and all the rest, but, of course, not for them-selves.

Mr. Shaw

I understand the hon. Gentleman's point. No doubt when he writes his autobiography it will be as successful as those of the two right hon. Gentlemen he has mentioned.

I was referring to paragraph 12 of the First Special Report of the Joint Committee on Statutory Instruments which said—it is important for the House to recognise this— The Committee fully appreciate that the justification for the granting of delegated legislative powers is to remove subsidiary or procedural details from the Statute Book and to afford to the Executive flexibility and the ability to alter detailed provisions to fit changing circumstances, without the need to enact a new Statute. The corollary of this, however, must be that the delegated legislation itself should be detailed, specific and self-explanatory and should not depend on the exercise of ministerial or departmental discretion unless provision to that effect is expressly contained in the enabling Statute. I recognise that we are not dealing with matters of statute. But, on the other hand, I suggest that this is of some importance with regard to the activities that have been under discussion both last Tuesday and today.

We are talking about the use of ministerial power to issue instructions in this particular case and the nature of a clause which may not be specifically defined by its parent statute and which may run somewhat outside the remit for which the original statute was designed. These wide uses of administrative instruments without full parliamentary scrutiny can hardly be said to apply. Public accountability is thereby reduced. We must take exception to this increasing use.

Other abuses of power can take place. I think particularly of those which the Government operate through their external agencies, through boards or commissions.

I take the Price Commission as an example. It was set up under the Price Commission Act 1977 and has in part a duty to administer sanctions. These sanctions are derived under the old Remuneration, Charges and Grants Act whose parent was the Counter-Inflation Act 1973. Section 20 of the Price Commission Act states: It shall be the duty of the Commission to have regard to the sanction provisions in performing their functions under this Act; and where that duty conflicts with the duty imposed on the Commission by Section 2(1) of this Act their duty to have regard to the sanction provisions shall prevail. Under Section 2 of the Price Commission Act certain criteria are laid down under which firms' prices applications can be accepted. The criteria deal with the recovery of costs, the desirability of encouraging reductions in costs by improvements, the need to earn a reasonable profit, the need to take account of consumer interests and the need to safeguard the interests of users of goods and services. It also takes account of the need to promote competition.

In other words, Section 2 contains the guts of a competition policy under which pricing is to be allowed proper rein, but at the same time it gives sanctions under the Remuneration, Charges and Grants Act. The application of these sanctions overrides all other criteria under which the Price Commission operates. Such an application—a kind of half-clause in the back of the schedule which overrides all other criteria—can lead to substantial abuse.

Mrs. Jill Knight (Birmingham, Edgbaston)

Is my hon. Friend aware that a constituent of mine is at present under threat of a £1,000 fine from the Price Commission because he has not the time, the will or the inclination to fill out an extremely large questionnaire that he has been sent?

Mr. Shaw

No doubt my hon. Friend's constituent is quite right in that the load of administrative inquiry and detail required by a Price Commission investigation is a massive undertaking in which the powers of the Commission are almost absolute. The Commission can examine not just the matter of the price application but the running of the whole company. It can use the criteria under Section 2 to try to determine just what the company is trading about. Presumably this will provide an immense source of information about how companies operate. I believe that the House must set aside a day very soon to discuss the use to which this information that has been gleaned will be put.

I come to the question of sanctions and how these fit into the operation of the Price Commission. In Standing Committee on the Price Commission Bill we were faced with the prospect that the Price Commission's powers might well be used to provide sanctions for a wages policy that was ill-defined and not properly understood by the manufacturers. I raised a substantial number of questions with the Minister concerned. The Secretary of State for Prices and Consumer Protection said: I do not believe that that is technically possible, for two reasons. First, the number of investigations which would be mounted, let us say 40 a year, would make an insignificant contribution to wage limitation even were we to choose to apply the policy in the way suggested by the hon. Gentleman, and even were we legally entitled to do so. My own judgment—and I do not have direct legal advice on the subject therefore it is open to qualification and correction—is that, obliged as are the Government, and as is the Commission, to employ the investigation element in the policy in respect of the criteria in Clause 2, I believe that were we doing it for no other reason than preventing wage increases outside a norm which we had unilaterally declared, the Price Commission would be behaving improperly."—[Official Report, Standing Committee B, 24th May 1977; c. 564–5.] In the light of developments in the past two weeks, it would be right to ask the Minister when he replies tonight to confirm that the use of sanctions through the Price Commission in relation to the wages policy is not something that the Government have in mind purely to apply in that way.

If a price application is made in the normal course of events it must be processed in the usual way. The Remuneration, Charges and Grants Act expires in July this year as does that part of the Counter-Inflation Act on which these powers are based.

I want to make a few observations about the industrial relations aspect of this matter. It is a question of the degree to which companies should be treated openly, fairly and even-handedly as opposed to their being subjected to a twisted use of the law, to cajoles, and so on,

The Government may claim that they are operating the letter of the law. As the Solicitor-General is present, no doubt they are keeping a close eye on matters to ensure that the letter of the law is on their side. However, in a climate where it is necessary that there be confidence in industry, at the heart of any good industrial relations policy there must also be regard to the spirit of the law. In these contract clauses the Government are paying more attention to the letter of the law than they are to the spirit of the law within which industry and the services must operate.

No one wants the tentacles of law to extend into purchasing contracts or wage negotiations. What we must deplore is the substantial decline in standards and in public morality. That is why we attack these clauses tonight.

8.36 p.m.

Mr. John Watkinson (Gloucestershire, West)

I am inspired to take part in the debate because of a remark made by my hon. Friend the Member for Bolsover (Mr. Skinner). I thought that he was probably right in saying that the incomes policy as we know it is in its death throes. However, I do not go along with my hon. Friend in his pursuit of a free-for-all in incomes—that would be excessively dangerous.

My hon. Friend the Member for Bolsover does not fully appreciate the degree to which the control of incomes, and the method of controlling incomes, has changed dramatically. My hon. Friend appears on occasion to be almost in alliance with Tory Members. I must point out to him that a Tory Government would seek to operate, not an overt incomes policy as the Labour Government have attempted to do over the past two years, but a covert incomes policy through exclusive control of the money supply. My hon. Friend should appreciate the extent to which Governments of both political complexions are committed to some form of control over the money supply. Without control over the money supply we would return to the excesses which occurred under Chancellor Tony Barber.

Mr. Litterick

Does not my hon. Friend agree—as my hon. Friend the Member for Bolsover (Mr. Skinner) said at some length and with great force—that the debate has been initiated by the Opposition for the hyprocritical purpose of suggesting that they favour free, unfettered collective bargaining in an unqualified way?

Mr. Watkinson

I entirely agree. The Opposition are dishonest about this. They would operate an incomes policy by imposing rigid control of the money supply. Such a policy would be every bit as arbitrary in its working as the arbitrariness that they claim obtains at present.

I believe that next year we shall be moving into freer collective bargaining. However, I should like to see a continuation of the 12-month rule.

The policy of the Government in the last three years has sought to bring down the levels at which settlements are made and to proportions which our democratic process can stand. In that period it has been vital for the Government to set certain standards. The Government have stated time and again that their fundamental aim is to control inflation. They have made no secret of that fact, and they have put it at the forefront of their policy. Therefore, the Opposition cannot claim that there has been any secrecy about that commitment.

The Opposition can claim with some measure of justification that certain Government statements have not been given the express backing of this House. In other words, the means have not been backed by the decision of this House. It is said that the terms and conditions in these contracts do not have statutory backing.

I accept that the Government, as the contracting party, are in no different status from an ordinary contracting party. They enter into an agreement with another party and that party can say "No, we do not wish to accept the terms which you are seeking to impose".

Mr. Robert Kilroy-Silk (Ormskirk)

I do not dispute the legality of the Government's use of sanctions, but I think my hon. Friend would agree that it is important to distinguish between entering into a contract with firms and then withholding industrial assistance. Is this not a dangerous precedent to set? Is it wise to discriminate against a firm in my constituency, for example, which is an area of high unemployment? Does not my hon. Friend agree that a Labour Government should set higher standards of conduct than we expect from a Conservative Government? Is that not the crux of the issue?

Mr. Watkinson

My hon. Friend makes an important point. He must have had in mind the article in The Times this week. I agree with him that there are dangers in making a rod for our backs which may be used by a future Conservative Government, if that day ever comes to pass.

Let me return to the central theme of my argument. The Labour Party believes that the Government should be prepared to impose terms and conditions in the contracts which they make. For example, they might seek to include provisions in such a contract to bring about a better social or racial mix in our factories. I see no objection to the Government taking that course.

