§ Q5. Mr. Lathamasked the Prime Minister when last she met the Confederation of British Industry.
§ The Prime MinisterOn 9 July.
§ Mr. LathamIn view of some of the absurd wage claims that are apparently being lodged in the private and public sectors, will my right hon. Friend lose no opportunity to stress that excessive wage settlements will lead directly and inevitably to higher unemployment?
§ The Prime MinisterI entirely agree with my hon. Friend. If excessive wage claims lead to excessive wage settlements a number of people will price themselves out of the market and there will be 195 higher unemployment. The alternative is that they take more money themselves at the expense of others, because we shall not increase the money supply to accommodate higher wages.
Mr. James CallaghanIs it still the Prime Minister's view that a combination of a strict monetary control and a wages free-for-all, whether or not it leads to absurd wage claims, will reduce inflation and unemployment?
§ The Prime MinisterThe way to reduce inflation, as the right hon. Gentleman knows, must be not to print more money. If we print more money, if we increase the money supply, that will be next year's inflation. Within the money supply we expect management and employees to be able to negotiate responsibly, and if they do not they must bear the consequences of their own action.
Mr. CallaghanAre we to take it from that, then, that the right hon. Lady intends to stick to a policy of strict monetary control, irrespective of the effect on unemployment?
§ The Prime MinisterThe alternative is to print money—[HON. MEMBERS: "Answer."]—and to lead, as the right hon. Gentleman once said to his own party conference, to increased inflation and, thereby, to increased unemployment.
Mr. CallaghanI am much obliged to the right hon. Lady for referring to my past speeches, but I wish that she would refer to her present policy. What is it?
§ The Prime MinisterExactly as I have said. If we print money, that will lead to extra inflation and extra unemployment. Therefore, I can only urge people to realise that if they ask for pay settlements in excess of productivity they are leading either to extra inflation or to extra unemployment, and the extra unemployment would be their fault.
§ Mr. SpeakerMr. David Steel.
§ Mr. David Steelrose——
§ Mr. SpeakerOrder. From time to time the Leader of the Opposition is allowed extra latitude. I said that in the last Parliament. Mr. James Callaghan.
Mr. CallaghanIs not the conclusion, therefore, that this winter we shall have higher inflation and higher unemployment? When did the Prime Minister promise that in her election speeches?
§ The Prime MinisterWe had both of those in very big measure under the previous Government, which is why I am changing the policy.
§ Mr. David SteelHow does the Prime Minister square her commitment to free collective bargaining with the letter sent by the Secretary of State for Industry to the chairmen of nationalised industries setting pay limits and asking for Government consultation on pay settlements? Surely the kind of pay policy that is private and applies to only one sector of the economy is the last kind that will work.
§ The Prime MinisterI think that the right hon. Gentleman has misinterpreted the letter. That letter said that we are setting cash limits—a system which relies on the nationalised industries to improve their productivity performance and to reduce real unit labour costs.
§ Mr. Nicholas WintertonWhen my right hon. Friend met the Confederation of British Industry, did she discuss the future role of the National Enterprise Board? Was the view expressed that that body should have its role reduced and that it could act very well as a loan board for smaller businesses, enabling the Board to buy equity in a private company requiring funds for technological invention and for the company to repurchase that equity after a fixed period, thus allowing the private company to remain a private and free enterprise?
§ The Prime MinisterI did not discuss that matter with the CBI. As my hon. Friend knows, we are intending to change the role of the NEB, and we shall be publishing, or have published, a Bill accordingly.
§ Mr. MeacherWill the right hon. Lady confirm that the Government intend to keep to their present public sector borrowing requirement ceiling? If so, will she indicate whether it is her intention, or merely the by-product of her policies, that unemployment will rise, according to The Economist, to 9½ per cent by the end of 1981?
§ The Prime MinisterWe intend to keep to the public sector borrowing requirement ceiling. I have vivid memories of what happened when we did not in 1976, when we had to call in the IMF. On that occasion we had real cuts in public expenditure of some 6 per cent, from the level of the previous year. We intend to keep to the ceiling. The hon. Gentleman is inviting us to spend our way out of the difficulties that we are in now. That would lead only to increased inflation and increased unemployment.