PRICES AND INCOMES POLICY

HC Deb 01 July 1980 vol 987 cc1381-441 7.10 pm

Mr. David Steel (Roxburgh, Selkirk and Peebles)

I beg to move, That this House believes that inflation and unemployment cannot be effectively controlled without a prices and incomes policy; and calls on Her Majesty's Government to bring forward proposals for such a policy without delay.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Mr. Speaker has asked me to announce that the amendment has been selected.

Mr. Steel

A Liberal Supply day debate is a rare event, and it will not surprise hon. Members to learn that we had a considerable debate on which topic to choose for discussion this evening. With little hesitation we decided that the time had come for the House to concentrate its mind, for a few hours at least, on the need to consider a prices and incomes policy, particularly in view of the speeches that have been made by many hon. Members, both inside and outside the House, in recent weeks in pursuit of such a policy.

The commitment of the Liberal Party to a prices and incomes policy as part of the general equipment of the Government in managing the economy goes back to an incident in June 1968 when, during the consideration of prices and incomes legislation under the Labour Government, the Conservative Opposition decided to force a fundamental vote against that policy and were supported in the Lobby by the Tribune group, led by the right hon. Member for Ebbw Vale (Mr. Foot). On that occasion we felt that the parliamentary arithmetic was such that our votes could well be crucial in seeing the policy survive, and we supported the Government.

My party's record on prices and incomes policy has been consistent ever since, in that whatever the inadequacies of individual prices and incomes policies—no doubt we shall debate those during the next three hours—we have solidly supported it, believing it to be a necessary part of the modern equipment of the Government in dealing with the economy.

Since that time, of course, we have had no fewer than six—some would argue even more—different prices and incomes policies. It is not true to say, as many commentators do, that incomes policies have been tried and found wanting. What is true is that incomes policies have not been properly tried on a sustained and continuous basis. Incomes policies have been undermined by the process of chopping and changing in between short-term policies and by the inevitable bursting of the dam after every individual incomes policy has been abolished.

I believe that an increasing number of people recognise that no incomes policy can be effective if the general mood in the country is that it will not last, or that the Opposition of the day are committed to abolishing it, or that the Government of the day simply see the policy as a one or two-year crisis measure. We are asking for real thought to be given now to the kind of mechanism and machinery that might make a prices and incomes policy acceptable and effective in the country at large.

My first point is that many of our more successful competitors have used different forms of incomes policy as part of their natural way of life. If we look at the OECD countries which have been more successful than we have and if we look at countries whose economies can stand comparison with ours, such as West Germany, or at others which are rather different, such as the economies of Sweden, Norway and Austria, we find many different examples of pay policy. Some have a statutory element, and others have a non-statutory element. All those policies, however, demonstrate the common acceptance that the Government of the day require such a policy in their armoury, and all those policies have succeeded.

There is no one magic formula, however. I and my colleagues in this debate are not bringing forward to the House, or suggesting, a magic formula that is a cut above any other that might be suggested from any other quarter. We are anxious to propel forward the acceptance of an incomes policy as a principle. That is why I say at the beginning that I believe that the Government amendment, which says this House believes that a lasting cure for inflation and unemployment is best secured by policies designed to control public spending, borrowing and the money supply, whilst providing a realistic and equitable framework of taxation". is not an alternative to an incomes policy.

If one believes in an incomes policy, that does not mean that one does not believe in controlling public spending, that one does not believe in keeping adequate control over borrowing and the money supply or that one does not believe in a realistic and equitable framework of taxation.

The Government's extraordinary doctrinaire and dogmatic approach is amply represented tonight in the person of the Chief Secretary to the Treasury. That approach is that the whole of economic policy can be summed up in the Government amendment, and that that is all that is needed to put the country to rights. That approach indicates that all that is needed is control over the money supply, together with the associated practices which we believe are so wrong.