My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) made a significant point when he implied that the Government ran the risk of finding themselves imposing terms and conditions on enterprises which those concerns may legitimately claim ignored surrounding circumstances. It is vital that there should be openness in these matters. It has been claimed that in some cases there has been a certain amount of rough justice. However, the Government can claim that in pursuing their incomes policy the broad terms of that policy have been expressed time and again.

The Government have laid the policy before the people of this country and have stressed the paramount importance of controlling inflation. They can legitimately claim that the policy was endorsed by the House last week and that the White Paper set out that they would be seeking to use powers in terms of contracting with industry to ensure that private enterprise generally agreed with the incomes policy because the Government rightly attach so much importance to it.

I accept that it is necessary for a Government to intervene in these circumstances, and I accept the Chancellor's statement that, in the initial stages, the Government were not expecting events to move in the direction they have taken. He hoped that wage settlements would cluster round a figure, but 10 per cent. immediately became the norm.

The right hon. and learned Member for Surrey, East (Sir G. Howe) was right when he said that there has been a change in Government policy. It was vital that this change took place so that we could ensure that the level of inflation continued to come down. If it does, I hope that we can move back in the next round to a freer form of collective bargaining and rely on the use of money supply for a control on wages. I do not see that there will be any necessity to continue with a hard-line percentage norm, but the control of incomes will remain a key factor which will have to be controlled, and the Government are justified in pursuing the course that they are following.

8.47 p.m.

Mr. Walter Clegg (North Fylde)

The debate started with speeches totalling one and a half hours from the Front Benches, and that has deprived many Back Benchers of the opportunity to take part. One hour would have been long enough to deploy the arguments that were put forward. This is a matter that both Front Benches should consider for the future.

Mr. Arthur Lewis

Does the hon. Gentleman's figure of one and a half hours include the speech of the Shadow Chancellor of the Exchequer from the Liberal Benches?

Mr. Clegg

Heaven forbid. I intend to say something about that speech a little later.

The hon. Member for Gloucestershire, West (Mr. Watkinson) did not answer the point put to him by his hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). It is the main point of the debate and was put by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) and the right hon. Member for Down, South (Mr. Powell). We are talking about the abuse of power.

Mr. Kilroy-Silk

As the hon. Gentleman has chided my hon. Friend the Member for Gloucestershire, West (Mr. Watkinson) for not answering my point, will he answer a different question? As we are challenging the abuse of power, why has it taken his Front Bench two years to find out about this issue, given that the black list has been in existence for two years? Why did he and his right hon. Friends not sign my Early-Day Motion which was tabled on 30th November, and why did he not support my hon. Friends and me when we tried to get an emergency debate to save jobs in his area of Lancashire, 1,000 of which were threatened by the use of sanctions? The Opposition came in only when some of their Members on the board of Sun Alliance found themselves in difficulties and wanted to represent the interests of big business in this House.

Mr. Clegg

The hon. Gentleman has already made some serious points. He does not take them very much further by making such personal attacks. Denials were made about black lists by no less a person than the Prime Minister. On a recent date he said that they were non-existent. If we are in ignorance, we can plead that our ignorance was induced by believing the Prime Minister. That was an operation in which we should never have taken part.

I return to the theme of the debate—namely, the abuse of power. In deploying the Liberal case, the hon. Member for Cornwall, North (Mr. Pardoe) seemed completely to miss the point as put from the Opposition Front Bench and by the right hon. Member for Down, South. The hon. Gentleman missed the point of the criticism of the Liberal point of view made in the Financial Times today by Samuel Brittan. We must confine ourselves to the issues. Is what the Government are doing right in law? Are the Government abusing their powers? Are they acting in an arbitrary fashion? In other words, it is a debate not about ends—whether we want an incomes policy—but about means. The whole substance of the Chancellor's tirade was that he did not mind what means he used as long as he achieved the ends that he desires.

I return to a voice from the past. It is a voice that at some time has probably appealed to the hon. Member for Cornwall, North. I shall quote some extracts from the book entitled "The New Despotism" which was written in 1929 by the then Lord Chief Justice of England, Lord Hewart. What Lord Hewart wrote in "The New Despotism" is equally apt today. I shall put some of the tests by which he said that "The New Despotism" should be judged. Lord Hewart stated: The business of the Executive is to govern. We had that in abundance from the Chancellor of the Exchequer. Secondly, The only persons fit to govern are experts. We all know that the Chancellor is an expert. Lord Hewart continued: The experts in the art of government are the permanent officials, who, exhibiting an ancient and too much neglected virtue, 'think themselves worthy of great things, being worthy.' We have heard of a number of gentlemen who are getting together to decide whether certain people are in breach of the guidelines. Lord Hewart then wrote: Two main obstacles hamper the beneficent work of the expert. One is the Sovereignty of Parliament, and the other is the Rule of Law. The sovereignty of Parliament is very much concerned where those measures that Parliament has passed are being maltreated, as they are by the Government, by being used for aims for which they were never intended.

Lord Hewart added: To this end let him, under Parliamentary forms"— that, is the despot— clothe himself with despotic power, and then, because the forms are Parliamentary, defy the Law Courts. That is exactly what is being done in the document that we are discussing. We are debating the terms of the contract and the parliamentary form that has been used.

The White Paper goes so far as to refer to White Papers that have not yet been published. That would be despotism according to Lord Hewart, who wrote: This course will prove tolerably simple if he can: (a) get legislation passed in skeleton form". There may be nothing much more "skeleton" than a White Paper that fills up the gaps' with rules, orders and regulations. That is what the Chancellor is seeking to do in the White Paper. That makes it difficult or impossible for Parliament to check the said rules, orders and regulations". We know from experience the difficulty of trying to get information out of the Government.

Lord Hewart added: secure for them the force of statute"— which is exactly what the document does— and (h) prevent and avoid any sort of appeal to a Court of Law. That is implicit in every way in the document before the House.

Mr. Litterick

I am fascinated by the excerpts that the hon. Gentleman has read out. They revive for me memories of old reading. However, the worthy Lord Hewart was referring to a period of history when politics were dominated by Liberal and Tory Governments.

Mr. Clegg

I am not quite sure that I follow the reasoning behind that intervention. If they were Tory and Liberal Governments who were involved in creating a new despotism, all I can say is that, by God, the hon. Gentleman's side has learned from us.

Mr. Litterick

The new Liberals.

Mr. Clegg

As for the new Liberals, they are the hon. Gentleman's allies on this matter, not ours. He is more of an expert on that than I am.

I refer now to some of the details of this counter-inflation policy. It has been argued from the Labour Benches that firms are free to enter into the contract. That is not so. Many firms are entirely dependent upon Government work for keeping their work force going and keeping their businesses alive. I know other firms that are afraid of challenging the Government in case they lose future Government work. The true depth is plumbed in this so-called contract most significantly by the fact that a person is not able to go to a third party to ask for a decision on whether the terms of the contract are being performed. It is almost impossible, from the White Paper, to get any clear view of what is a breach of the pay policy.

Anyone entering into a contract will have no idea whether he is in breach of pay policy. The only recourse he will have is to approach the Secretary of State. He can make representations to him or confer with him. That is not giving the person contracting with the Government very much of a right at all. It is arbitrary. The right hon. Gentleman can make what decisions he likes and they cannot be challenged. That is a challenge to the rule of law.

It has already been pointed out that there is a means of challenging a decision by a Minister in respect of the fair wages rule. It is time that the House stopped giving great powers of discretion to Ministers who say that they will carry them out fairly and that there will be no discrimination. From the cases of Ford, Otis and others that have been mentioned, it is clear that there has been discrimination which the House finds hard to challenge and which cannot be challenged in the courts. For these reasons, I say that what we are talking about tonight concerns not whether we ought to have an incomes policy but whether it should be conducted legally.

Mr. Prior

rose—

Mr. Litterick

rose—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Mr. Prior.

Mr. Prior

If the hon. Member for Birmingham, Selly Oak (Mr. Litterick) would like five minutes, I will give way.

8.57 p.m.

Mr. Tom Litterick (Birmingham, Selly Oak)

I appreciate the generosity of the right hon. Member for Lowestoft (Mr. Prior). I look forward to his speech, during which I hope to interrupt him more than once.

The answer to the point put by the hon. Member for North Fylde (Mr. Clegg) is simple. It is that the definition of the point of entry by the State is 10 per cent. I readily concede that there are certain types of bargain in which the 10 per cent. becomes a bit grey at the edges, where the wage increase is perhaps 6 per cent. or 7 per cent. plus fringe benefits. Then it becomes difficult to evaluate in straight money terms.

We do less than justice to the Government if we accuse them of ambiguity. I would wish to accuse the Government of dogmatism in that they have stood rather rigidly on the figure of 10 per cent. They have become less flexible than we would have expected. As a result, they have run into one or two problems.

I am not a dogmatic opponent of incomes policy. I am a fairly rigid opponent of wages policy. I hope that the right hon. Member for Lowestoft will take that on board during the course of his speech. If the Government were laying down fundamental principles by which income differentials should be determined, if the debate was about the principles underlying the wage-work bargain or if the debate was about the shares of wage income and property income in society in general, we would truly be debating something serious. In fact, however, the debate is about none of those things. It is about a spurious, tactical political issue, and that is all. In that sense it is disappointing.

The issue of incomes policy looms larger and larger with each year that goes by. It is one which we evade not only at our peril but at the peril of the country. It is an evasion of a question which has to be settled. I do not mean that in a simplistic way. I have been a specialist in these matters for many years, and I understand clearly that one cannot settle once and for all the determination of earned incomes and unearned incomes and their relationship in society.

However, in our kind of economy as a community we have to agree collectively on certain basic principles. We must all by now understand that we should not leave it to the accidental and often catastrophic settlement of the so-called market. I presume that I shall be agreeing with the right hon. Member for Lowestoft in saying that this is often not a market of the classic nineteenth-century type but one that is severely distorted by monoplistic or other types of influence. We must intervene with Socialist considerations.

This may violate what many hon. Members on both sides of the House think are fundamental and immutable economic principles. I do not, by the way, believe that there are any such things. I am an economist. But we have to invent new truths for ourselves. The truth that lies ahead of us is that we shall have to define the logic of incomes policies not simply on an ad hoc temporary basis but accepting it as a normal part of our political and economic life virtually for ever.

For my own part, I recognise that this kind of economic policy is regressively and reactionarily redistributive. If we hold this rigid line of 10 per cent., there will be a redistribution of income between property income and earned income. From my point of view at least, that is reactionary and regressive. Therefore, in principle, I should oppose the whole idea if that was what we were debating, but it is not. We are debating a spurious, trivial and shallow tactical political matter which is of no significance.

9.2 p.m.

Mr. James Prior (Lowestoft)

The hon. Member for Birmingham, Selly Oak (Mr. Litterick) and some other members of what one might term the Left wing of the Labour Party have made a great deal of play today of the fact that the Opposition are debating what they term something that is trivial, hypocritical and shallow. During the course of my speech I hope to show that, far from that being the case, the Opposition are debating and focusing attention again on a matter of great principle which goes to the heart of parliamentary democracy and, what is more, to the continuance of a free society.

It is right for Parliament to debate these things. There are many hon. Members on both sides of the House who are worried about what is happening and what is being done in the name of government without parliamentary approval. I shall return later to the question of pay determination in a free society and to the: control of inflation.

I have heard my views expressed on a number of occasions recently from the Government Front Bench, and perhaps it would help Labour right hon. and hon. Members if I put on record the views of the Conservative Party. In the views that I have expressed in incomes policy—if one likes to call it incomes policy—I have been expressing the views laid down in "The Right Approach to the Economy" and in the other booklet that we published, which has become the Prime Minister's bedside reading. Since we published it two years ago it has been pretty effective bedside reading for the Prime Minister, because he has very largely followed the approach of the Conservative Party and, as a result, has learned considerably from it.

The cardinal point that has emerged during this debate and last Tuesday's debate is that discretionary powers are being used by the Government in a way that they consider to be legal and perfectly challengeable in the courts. That applies to ECGD, the Counter-Inflation Act and other such measures. But Parliament has had no chance to approve these other matters, and the Government have not put proposals to the House for its approval.

It is not good enough for the Chancellor of the Exchequer to claim today that the debate on counter-inflation policy last July or last Tuesday's debate in any way gives the Government approval for the clauses they are seeking to write into agreements now. The Government have admitted today that they have changed their incomes policy entirely since last July. That was a very big and serious admission for them to make.

We all recognise that in a modern society the Government have enormous, almost frightening, power. It is great fun on occasions to be in Government and to use that power. All hon. Members, particularly those who have not been in Government, have a duty to see that the Executive's power is properly controlled and properly checked. The Government always have a duty not to abuse their power. My hon. Friend the Member for North Fylde (Mr. Clegg) made that point in his speech.

One of the great worries of modern society, one of the great worries of people outside the House, is the lack of control by Parliament. I believe that the House should start looking much more deeply at how it can once more obtain the power and the control that it has lost in recent years.

As power grows, so the ability and courage to speak are diminished. When firms say that they do not wish to dis- cuss what grants or subsidies they are receiving from the Government, I am not the least surprised. More and more they fear that if they speak out of turn the Government will turn a blind eye towards them or perhaps pick them out for certain treatment.

I think that it was my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) who asked "Why restrict this to wage policy? Why not say, for example, that firms which support the Conservative Party should not be included in these contracts?" A Labour Member then said "Why not?", as if it were a good idea. It is very easy in Government to be convinced that the end justifies the way in which one gets there. That matter has gone to the heart of this debate.

How did the Government reach their present position? We had the admission from the Chancellor today that they started off with the transformation of an average increase in national earnings of 10 per cent. into a rigid ceiling of 10 per cent. for each case. The Government could get the TUC to agree only to an extension of the 12-month rule. That was as far as the TUC was prepared to go. Therefore, the Cabinet picked an arbitrary figure of 10 per cent. for the level of earnings. The Chancellor said that if inflation was to be kept down, this meant wage settlements of 5 per cent. to 6 per cent. So the argument of 15th July has been proved to be totally ambiguous. When I asked the Chancellor, in a letter I sent him in August, to confirm this, he agreed that a precise ceiling on settlements was not envisaged then. Since then we have had strict limits applied.

The Government have failed to elaborate or clarify the position any further, until today. As the months have passed, it has become clear that the 10 per cent. guideline is being transformed into a limit. This is contrary to the original policy, and approval was not sought in the House. The decision was taken behind closed doors in the corridors of Whitehall.

The original return to free collective bargaining has been transformed into a further year of rigid incomes control. The Prime Minister would not admit this. Only last month he claimed that we had free collective bargaining now. I cannot understand how he could say that when the Chancellor of the Exchequer has admitted this afternoon that that has been far from the case in the last few months. The Chancellor and the Prime Minister should get together to sort this out—unless it was another figment of the media's imagination about which we have heard the Prime Minister talk. Alternatively, perhaps it was a figment of the Prime Minister's imagination.

The moves back to a free system are being delayed. We are back to a rigid 10 per cent. No doubt the Chancellor and the Government have been told by Mr. Robert Worcester that the two main planks on which public opinion are most centred are, first, to slow down price rises for this year and, second, to be seen to be taking some frenzied action. That was the point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley).

In the last few weeks and months, we have seen some arm-twisting of union leaders, blacklisting, threats and sanctions against employers. I say to Labour Members that it is not that these threats are made against the private sector of industry that is important. The importance is that they are threats which are not substantiated or backed up by the approval of the House.

A small employer who rewarded his workers with a 10.24 per cent. increase received a letter from the Department of Employment, Incomes Division, Rex House. The letter stated: As I explained, this Division has been informed"— by whom?— that increases have been paid to your employees which may be in breach of the current pay restrictions. The policy as you may be aware, is voluntary and there is no obligation on the company to provide us with information. However, in view of the fact that sanctions may be imposed upon a company shown to be in breach of the policy I should be grateful for your comments on the allegation. [HON. MEMBERS: "Disgraceful."] It was signed not by a Minister but by an official at the Department. I should not expect it to be signed by a Minister, because I know that Ministers cannot sign every letter.

Mr. Arthur Lewis

I have a letter which is even worse. It reads: For all these reasons, I am unable to advise Ministers that the settlement is consistent with the Government's approach to pay matters and I would be grateful if, in the absence of any supporting costings, you would renegotiate the agreement accordingly. That letter is signed by a "Tommy" Atkins. What right has he to usurp the functions of a Minister?

Mr. Prior

I suppose that it is better that the letter was signed by "Tommy" Atkins than by Fanny Atkins.