Mr. John Bruce-Gardyne (Knutsford)

The right hon. Member is arguing that the other items suggested in the Government's amendment are also desirable with an incomes policy. Will he tell us how he proposes to achieve the degree of acceptance by the trade union movement, which is, presumably, needed to make his policy work, without a commitment to substantial expansion in public expenditure, which is totally counterproductive in terms of incomes policy?

Mr. Steel

I have taken the hon. Member's argument on board and I shall come to my proposals for dealing with these matters later in my speech. I believe that an effective incomes policy would enable money supply control to be less disastrously rigid. The Government are now widely believed to be running too tight a monetary policy, which adds to the over-valuation of the pound and involves excessively high interest rates.

We are not suggesting that monetary control, as a principle, should be abandoned. On the contrary, I remind the House of what was said by the last Labour Chancellor of the Exchequer during the period of the Lib-Lab pact when we supported both an incomes policy and monetary control. He said The rate of inflation is falling fast … 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 Govern- ment. But far the most important single factor has been the co-operation of trade unions and employers alike in adhering to senisble guidelines for pay policy."—[Official Report, 13 February 1978; Vol. 944, c. 46–47.] It is undeniable, in retrospect, that the most effective counter-inflation period of government in recent years was the period of the Lib-Lab agreement. I see the hon. Member for Knutsford (Mr. Bruce-Gardyne shaking his head, so let me remind him since, fortunately, he was not in the House at the time, that during that 18-month period inflation came down from 20 to 8 per cent. His Government have been responsible for reversing those figures. What halcyon days those were. People were able to get mortgages at 8½ per cent, and to borrow money for industry at 7 per cent. That was the true state of the economy, and it was done not by reliance on one dogmatic economic theory but by a whole range of economic measures, including incomes policy.

That record is in great contrast to the past year of growing unemployment, growing inflation and growing despair. My criticism of the Prime Minister and of the Secretary of State for Industry is that the two of them believe that one can hector and lecture the country into accepting their 1930-style economic theories. All the evidence shows that the medicine that they are making us swallow is threatening to kill the patient. The appeal from this House must be for them to alter course.

It can be argued in part that the Government are already beginning—although they do not like the phrase—to consider something of a pay policy. Are they not to intervene in the recommendations of the Top Salaries Review Body? Are they not likely to intervene on the question of Members' salaries? A few weeks ago I met a deputation of teachers from my constituency. The Scottish teachers are currently engaging in industrial action in pursuit of a pay claim, having been offered about 14 per cent. I am not saying that the deputation represented the official view of the teachers union, because I have not discussed it with the union, but they constituted an ordinary representative group of one section of the community in the public sector that is being told that 14 per cent. is the limit.

That deputation told me that it accepted that the present rate of inflation was around 21 per cent., and it was not even asking to be compensated for that. These rank and file teachers said that they would be prepared to accept, say, 18 per cent. if that would help to gear down inflation, and provided that a fair policy of that kind was being applied to everyone. But it is not. The Government are trying to screw down every group of workers whom they can tackle directly in the public sector but without the overall context of fairness within which such a policy might be acceptable. That is why I believe that an overall incomes policy is a more honest and straightforward approach.

I note that the policy is gaining acceptance. There was a notable speech from the right hon. and learned Member for Hexham (Mr. Rippon) last week. We heard from the hon. Member for Sidcup (Mr. Heath). The statement from the Conservative side of the House with which I most agreed was in an article on 5 February 1979 just before the last election. It said: What is needed is a consensus that Britain needs some kind of pay policy until its inherently inflationary collective bargaining system is replaced by something better—and there needs to be a consensus about what that should be too. Free collective bargaining is a euphemism for spiralling inflation and mass unemployment. What an accurate forecast that has turned out to be. It is the militants' passport to huge wage increases which, in the end, impoverish even the people who receive them. They have become a virility symbol of the trade union movement. As a result they have stymied the living standards of trade union members. That was written by a member of the present Cabinet, the Minister of Agriculture, Fisheries and Food, and I wonder how he, looking at his forecast of "spiralling inflation and mass unemployment" can sit happily in on the present Cabinet debates on pay policy.