The Government are using powers of coercion. I never dreamed that I would stand at the Dispatch Box and witness a Labour Government stopping a small employer by threats and intimidation from raising the wages of his employees by 10.24 per cent. It seems to me really extraordinary.

I wonder what the Secretary of State for Employment is going to say about this letter. Is he proud of its content and language? Does he think it right that the company I have mentioned should not pay this sort of increase in wages? Does he believe it right that the company should be penalised in this manner'? Does he believe it right that its employees should be penalised in this way? Is that what he means when he says "You know that Labour government works"? If that is so, I think that it is a very different situation from any that I have ever heard before from Labour Members, whether sitting below the Gangway opposite or when they were on the Opposition Benches.

It is not good enough for the Chancellor of the Exchequer to say, as he did today, "We have tried to make our views known to the firms even if we have not always succeeded." I do not think that that is the way that one can run a policy of this nature. I do not underestimate the difficulty of trying to run any pay and prices policy, but I certainly do not think that the Government can go on trying to run one in this way.

I repeat, because it is important, that the case I have quoted was that of a small employer who wrote about the matter. How does the threat of sanctions that the Government are applying, whether it forms the black list or any thing else—this employer said that he did not know whether he was on it—conform with the following words: in a free country like ours as far as possible our Government must be carried on by consent. Now that places upon Ministers, and particularly upon myself, a special responsibility to take you into our confidence. To tell you the truth. To explain the facts. Tell the people. Consult the people. Trust the people. That was the Prime Minister in a ministerial broadcast on 5th April. He should look at those words again in relation to the words contained in the letter I have read out.

Once the black list is exposed, once the rigidity of the policy is questioned, it is necessary to go further. So now we have the new clauses. It is doubtful whether one can use commercial judgment and contract to deal successfully with matters which have no relevance to it. It may well be correct to take that view, but I also take up the point raised by my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) in what everyone who heard it thought was an excellent speech. He was really saying that the Government can use their purchasing power quite properly to influence their own policy. He then quoted the fair wages clause of 1946. That clause was debated, amended and approved by the House of Commons, and it gave a right of arbitration to anyone who felt that he was being unfairly affected by it.

The hon. Member for Gloucestershire, South West (Mr. Watkinson) said that he thought the Government were in a similar position to that of other purchasers of goods. I doubt whether that argument can be sustained. I do not think that they are in a similar position. In many cases the Government are in a monopoly position. In many cases, because they have all these other powers, they are able to exert and can exert a quite unfair influence on certain companies. Therefore, the Government have to be extremely careful in the attitude they take.

It may be, as my right hon. Friend the Member for Chipping Barnet has suggested, that there is a way forward for a clear definition in the House of these points. If we could have clauses which might be debated and amended in the House and if they were then inserted into a similar agreement, I think that there would be less cause for complaint.

But there are many objections to these clauses as they are at the moment, and certainly I believe that my right hon. and hon. Friends would do well to vote against the clauses tonight and ask for their withdrawal because, as they are at the moment, they make nonsense.

As my hon. Friend the Member for Honiton (Mr. Emery) said, anyone who understands commercial purchasing at all knows that some of the provisions contained in the new clauses are totally unacceptable and make absolute nonsense. For example, we cannot have a situation where there is no appeal against the decision of the Secretary of State. There is no arbitration. There is no appeal. The clauses are retrospective. But will they now be applied universally? There is no specific figure for all pay settlements, so how can anyone decide whether the pay guidelines mean what the Government say they mean? The clauses apply to all future pay policies, provided only that they are set out in a Command Paper. In other words, we are to have future pay policies. But we do not know what they are, and, whether we know what they are or not, companies have to sign them already as if they knew what they were.

I ask the Secretary of State again whether these clauses will apply to firms such as Ford which have already settled their wage increases and have not had sanctions applied to them. I noticed on the "tape" tonight that Ford was now being told that, if more motor cars were supplied to the Government, the company would have to abide by the incomes policy. I should imagine that Ford will not be supplying any more motor cars to the Government. But it seems that the Government are shutting the stable door long after the horse has bolted. Again, it is the Government's discretion which is so utterly undesirable in this case.

When we come to consider the clause which deals with a main contractor being penalised because of what happens to one of its sub-contractors, it shows that the Government have rushed through these matters without giving proper consideration to what they may do. I advise the Government to withdraw these clauses, to think them through again and to lay them in a form which can be debated properly in the House.

I sum up this part of my speech by quoting from The Economist. It said on Friday: But such sanctions need, first, to be specifically included in new legislation passed by parliament: there must be an end to the pretence that, because the trade unions will not allow weapons for incomes policy to be introduced through the front door, ministers can decently scrabble around in dustbins outside the back door to find old powers once introduced for entirely different purposes. Second, blacklisted or otherwise punished firms must be allowed a right of public appeal, preferably to the ordinary courts. If the Government would go along with that course, I think that many Opposition Members would at least find that that had no parliamentary or constitutional objections.

There is a way in which we should be debating these matters and there is a way in which the House of Commons should decide. That is why I believe that all these new clauses should be withdrawn—and withdrawn tonight.

This is the fourth shot at income policy which the present Government have had in four years. We had the social contract, the imposed guidelines, the flexible guideline and the return to free collective bargaining of last summer, and now, once more, we are back to a rigid 10 per cent. It ill becomes the Government and their supporters to question whether the Opposition have an incomes policy at a time when they themselves have had four incomes policies in four years, none of them particularly successful.

Mr. John Mendelson (Penistone)

I can understand that perhaps some trade union leaders may make a case against the Government's present policy. But how does an Opposition spokesman, after months and months of urging the Government to stick by the 10 per cent. and after saying again and again that the Opposition support the TUC and the CBI in their support for the 10 per cent., now have the face to criticise? What did the Opposition want the Government to do when they urged them to stick by the 10 per cent.?

Mr. Prior

I have been telling the Government what they should do. But the other interesting matter which the hon. Gentleman raises is this. Throughout the two debates which we have had on this matter, the criticism coming from the Treasury Bench has been that the Government have not had the support of the Opposition in the way they expected. All I can say—I agree with the hon. Gentleman—is that the Opposition have proved themselves to be extraordinarily responsible in their attitude towards incomes policy, in a way far different from that shown to us by the Government party when in Opposition.

Hon. Members on the Government side, the Chief Secretary in particular, have quoted what I said on television, which was that I believed that the 12-month rule should be maintained. Of course it should. We on this side believe that, if one does not stick to at least a year's interval between wage increases, one has precious little chance of sticking to anything.

We have given great support to the Government over many different matters, and we are entitled to take the credit for having done that. But my worry is that the Government have solved nothing in the past four years. They have avoided the abyss, but a fresh start, a fresh approach to incomes policy and a beginning on the way to solving our economic problems are as far off as ever.

Great play has been made of "The Right Approach to the Economy" and "The Right Approach". I shall read a passage to the House: Experience does not suggest that this"— that is, a fully-fledged prices and incomes policy— is the best way of finding a long-term solution to the problem. That same experience demonstrates the unwisdom of flatly and permanently rejecting the idea. Again, in "The Right Approach to the Economy", published in the autumn, we said: Yet in framing its 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; and this estimate cannot be concealed from the representatives of employers and unions whom it is consulting. I regard that as perfectly plain and extra-ordinarily good, common sense. Indeed, in private I often hear members of the Government party say that they very much agree with that approach. It would be nice if we heard it in public occasionally as well.

There is some common ground between the parties. Cash limits in the public sector are common ground between the parties. Monetary targets are common ground between the parties. All have been laid down in the White Paper published in the summer. As for guidance—yes. I have just quoted from "The Right Approach to the Economy".

In addition, we need a proper forum for open discussion of these problems. As well as that, we need to use the authority and interrogatory powers of Parliament through Select Committees to bring all these matters out into the open. Select Committees have an important part to play in the whole basis of policies for incomes. That also is stated in our published approach to these matters.

We need openly to discuss reform of collective bargaining. It is no good the House thinking that we shall achieve the reforms that we need unless there is far more open discussion of these problems and people recognise that changes must be made.

Several hon. Members have talked about the imbalance of power in society today. My right hon. Friend the Member for Chipping Barnet spoke about that, and he is right. If there were not an imbalance of power in society today, there would be no need for the reverse fair wages conditions now needed in Government contracts.