Mr. Norman Atkinson (Tottenham)

The right hon. Gentleman is making a series of serious charges against trade unionists. On what evidence does he base his allegations that wages are currently too high and therefore need restraining? Secondly, on what evidence is he saying that wages are responsible for inflation?

Mr. Steel

The hon. Member is falling again into the trap—this is what the Tribune group has in common with the Right wing of the Tory Party—of believing that there is one root cause of inflation. I believe that there is a series of causes. Spiralling and competing wage demands are certainly one.

One of the hon. Gentleman's trade union colleagues, Mr. Sidney Weighell, general secretary of the NUR, in a speech opening his conference the other day, was reported in The Guardian as saying: Support for a planned approach to incomes is growing in all parts, and at all levels, of the Labour Party. Looking around me at the Labour Benches, all I can say is "You could have fooled me". I understand that there is to be no support for this motion from the Opposition Front Bench, although a few brave spirits on the Labour Benches will no doubt intervene. I hope that they will.

That view is not confined to Mr. Weighell. At the end of March this year the Leader of the Opposition said that if Britain was to recover from its present depressed condition an incomes policy was essential. Even so, we are not to have a speech from the Opposition Front Bench tonight in support of the motion. As for the brave stalwarts of the Social Democrats, the right hon. Member for Stockton (Mr. Rodgers) is on record earlier this year as saying: Labour's willingness to put to the electorate an effective policy for pay, prices and productivity, would soon become a test of the Party's credibility". Where is that credibility tonight? The right hon. Gentleman is not with us, I am afraid, to add to the discussion.

The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) filled an entire page of The Guardian on the merits of incomes policy, but when we come to debate it in the House, when the opportunity is provided by the selfless generosity of the Liberal Party, where are the troops who will support the motion?

Mr. Eric Ogden (Liverpool, West Derby)

The right hon. Gentleman is complaining about those who are not here and many are not, but he is not supported by 100 per cent. of his party.

Mr. Steel

I invite the hon. Gentleman to test that claim by looking at the Division lists. Not even I expect a 100 per cent. audience from my party on every occasion. Perhaps the leaders of other parties are used to that sort of thing.

The charge against the Government is that they are simply not prepared to consider this subject, that they are blind and deaf to it. I turn to what ought to be the broad outline of the policy. This does not claim to be a sacrosanct blueprint.

The first requirement is for someone to monitor price increases. The Conservatives, not Labour, established the Price Commission and, sadly, it was a Conservative Government who abolished it. There is plenty of room for argument about what the powers of the body ought to be and whether it had grown too bureaucratic at the end of its life, but there is no doubt that it is generally accepted that some monitoring of price increases is essential as the price that one pays for assent to an incomes policy. I think that that is a general point of agreement.

Secondly, there must be some national forum within which trade unions, employers, the Government, chambers of commerce, and perhaps the academics, can discuss and assess the nature of the economy and the guidelines that should be established for the general movement in wages. The Chief Secretary looks askance at that suggestion. He thinks that it comes from some radical quarter. Let me quote from the blue document "The Right Approach to the Economy", published in October 1977, in which the Conservative Party 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. This is one of the reasons why some kind of forum is desirable, where the major participants in the economy can sit down calmly together to consider the implications—for prosperity as well as for unemployment and paybargaining—of the Government's fiscal and monetary policies. My source is a good and authentic Conservative Party document. [Interruption.] I invite hon. Members to participate in the debate instead of interrupting constantly.

My third point is that some specialist body—whether it be called the Prices and Incomes Board, the Pay Board, or whatever name that has been used in the past—is required to gain national acceptance of the idea of experts adjudicating in special cases, hard cases and special pleading. The old Prices and Incomes Board under Mr. Aubrey Jones, after many years of work, had just gained national acceptance, authority and expertise, when it was suddenly abolished.

I make my fourth point rather more tentatively because I am not 100 per cent. convinced that it will easily be achieved. It is desirable to enter into discussions with employers and trade unions about a move towards a synchronised pay day. That would help to prevent the process that we see in every wage round when each wage claim has to be topped by the next. If we were able to synchronise company accounting and wage levels on the same day, there would be a greater chance of controlling inflationary pay claims.

My fifth point is one that has not been included in past incomes policies but which my Party thinks is essential. The development of profit sharing and genuine productivity bargaining within pay policy should be encouraged. Nobody should be told by the Government that the maximum that he can earn in any one year is X per cent. but that that is the guideline that the country as a whole can afford. If a company is able to demonstrate that its productivity and profits have increased through the efforts of the company and the work force, those improvements should be shared among those who have contributed to those earnings over and above the agreed guidelines. If that were commonly accepted, and if the modest profit sharing scheme introduced during the Lib-Lab period—which the Government expanded in the Budget—were to be developed as part of an incomes policy, that would answer the criticism from those who say "Why should we restrain wages if it simply means higher profits for the company?" Those higher profits should be distributed, in part, to the work force. If we were to marry the traditional attitude of my party on profit sharing to an incomes policy, the result would be a policy that not only restrained incomes but positively encouraged higher production, higher efficiency, higher productivity and just rewards for those who helped to achieve them.

My last point relates to the vexed question of penalties. All Governments have faced this problem. How do we enforce a policy? Can we send people to gaol? The Liberal Party has toyed with the idea and advocated that there should be tax penalties for those who break the policy. In a recent conversation, Mr. Aubrey Jones—whose name I mention because he is a recent recruit to the Liberal Party and a considerable expert in this area—he took the view that penalties were not the most important element in the policy. He said that if we rely on penalties it means that the policy has not been accepted.

The whole point of an incomes policy is that it should be generally accepted as fair and should gain general consent and support. For that reason I suggest that the Government should examine not a penalty system but an incentive system. They have the mechanism to hand, because they are maintaining the 3½ per cent. national insurance surcharge on the employers' contribution. There is no reason why they could not frame a policy that said that all companies that maintain the Government's pay policy and remain within the guidelines—unless they were indulging in profit sharing and productivity schemes—should receive a rebate on the national insurance surcharge. Why should there not be a carrot to maintain the policy, instead of a big stick?

Mr. Nick Budgen (Wolverhampton, South-West)

Would the right hon. Gentleman also be in favour of the continuing and progressive twist that the previous Labour Government gave to a pay policy, by which they made the adherence to a pay policy a condition of the granting of Government contracts?

Mr. Steel

If the hon Gentleman's memory is correct, he will remember that we regarded that policy as an illiberal and unsatisfactory way of getting round the lack of acceptance by the previous Government of the need for a formal pay policy which rested on more than a bilateral agreement between the Government and the trade unions. I recognise that that was a spatchcock policy that could not last and did not last. It broke down in the winter of discontent. We did not believe that backstairs arm-twisting was the way to make the policy effective. We thought that it should be more open, and planned in one of the ways that we are now suggesting.

I believe that this is an issue to which the House will return again and again over the next few years. Increasingly the country is rebelling against the economic policy of the Government which, in a sentence, is that the law of the jungle should prevail. The country is totally opposed to that philosophy.

7.38 pm

The Chief Secretary to the Treasury (Mr. John Biffen)

I beg to move, to leave out from "That" to the end of the question and to add instead thereof: 'this House believes that a lasting cure for inflation and unemployment is best secured by policies designed to control public spending, borrowing and the money supply, whilst providing a realistic and equitable framework of taxation.'. The debate on the motion of the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) started rather late. As a veteran of prices and incomes policy discussions I know that life can be wearisome for Back Benchers in these circumstances. I wish to say at the outset that, although I have been given the privilege of replying for the Government, I hope that it will not be thought a discourtesy to the House—but rather that I remain a paid-up member of the Back Benchers union—if I content myself with five minutes.