We have a duty to build on common ground, where it is present—I believe that there is considerable common ground—but the Government are wrong in their attitude to black lists, sanctions and so on. The simple truth is that arm-twisting of unions in election year and the blacklisting and threatening of companies are not compatible with a free society. For that reason, it cannot last. The foundations for future prosperity, the control of inflation and higher employment are not to be found in this way. As they are not to be found in this way, and as the Government have put forward these clauses, which should be withdrawn, I hope that all my right hon. and hon. Friends will vote solidly in the Lobby tonight.

9.31 p.m.

The Secretary of State for Employment (Mr. Albert Booth)

I hope that it is sig- nificant that employment spokesmen on both Front Benches are replying to the debate tonight.

I see it as my primary responsibility in this House and in carrying out my duties as a Minister to promote employment under safe conditions and at proper levels of pay. Pay policy and employment policy are related in the battle to reduce inflation. It makes no more sense to disregard employment policies when we are discussing pay policy than it does to disregard pay policy when we are discussing employment policies. Not only does inflation make it more difficult to sell our goods and services abroad, and to compete with imports but it undermines our whole economic and social structure.

A return to the levels of inflation experienced in 1975 would mean that un-employment would rise rapidly above its present unacceptable level in this country. We cannot treat employment, pay policy, industrial policy or any other aspect of our economic policy as if they existed in completely separate compartments.

That is why it is entirely proper that pay policy considerations should be taken account of when considering temporary employment subsidies or discretionary assistance under the Industry Act. That is also why we should take account of employment and industrial considerations when dealing with questions of pay policy.

That is not a new policy. It is one that the Government brought to the House in 1975. I am amazed that hon. Members should talk as if it is something that we have suddenly stumbled upon and as if it were only in the last few months that the Government had sought to use discretionary powers. If Conservative Members doubt this they should allow me to quote from the White Paper published in July 1975 which says: From now on the Government, in handling applications for assistance under the Industry Act 1972, will interpret the national interest as including observance of the pay limit. The Government will not give discretionary assistance under the Industry Act to companies which have broken the pay limit. When it is in full operation the National Enterprise Board, in discharging its duties, also will take these considerations into account. Corresponding policies will be followed in Northern Ireland. In relation to public purchasing the White Paper said: The Government will also take account of a firm's record of observance of the pay limit in its general purchasing policy and in the awarding of contracts. That policy was clearly laid before the House two and a half years ago and was voted upon. The House approved that policy on 22nd July 1975 by 262 votes to 54. On that occasion the Conservative Opposition abstained.

Mr. Burden

In the new forms of contract on which the Government are insisting, there is no appeal. Therefore, will it be possible, if firms feel that they have been unfairly treated by the Government to make representations to the Ombudsman?

Mr. Booth

I would not see that as being within the role of the Ombudsman, because the Ombudsman does not normally consider matters of firms' commercial policies. Obviouosly, if any firm considers that any Minister, in using his discretion, is exceeding his statutory duty it has a form of redress open to it in the courts.

Having accepted, as I hope the House now has, the policy of using this discretion, while taking into consideration the question of whether firms are observing pay limits before the granting of public contracts, I think that we should be able to pass on to the heart of the debate, and that is the question whether the House can approve the way in which the Government are doing this.

The right to make the awarding of Government contracts conditional upon employers accepting the pay policy approved by this House in the fair wages clauses has not been challenged today. The argument has been based upon the distinction between the sort of pay policy which the House approved in the Fair Wages Resolution and the sort of pay policy that is now being operated. I believe that since this House passed the Fair Wages Resolution Governments have had to operate many more powers to support industry and employment in this country.

It is now appropriate to consider whether those many powers used by Government are capabe of the same sort of application to pay policy as was used in the case of the Fair Wages Resolution. I contend that it would not be possible to use them in that way. If all support which Government gave to firms, industry and employment was conditional upon the obesrvance of pay policies and had to be decided by any outside impartial body, Government policy—and the House in its debate on Government policy—would be subject to two impossible limitations.

If the pay policy were to be put to any outside body—whether the Central Arbitration Committee or any board of which Opposition Members might approve—in order that it should have to decide whether pay policy had been breached before a firm was awarded a contract, it would first have to be a rigid policy. There would be no doubt about that.

For the purposes of operation by the Central Arbitration Committee, it would be hard to define what was a self-financing productivity agreement, for example. There is no doubt in my opinion that it would have to be an extremely rigid policy.

In addition, if the conditions were to be subject to consideration by another outside impartial body, that body could look only at the words of that pay policy. It would have to put on its blinkers and disregard everything but the words on that paper, and would have to take a decision which on the logic of the argument used by Opposition Members would preclude any of the many considerations that are obviously important to employment and economic policies as well as to the counter-inflation policy.

I do not accept that our successive pay policies have been too rigid. In fact, I thought that some of the complaints of Opposition Members suggested that they had been anything but too rigid. It was suggested that they had been anything but too rigid. It was suggested that we were making up the policy as we went along. That might be an easier argument to sustain than the argument that we have been far too rigid. The truth is on the record. It is not a matter of speculation. In July 1975 the pay policy contained a single pay limit of £6, with a cut-off at £8,500. The only things allowed over and above that were equal pay awards and Fair Wages Resolution awards.

In the round that followed that, in addition to the removal of the £8,500 cut-off, sick pay scheme improvements were allowed additional to the pay limit. Even the pay limits were more flexible, ranging from £2.50 to £4. Additionally, awards under Schedule 11 of the Employment Protection Act were allowed. Therefore, the range of possibilities in pay determinations in that year were certainly more flexible than they were in the preceding year.

Finally, in this round, negotiators have had freedom to choose their own priorities within the pay guidelines. They do not have to take into account payments under self-financing productivity schemes, improvements in pensions, sickness benefits, job security and a whole range of other matters. Therefore, I contend that as we have passed three successive stages of pay policy there is no doubt but that the pay policy that we have operated has become considerably more flexible.

Mr. John Nott (St. Ives)

Has the Secretary of State discussed these very important matters with the Liberal Party in accordance with the terms of the Lib-Lab pact?

Mr. Booth

Had the hon. Gentleman been in the House at the time, he would have heard the views of the Liberal Party on this matter. The Liberal Party's view has been consistent. It has taken the view that the policy should be pursued consistently and that it was a matter of the utmost importance to it in supporting the Government that the Government should seek by all legitimate means they had at their disposal to reduce the level of inflation. Ordinarily I do not claim any expertise in presenting the views of other political parties, but I hope that in this matter I have fairly presented the views of the Liberal Party.

Next, I feel obliged to turn to the question of the work of some of my officials, particularly those who work at Rex House. It has been suggested that my Department administers the pay policy in the private sector in an arbitrary, secretive and bullying manner. There is talk of my being a commissar operating from the Kremlin and of a twentieth century Star Chamber, and my officials at Rex House in Lower Regent Street who administer the policy have been publicly branded as snoopers, or as a terror squad. The kindest description that has been applied to them by their critics is that they are possibly more like Dr. Watson than Sherlock Holmes. I hardly recognise them as the staff that I work with. These accusations could not be further from the truth. They are so far off the mark as to be ludicrous, and I shall explain why.

Incidentally, it might be worth reflecting on the fact, in view of what the right hon. and learned Member for Surrey, East (Sir G. Howe) said about my officials, that there are only 69 of them, and that the Pay Board over which the Government of which he was a member presided had a staff of over 300. Though no fault of the staff of the Pay Board, their efforts at reducing pay awards were not such as to commend themselves to trade unions or employers or the majority of Members of the House.

The role of my Department and of those officials has been threefold—to keep the Government informed of the more important negotiations and settlements; to provide advice to unions and management about the pay guidelines; and to clear settlements where the firms concerned have asked for Government financial assistance, perhaps under the Industry Act, perhaps under the temporary employment subsidy scheme, or where the operation of the Price Code has been concerned.

I do not think it can be seriously contended that a Government seeking to operate a pay policy to reduce inflation should not be kept informed how that pay policy is developed. That would be impossible without the back-up of officials. Nor can it be contended that advice sought by employers or unions on pay policy should be refused by Government. That advice could not be given without the work of the officials in Rex House.

Neither should it be contended that, when the Government use taxpayers' money in a series of areas to support industry and the maintenance of jobs, the Government should go ahead and take that course without advice on how pay policy is operating in those areas when taxpayers' money is being sought in assistance. It is hardly sense to provide Government money to subsidise jobs when the workers are receiving inflationary wage increases that prevent the firms concerned from supporting those jobs.

Let me return to the accusation about the way in which my officials carry out their job. That was a large part of the burden of the attack made on those officials.

Mr. Ridley

Will the right hon. Gentleman say whether the Government will publish a list of firms which have breached pay policy but against which sanctions are not to be taken? The Chancellor of the Exchequer sidestepped this issue earlier in the debate, but I hope that the Secretary of State for Employment, who is a man of honour and integrity, will answer that question.

Mr. Booth

I do not think that my right hon. Friend the Chancellor side-stepped the issue, nor did my right hon. Friend the Prime Minister when the same question was put to him. I shall give the hon. Gentleman exactly the same answer. The Government are considering whether we should publish a complete list of all the firms which have breached the policy, but before we take a final decision we are to consult with the CBI and with some of the employer federations, because we have reason to believe that a number of employers would not welcome our engaging in such a practice. It might be detrimental to certain firms to publish that information.

One of the accusations made against my officials is that they have behaved in an arbitrary manner. On the contrary, I believe that my officials have behaved in anything but an arbitrary manner. In the overwhelming majority of cases, certainly in the ones I have examined, I believe that they have displayed a careful and patient understanding of problems when faced by trade unions and managements on pay policy matters.

There have been numerous meetings on particular cases. There have been many meetings in my Department with firms in which the details of pay policy have been considered and where it appears that any firm is likely to be in breach. Every opportunity is given to come forward and discuss these matters with officials or, where such consultation is requested, by the unions or managements concerned for discussion with Ministers.

My hon. Friend the Minister of State and I have spent a great deal of time discussing with the unions and managements, preferably together, ways in which we can attempt to obtain agreement. Agreement has been obtained in the overwhelming majority of cases. This is why the pay policy has had a measure of success. Had there been arbitrary treatment,, it would not have been possible for Her Majesty's Government to have achieved that measure of success.

The next accusation relates to the subject of secrecy—an accusation which, frankly, is laughable. Since July 1975, my officials at Rex House have held more than 5,500 meetings with those involved in pay policy. That is a rather strange way of trying to keep the operation secret. They have dealt with 87,000 telephone calls and more than 24,000 written inquiries—hardly a way of conducting a secret operation. Rex House has even received the accolade of being mentioned by Clive Jenkins on "World at One". One can hardly sustain the contention that it has been a secret operation.

Sir G. Howe

The Secretary of State will remember that the Chancellor of the Exchequer and the Prime Minister heralded the period of policy through which we have been moving as a return to free collective bargaining. If, during, a period of return to free collective bargaining, his officials have conducted more than 110,000 interviews on the telephone, in person and in writing, how many more does he think they would have conducted if we were operating a formal pay policy?

Mr. Booth

If the logic of some of the right hon. and learned Gentleman's earlier remarks were followed, they might have no work to do. The whole job might have been turned over to a pay board and we might not be discussing various important considerations relating to how pay policy, employment policy, economic policy and counter inflation policy impinge upon each other.

I can only say that if the Opposition really believe that the activities of my officials are a secret, they will believe anything.

Mr. Pardoe

Following the point made by the right hon. and learned Member for Surrey, East (Sir G. Howe), will the Secretary of State confirm that his Department has 69 officials working on the pay policy and that the Conservative Government's Pay Board had 300 officials? Unless the Pay Board was considerably less productive than his Department, those officials must have written substantially more letters and made substantially more telephone calls.

Mr. Booth

The hon. Gentleman has me in a cleft stick. I hate to concede that anyone could work harder than the 69 officials in Rex House. It may be that they have conducted as many meetings, written as many letters and dealt with as many telephone calls as did the officials of the Pay Board.

I insist that the essential difference between the Pay Board operation and the operation that has been conducted through my Department is that we have persuaded and won people over to a broad acceptance of our aims and that people have gone along with the policy, not necessarily because they agreed with every word of every paragraph in the White Paper, but because they have seen the overall sense and been persuaded of what we are trying to do Those who, in the last analysis, have refused to comply have been the exceptions which have proved the rule.

Among the many accusations laid against my Department is that we have been bullying. I also find this hard to take seriously. The board of directors of Sun Alliance does not seem to have been cowed by me. Nor does "bullying" seem to be quite the right expression to to describe the way in which we communicated with John Lewis. Those who have read the very long correspondence between us may have come to a number of conclusions, but I am sure that they will not have concluded that we bullied John Lewis. Neither can anyone contend that we bullied Ford. John Lewis is a firm against which we have used our discretionary powers. I do not accept that that constituted bullying.

If Opposition Members are to reject the Government's method of pursuing a pay policy and the results that our policy has produced, they must seriously try to form some assessment of the results they would get from the policy that they now advocate.

Since the beginning of stage 1 of the three policies, there have been nearly 32,000 settlements. My Department has considered those settlements, and in the two and a half years of pay policy we have found only 385 firms which have reached settlements outside the guidelines. Only 55 of those firms come within the current round. Of the 385 which reached settlements outside the guidelines—

Sir Frederic Bennett

Including Ford.

Mr. Booth

Yes, including Ford. Of the 385, 89 per cent. renegotiated settlements as a result of further meetings with the Department, leaving only 48, including Ford, which did not conclude settlements within the guidelines. It is among the 48 that we have imposed sanctions or applied discretionary powers.

I find it hard to imagine any other non-statutory policy, or even a statutory policy, that can achieve such effective results. There has been overwhelming acceptance and support of the present policy. During the first two years, that support came about in the main because we had the backing of the organised trade union movement. In practice, the present round has acquired similar support. That support was not obtained as a result of an agreement with the TUC. It was obtained in discussions with trade unionists firm by firm or industry by industry. It was obtained after discussions with joint industrial boards and a whole series of other organisations.

I have been asked to reply to some specific questions, and I shall try to do so quickly. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) questioned me about the time that it is taking the CAC to deal with wages resolution cases. I have had the matter checked and I find that the average time for dealing with a reference to the CAC is six months. However, I know that the case about which my hon. Friend is extremely concerned has taken a fair bit longer. Many special considerations apply in that case.

My hon. Friend the Member for West Lothian (Mr. Dalyell) asked me whether the power to refuse export credit to James Mackie and Sons would have rested with Stormont had Stormont been in operation at the time. That is a matter that rests on whether we devolve such powers. The power to pay export credits would depend upon that power being devolved in the re-creation of a Northern Ireland Parliament as much as in the creation of a Scottish Assembly. That would be a matter for the House. I have to agree with my hon. Friend that the powers that a Scottish Assembly could exercise are far more appropriate for debate, on the relevant Bill than on the matter before the House.

The hon. Member for Pudsey (Mr. Shaw) asked me whether the Government refer individual firms to the Price Commission in pursuance of pay policy. The answer is "No". The Government do not do that The Government have powers only to refer a complete sector of an industry or service to the Commission. In the main, the Commission decides for itself whom it will investigate.

There are various amendments on the Order Paper, but I join with my hon. Friends who signed the amendment which condemns the irresponsible and desperate … opportunism of the Leader of the Opposition". However, for reasons that I have explained, I cannot go along with their suggestion that the Government's use of their powers has been either unexpected or too rigid. I think I have shown that there has been every reason to expect the powers and that they have been operated with an increasing degree of flexibility. I have made it clear that the policy is not being applied rigidly.

The Opposition's motion cannot have it both ways. It cannot be contended on the one hand that the policy is rigid yet contended that the policy is arbitrary. Do the Opposition really want to return to the rigidity of the pay code which they operated when they were last in office? What we have done is to provide a clear indication of the underlying aims and objectives of the policy and the framework within which negotiators are free to reach settlements which meet their own situation.

As Secretary of State for Employment, I urge the House to support the Government in their efforts to safeguard jobs and to provide desirable social policies. To do that, it is essential to beat inflation. It is no use giving industrial assistance to maintain jobs if the money is used for other purposes, including the financing of unacceptable settlements. I would not take the view that the end can ever justify the means. I do say that Ministers, in taking decisions to place orders, must do so in a responsible way. To fail to do so would be to abdicate our responsibility to the people of this country.

Question put, That this House 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; and calls upon the Government to withdraw its new contract clauses for public purchasing.

The House divided: Ayes 268, Noes 283.