The right hon. Gentleman deserves the good will of the House for having chosen this topic. As he said, we shall return to it again and again. I have absolutely no doubt about that, because we have lived with this subject, man and boy, since I have been in this place. I think of the hon. Member for Tottenham (Mr. Atkinson) as a distinguished contributor during the 1960s and 1970s. It is as old a subject as the fairground trick of trying to persuade people that there is an easy way to spot the three card trick. At the heart of the seductions of the policy elaborated by the leader of the Liberal Party lies the belief that somehow one can work one's way out of difficult positions by painless remedies.

The right hon. Gentleman did us the courtesy of providing a trailer of his speech. It is an innovation that I heartily recommend to many others. He did so in the Spectator newspaper. Therefore, I was able to be reasonably equipped for the arguments that he advanced this evening. They were advanced in a charming fashion, as we would expect from the right hon. Gentleman. However, somehow or other, despite his pleasant and relaxed manner, I felt that I was being introduced to old friends. There was nothing that much different in his speech. I suppose that after a while in this place one loses one's thirst for innovation. That is why I was reasonably content as I heard him develop his argument.

There are four major factors to the incomes policy that is being commended to the House. I am sure that the right hon. Gentleman will allow me to quote from his article in the Spectator a week ago under the rubric: Roy is ahead of his time". The first factor is a forum of discussion between Government, the TUC, the CBI, chambers of commerce and academic experts—that is to say, a Professor Clegg with a pocket calculator that works. That should establish the limits to going rates of increase.

Secondly, there should be a specialist body, such as the old Prices and Incomes Board, to which the claims of special cases could be referred.

Thirdly, there should be a formula for flexibility in allowing the maximum of productivity bargaining and profit share-out above nationally agreed norms.

We then come to the novelty—it is nice to have novelty in this situation—which was the move to a "synchro-pay-day" when all wages are annually reviewed—the centraliser's dream. The only problem is that if one gets it wrong, one gets it monumentally wrong.

That is the policy. The right hon. Gentleman is perfectly correct in saying that he has argued it consistently over a period—I do not quarrel with that—but if we are to take this subject seriously we must recognise the essential ingredients —the real hallmark—of an incomes policy as opposed to an incomes noise. I shall tell the House what the essential features are. They are that a public authority should have the ability to identify, to select and to enforce the differential movement of incomes throughout the economy. That is what incomes policy is all about. Anything other than that may be dressed up as incomes policy, because it is a rather nice sort of mother image word, which, broadly speaking, is politically popular so long as one does not have to experience all the implications and consequences. However, the real thing has those essential ingredients.

I argue that because, like most hon. Members, I have lived through it at one stage or another.

Mr. David Steel

The right hon. Gentleman voted for it.

Mr. Biffen

It is interesting that the right hon. Gentleman, who is a man of great skill, has not done overmuch homework. It so happens that I have not voted for it, but I do not want to engage in small debating points. It is perfectly true that this is a policy that at one time or another has commended itself to successive parties. That is the point that I make, and I do not deny it for a moment.

Mr. David Winnick (Walsall, North)

Is the right hon. Gentleman saying that the Government rule out any possibility of a formal prices or incomes policy, wage restraint or wage freeze during the lifetime of this Parliament? Bearing in mind the right hon. Gentleman's views, which are well known, would he consider it a resigning matter if such a policy were introduced?

Mr. Biffen

If the hon. Gentleman cannot draw his conclusions from what I have said up to now—I do not think that I have been over-subtle—there is not too much that I can add. However, I shall bear in mind his suggestion that occasionally one's career is seasoned by the odd resignation.

Mr. Dan Jones (Burnley)

What the right hon. Gentleman cannot possibly challenge is the fact that the prices and incomes policy that we followed, with the assistance of the Liberal Party, brought inflation down to 7½ per cent. There is no doubting that.