Division No. 106]	AYES	[9.59 p.m.
Adley, Robert	Brooke, Peter	Douglas-Hamilton, Lord James
Aitken, Jonathan	Brotherton, Michael	Drayson, Burnaby
Alison, Michael	Brown, Sir Edward (Bath)	du Cann, Rt Hon Edward
Amery, Rt Hon Julian	Bryan, Sir Paul	Dunlop, John
Arnold, Tom	Buchanan-Smith, Alick	Durant, Tony
Atkins, Rt Hon H. (Spelthorne)	Buck, Antony	Dykes, Hugh
Atkinson, David (Bournemouth, East)	Budgen, Nick	Eden, Rt Hon Sir John
Awdry, Daniel	Bulmer, Esmond	Elliott, Sir William
Bain, Mrs Margaret	Burden, F. A.	Emery, Peter
Baker, Kenneth	Butler, Adam (Bosworth)	Eyre, Reginald
Banks, Robert	Carlisle, Mark	Fairbairn, Nicholas
Bell, Ronald	Carson, John	Fairgrieve, Russell
Bennett, Sir Frederic (Torbay)	Chalker, Mrs Lynda	Farr, John
Bennett, Dr Reginald (Fareham)	Channon, Paul	Fell, Anthony
Benyon, W.	Clark, Alan (Plymouth, Sutton)	Finsberg, Geoffrey
Biffen, John	Clark, William (Croydon S)	Fisher, Sir Nigel
Biggs-Davison, John	Clarke, Kenneth (Rushcliffe)	Fletcher, Alex (Edinburgh N)
Blaker, Peter	Clegg, Walter	Fookes, Miss Janet
Body, Richard	Cockroft, John	Forman, Nigel
Boscawen, Hon Robert	Cooke, Robert (Bristol W)	Fowler, Norman (Sutton C'f'd)
Bottomley, Peter	Cope, John	Fox, Marcus
Bowden, A. (Brighton, Kemptown)	Costain, A. P.	Fraser, Rt Hon H. (Stafford & St)
Boyson, Dr Rhodes (Brent)	Craig, Rt Hon W. (Belfast E)	Fry, Peter
Bradford, Rev Robert	Crowder, F. P.	Galbraith, Hon T. G. D.
Braine, Sir Bernard	Davies, Rt Hon J. (Knutsford)	Gardiner, George (Reigate)
Brittan, Leon	Dean, Paul (N Somerset)	Gardner, Edward (S Fylde)
Brocklebank-Fowler, C.	Dodsworth Geoffrey	Gilmour, Rt Hon Ian (Chesham)
Gilmour, Sir John (East Fife)	Luce, Richard	Ridsdale, Julian
Glyn, Dr Alan	McAdden, Sir Stephen	Rifkind, Malcolm
Godber, Rt Hon Joseph	MacCormick, Iain	Roberts, Wyn (Conway)
Goodhart, Philip	McCrindle, Robert	Rodgers, Sir John (Sevenoaks)
Goodhew, Victor	McCusker, H.	Ross, William (Londonderry)
Goodlad, Alastair	Macfarlane, Neil	Rossi, Hugh (Hornsey)
Gorst, John	MacGregor, John	Rost, Peter (SE Derbyshire)
Gow, Ian (Eastbourne)	MacKay, Andrew (Stechford)	Royle, Sir Anthony
Grower, Sir Raymond (Barry)	Macmillan, Rt Hon M. (Farnham)	Sainsbury, Tim
Grant, Anthony (Harrow C)	McNair-Wilson, M. (Newbury)	St. John-Stevas, Norman
Gray, Hamish	McNair-Wilson, P. (New Forest)	Scott, Nicholas
Grieve, Percy	Madel, David	Shaw, Giles (Pudsey)
Griffiths, Eldon	Marshall, Michael (Arundel)	Shelton, William (Streatham)
Grist, Ian	Marten, Neil	Shepherd, Colin
Grylls, Michael	Mates, Michael	Shersby, Michael
Hall-Davis, A. G. F.	Mather, Carol	Silvester, Fred
Hamilton, Michael (Salisbury)	Maude, Angus	Sims, Roger
Hampson, Dr Keith	Maudling, Rt Hon Reginald	Sinclair, Sir George
Hannam, John	Mawby, Ray	Skeet, T. H. H.
Harrison, Col Sir Harwood (Eye)	Maxwell-Hyslop, Robin	Smith, Dudley (Warwick)
Harvie Anderson, Rt Hon Miss	Mayhew, Patrick	Smith, Timothy John (Ashfield)
Haselhurst, Alan	Meyer, Sir Anthony	Speed, Keith
Hastings, Stephen	Miller, Hal (Bromsgrove)	Spence, John
Havers, Rt Hon Sir Michael	Mills, Peter	Spicer, Michael (S Worcester)
Hawkins, Paul	Mitchell, David (Basingstoke)	Sproat, Iain
Hayhoe, Barney	Moate, Roger	Stainton, Keith
Heath, Rt Hon Edward	Molyneaux, James	Stanbrook, Ivor
Henderson, Douglas	Monro, Hector	Stanley, John
Heseltine, Michael	Montgomery, Fergus	Steen, Anthony (Wavertree)
Hicks, Robert	Moore, John (Croydon C)	Stewart, Ian (Hitchin)
Higgins, Terence L.	More, Jasper (Ludlow)	Stokes, John
Hodgson, Robin	Morgan, Geraint	Stradling Thomas, J.
Holland, Philip	Morgan-Giles, Rear-Admiral	Tapsell, Peter
Hordern, Peter	Morris, Michael (Northampton S)	Taylor, R. (Croydon NW)
Howe, Rt Hon Sir Geoffrey	Morrison, Charles (Devizes)	Taylor, Teddy (Cathcart)
Howell, David (Guildford)	Morrison, Hon Peter (Chester)	Tebbit, Norman
Hunt, David (Wirral)	Mudd, David	Temple-Morris, Peter
Hunt, John (Ravensbourne)	Neave, Airey	Thatcher, Rt Hon Margaret
Hurd, Douglas	Nelson, Anthony	Thompson, George
Hutchison, Michael Clark	Neubert, Michael	Townsend, Cyril D.
Irving, Charles (Cheltenham)	Newton, Tony	Trotter, Neville
James, David	Nott, John	Van Straubenzee, W. R.
Jenkin, Rt Hon P. (Wanst'd&W'df'd)	Onslow, Cranley	Vaughan, Dr Gerard
Johnson Smith, G. (E Grinstead)	Oppenheim, Mrs Sally	Viggers, Peter
Jones, Arthur (Daventry)	Page, Rt Hon R. Graham (Crosby)	Wakeham, John
Jopling, Michael	Page, Richard (Workington)	Walder, David (Clitheroe)
Joseph, Rt Hon Sir Keith	Paisley, Rev Ian	Walker, Rt Hon P. (Worcester)
Kaberry, Sir Donald	Parkinson, Cecil	Wall, Patrick
Kershaw, Anthony	Pattie, Geoffrey	Walters, Dennis
Kimball, Marcus	Percival, Ian	Watt, Hamish
King, Evelyn (South Dorset)	Peyton, Rt Hon John	Weatherill, Bernard
King, Tom (Bridgwater)	Pink, R. Bonner	Wells, John
Kitson, Sir Timoth	Powell, Rt Hon J. Enoch	Whitelaw, Rt Hon William
Knight, Mrs Jill	Prentice, Rt Hon Reg	Wiggin, Jerry
Knox, David	Price, David (Eastleigh)	Wilson, Gordon (Dundee E)
Lamont, Norman	Prior, Rt Hon James	Winterton, Nicholas
Langford-Holt, Sir John	Pym, Rt Hon Francis	Wood, Rt Hon Richard
Latham, Michael (Melton)	Rathbone, Tim	Young, Sir G. (Ealing, Acton)
Lawrence, Ivan	Rawlinson, Rt Hon Sir Peter	Younger, Hon George
Lawson, Nigel	Rees, Peter (Dover & Deal)
Lester, Jim (Beeston)	Renton, Rt Hon Sir D. (Hunts)	TELLERS FOR THE AYES:
Lewis, Kenneth (Rutland)	Renton, Tim (Mid-Sussex)	Mr. Spencer Le Marchant and
Lloyd, Ian	Rhodes James, R.	Mr. Anthony Berry.
Loveridge, John	Ridley, Hon Nicholas
NOES
Abse, Leo	Boardman, H.	Carter-Jones, Lewis
Anderson, Donald	Booth, Rt Hon Albert	Cartwright, John
Archer, Rt Hon Peter	Boothroyd, Miss Betty	Castle, Rt Hon Barbara
Armstrong, Ernest	Bottomley, Rt Hon Arthur	Clemitson, Ivor
Ashley, Jack	Boyden, James (Bish Auck)	Cocks, Rt Hon Michael (Bristol S)
Ashton, Joe	Bradley, Tom	Cohen, Stanley
Atkins, Ronald (Preston N)	Bray, Dr Jeremy	Coleman, Donald
Atkinson, Norman	Brown, Hugh D. (Provan)	Colquhoun, Ms Maureen
Barnett, Guy (Greenwich)	Brown, Robert C. (Newcastle W)	Concannon, Rt Hon John
Barnett, Rt Hon Joel (Heywood)	Buchan, Norman	Conlan, Bernard
Bates, Alf	Buchanan, Richard	Cook, Robin F. (Edin C)
Bean, R. E.	Butler, Mrs Joyce (Wood Green)	Corbett, Robin
Beith, A. J.	Callaghan, Rt Hon J. (Cardiff SE)	Cowans, Harry
Benn, Rt Hon Anthony Wedgwood	Callaghan, Jim (Middleton & P)	Cox, Thomas (Tooting)
Bennett, Andrew (Stockport N)	Campbell, Ian	Craigen, Jim (Maryhill)
Bidwell, Sydney	Cant, R. B.	Crawshaw, Richard
Bishop, Rt Hon Edward	Carmichael, Neil	Cronin, John
Blenkinsop, Arthur	Carter, Ray	Crowther, Stan (Rotherham)