Mr. Biffen

Other hon. Members will be anxious to reply to that point, and I do not want to anticipate other argments. I do not want to pilot a path that will become so well trodden as to be absolutely subterranean. It was the strictures and disciplines of the IMF, and the movement in the monetary aggregate, which had a major impact upon incomes. My recollection is not merely of the fall in the rate of income increases during the period referred to by the hon. Gentleman but the absolute disaster in social and economic terms that attended the conclusion of that exercise.

Such a policy, in the terms that I have described, necessitates sanctions and economic value judgments and, ultimately, an authority that I believe must reside in Parliament. It is in that Context—

Mr. Cyril Smith (Rochdale)

rose—

Mr. Biffen

Perhaps the hon. Gentleman will forgive me, but I have been reasonably generous to the House.

The first question is how the movement of incomes would be identified and reported in the scheme proposed by the right hon. Gentleman. I have no doubt that there would be arrangements for that. But let us be quite clear that there would literally have to be a comprehensive and universal system of companies reporting their income movements. I believe that that will need the authority of law, because I do not see how it can be undertaken otherwise.

We know that the actual investigation will be undertaken by the Prices and Incomes Board. Therefore, we are on very familiar territory. We then come to what has always been the most delicate of all issues—the sanctions that will be taken when companies and their employees decide to disregard the superior wisdoms of the CBI, the TUC, the chambers of commerce and the learned professors.

We have heard this evening that it would not be the old-fashioned form of sanctions but rather a form of tax penalty. I find that particularly compelling, because, although I have never been steeped in the history of the Liberal Party by personal experience, I can vividly remember reading of the great difficulties that were encountered by the authorities when it was attempted to impose education in the first decade of this century, with a Church backing that was resented by many Nonconformists who subsequently withheld their rates as a form of protest. The belief that one can secure compliance by work force or employers through financial sanctions in an area as sensitive as the remuneration struck between employers and work people is, I believe, a most dangerous delusion.

Therefore, the route that is being traced by the leader of the Liberal Party is destined to be an obtrusive extension of unenforceable Government responsibility, and voluntary exhortation will slide into statutory and mandatory requirements. The scene is then set for a demand for greater powers. To some extent, they have already been anticipated by the leader of the Liberal Party, because although the motion refers to an incomes policy, he said "And, by the way, it is also a prices policy". He argued on the radio that in order for there to be an incomes policy there must be a prices policy. I know that I am merely reinforcing what he said. The hon. Member for Rochdale (Mr. Smith) may have some misgivings about his right hon. Friend, but it should not distress him too much that I reinforce the remarks of the leader of the Liberal Party.

Mr. Cyril Smith

I have more misgivings about the Chief Secretary to the Treasury than I have about my right hon. Friend. Perhaps the Chief Secretary will answer a simple question. He, the Chancellor of the Exchequer, the Prime Minister and the Secretary of State for Industry are now stomping the country telling everyone that unless wage increases in the coming year are only 50 per cent. of the level of last year—between 5 per cent. and 10 per cent.—the Government cannot control inflation.—[HON. MEMBERS "No."] If that is so, and if they are not able to keep wage increases at the level that they seek, what do they propose to do about it?

Mr. Biffen

I share with the leader of the Liberal Party the strictures of the hon. Member for Rochdale. Indeed, I would not wish to be apart from the leader of the Liberal Party in that sense. I say to the hon. Member for Rochdale that I have never made arguments remotely similar to those that he suggests, and it is not my job here to answer tawdry McCarthyism. I shall not have arguments put in my mouth and then be asked to defend them.

The issue is beyond that of incomes. It covers prices and dividends. The CBI said that the 12-month experience of profit and price control after August 1977 cost £130 million. I believe that profit levels in this country are already sufficiently attenuated without being exposed to further politicisation. That is what would happen if they were subject to the proposals of the leader of the Liberal Party.