Cryer, Bob	Judd, Frank	Roderick, Caerwyn
Cunningham, G. (Islington S)	Kaufman, Gerald	Rodgers, George (Chorley)
Cunningham, Dr J. (Whiteh)	Kelley, Richard	Rodgers, Rt Hon William (Stockton)
Davidson, Arthur	Kerr, Russell	Rooker, J. W.
Davies, Bryan (Enfield N)	Kilroy-Silk, Robert	Roper, John
Davies, Rt Hon Denzil	Kinnock, Neil	Rose, Paul B.
Davies, Ifor (Gower)	Lambie, David	Ross, Stephen (Isle of Wight)
Davies, Clinton (Hackney C)	Lamborn, Harry	Ross, Rt Hon W. (Kilmarnock)
Deakins, Eric	Lamond, James	Rowlands, Ted
Dean, Joseph (Leeds West)	Leadbitter, Ted	Ryman, John
Dell, Rt Hon Edmund	Lee, John	Sandelson, Neville
Dempsey, James	Lestor, Miss Joan (Eton & Slough)	Sedgemore, Brian
Doig-Peter	Lever, Rt Hon Harold	Selby, Harry
Dormand, J. D.	Lewis, Arthur (Newham N)	Sever, John
Douglas-Mann, Bruce	Lewis, Ron (Carlisle)	Shaw, Arnold (Ilford South)
Duffy, A. E. P.	Lipton, Marcus	Sheldon, Rt Hon Peter
Dunnett, Jack	Litterick, Tom	Shore, Rt Hon Peter
Eadie, Alex	Lomas, Kenneth	Short, Mrs Renée (Wolv NE)
Ellis, John (Brigg & Scun)	Luard, Evan	Silkin, Rt Hon S. C. (Dulwich)
English, Michael	Lyon, Alexander (York)	Silverman, Julius
Ennals, Rt Hon David	Lyons, Edward (Bradford W)	Skinner, Dennis
Evans, Fred (Caerphilly)	Mabon, Rt Hon Dr J. Dickson	Smith, Cyril (Rochdale)
Evans, Ioan (Aberdare)	McCartney, Hugh	Smith, John (N Lanarkshire)
Ewing, Harry (Stirling)	McDonald, Dr Oonagh	Snape, Peter
Fernyhough, Rt Hon E.	McElhone, Frank	Spearing, Nigel
Fitch, Alan (Wigan)	MacFarquhar, Roderick	Spriggs, Leslie
Fitt, Gerard (Belfast W)	Mackenzie, Rt Hon Gregor	Stallard, A. W.
Flannery, Martin	Maclennan, Robert	Steel, Rt Hon David
Fletcher, Ted (Darlington)	McMillan, Tom (Glasgow C)	Stewart, Rt Hon M. (Fulham)
Foot, Rt Hon Michael	McNamara, Kevin	Stoddart, David
Ford, Ben	Madden, Max	Stott, Roger
Forrester, John	Magee, Bryan	Strang, Gavin
Fowler, Gerald (The Wrekin)	Mahon, Simon	Strauss, Rt Hon G. R.
Fraser, John (Lambeth, N'w'd)	Mallalieu, J. P. W.	Summerskill, Hon Dr Shirley
Freeson, Rt Hon Reginald	Marks, Kenneth	Swain, Thomas
Freud, Clement	Marshall, Dr Edmund (Goole)	Taylor, Mrs Ann (Bolton W)
Garrett, John (Norwich S)	Marshall, Jim (Leicester S)	Thomas, Jeffrey (Abertillery)
Garrett, W. E. (Wallsend)	Maynard, Miss Joan	Thomas, Mike (Newcastle E)
George, Bruce	Meacher, Michael	Thorne, Stan (Preston South)
Gilbert, Rt Hon Dr John	Mellish, Rt Hon Robert	Thorpe, Rt Hon Jeremy (N Devon)
Ginsburg, David	Mendelson, John	Tierney, Sydney
Golding, John	Millan, Rt Hon Bruce	Tinn, James
Gould, Bryan	Miller, Dr M. S. (E Kilbride)	Tomlinson, John
Gourlay, Harry	Mitchell, Austin	Tomney, Frank
Graham, Ted	Molloy, William	Torney, Tom
Grant, George (Morpeth)	Moonman, Eric	Tuck, Raphael
Grant, John (Islington C)	Morris, Alfred (Wythenshawe)	Urwin, T. W.
Grocott, Bruce	Morris, Rt Hon Charles R.	Varley, Rt Hon Eric G.
Hardy, Peter	Morris, Rt Hon J. (Aberavon)	Wainwright, Edwin (Dearne V)
Harrison, Rt Hon Walter	Moyle, Roland	Wainwright, Richard (Colne V)
Hart, Rt Hon Judith	Mulley, Rt Hon Frederick	Walker, Harold (Doncaster)
Hattersley, Rt Hon Roy	Murray, Rt Hon Ronald King	Walker, Terry (Kingswood)
Hayman, Mrs Helene	Newens, Stanley	Ward, Michael
Healey, Rt Hon Denis	Noble, Mike	Watkins, David
Heffer, Eric S.	Oakes, Gordon	Watkinson, John
Hooley, Frank	Ogden, Eric	Weetch, Ken
Horam, John	O'Halloran, Michael	Weitzman, David
Howell, Rt Hon Denis (B'ham, Sm H)	Orbach, Maurice	Wellbeloved, James
Howells, Geraint (Cardigan)	Orme, Rt Hon Stanley	White, Frank R. (Bury)
Huckfield, Les	Ovenden, John	White, James (Pollok)
Hughes, Rt Hon C. (Anglesey)	Padley, Walter	Whitehead, Phillip
Hughes, Robert (Aberdeen N)	Palmer, Arthur	Whitlock, William
Hughes, Roy (Newport)	Pardoe, John	Willey, Rt Hon Frederick
Hunter, Adam	Park, George	Williams, Rt Hon Alan (Swansea W)
Irvine, Rt Hon Sir A. (Edge Hill)	Parker, John	Williams, Alan Lee (Hornch'ch)
Irving, Rt Hon S. (Dartford)	Parry, Robert	Williams, Rt Hon Shirley (Hertford)
Jackson, Colin (Brighouse)	Pavitt, Laurie	Williams, Sir Thomas (Warrington)
Jackson, Miss Margaret (Lincoln)	Pendry, Tom	Wilson, Alexander (Hamilton)
Janner, Greville	Penhaligon, David	Wilson, Rt Hon Sir Harold (Huyton)
Jay, Rt Hon Douglas	Perry, Ernest	Wilson, William (Coventry SE)
Jeger, Mrs Lena	Phipps, Dr Colin	Woodall, Alec
Jenkins, Hugh (Futney)	Price, William (Rugby)	Woof, Robert
John, Brynmor	Radice, Giles	Young, David (Bolton E)
Johnson, James (Hull West)	Rees, Rt Hon Merlyn (Leeds S)
Johnson, Walter (Derby S)	Richardson, Miss Jo	TELLERS FOR THE NOES
Jones, Alec (Rhondda)	Roberts, Albert (Normanton)	Mr. James Hamilton and
Jones, Barry (East Flint)	Roberts, Gwilym (Cannock)	Mr. Joseph Harper.
Jones, Dan (Burnley)	Robinson, Geoffrey

Question accordingly negatived.