There are three predictable consequences to the policies that have been elaborated this evening. First, the crime will be visibility. Given the army of price and income controllers, with all their sophistication, there will be a rush to the undergrowth of the black economy, where people will be unseen and undetectable. Secondly, the criteria that will be applied will inevitably be adjusted to favour income redistribution. That has happened every time there has been strict State control of incomes. An attempt artificially to increase lower incomes in order to narrow differentials will create additional unemployment. Thirdly, the policy will end in industrial conflict.

I am wholly unashamed in quoting the Leader of the Opposition and to make cause with him in his analysis, when he said, on 15 February 1974: As the country now knows, fixing wages by law means tension, unfairness, evasion and strikes. I appreciate that genuine anxieties have prompted the motion. The fact that I contest an argument doesn't in any sense mean that I contest the good faith with which it has been put forward. When this House can entertain debates on their merits, without becoming involved in personalities, it will have taken one step forward, and it will be the true mirror of the nation, as it should be.

I do not believe that even in the golden age of the Lib-Lab pact it was possible to secure proof against rising unemployment. Between March 1977 and August 1978 the figures rose by 60,000, seasonally adjusted, and by 225,000 in actual numbers. From our experience, there is nothing to suggest that this is a policy that can deal with inflation or unemployment. It deals with income distribution and the capacity of politics to intrude into every area of the economy.

We have before us a motion that invites a gigantic expansion in the economic role of government, a potentially dangerous flirtation with corporatism, and a most illiberal attempt to secure centralised control of the economy.

The amendment in the name of the Prime Minister, my right hon. Friends and myself is a stark amendment. I do not deny that. It sets out the policies that we believe are appropriate to our present economic circumstances if the central objective is a reduction in the rate of inflation. It seeks to control public spending, with a commitment to stabilise public spendng over the lifetime of this Parliament, or possibly to get a modest reduction. It contains a commitment to reduce borrowing and to reduce the growth of sterling M3. It seeks to provide tax policies on spending rather than earning, and to reduce taxation on capital.

Mr. David Penhaligon (Truro)

Will the Chief Secretary indicate what he believes would be the current level of inflation if the Government had not pursued these policies so brilliantly over the last 12 months?

Mr. Biffen

I have no reason to believe that the present rate of inflation is other than mainly determined by the expansion in the money supply two years ago.

Mr. John Grant (Islington, Central)

Sheer dishonesty.

Mr. Biffen

The hon. Gentleman says "Sheer dishonesty". It is easy to pass those moral strictures across the Dispatch Box. But I have accepted that analysis many times. I may be mistaken, but I am not dishonest.

Mr. Grant

In that case, when I asked the Secretary of State for Employment for an estimate of the various factors that had contributed to the rate of inflation over the last 12 months—a question that was passed to the Chief Secretary for answer—why did not the Chief Secretary give me those estimates? He said that he could not give them. That does not square with what he has just said.

Mr. Biffen

I think that it squares entirely with what I said. If the hon. Gentleman is asking whether we can relate, with a degree of mechanical precision, the expansion in the money supply and the consequential increase in prices, the answer is "No". If he is asking what is the major determinant in the rate of inflation, the answer is that it is money supply, and there is a time lag of approximately two years.

Mr. David Steel

Is the Chief Secretary seriously telling the House that he believes that the income increases that have taken place over the last 12 months have not been a contributing factor to the rise in inflation?

Mr. Biffen

Broadly speaking, yes. The right hon. Gentleman clearly believes in the Wilsonian adage that one man's pay increase is another man's price increase. Over the past couple of years we have moved on a little from that rather simple analysis.

Mr. Ogden

rose—

Mr Biffen

I have already given way several times and I have been on my feet for practically half an hour. There are many other hon. Members who wish to take part in the debate. I should have thought that I had given enough hostages to fortune without giving way yet again.

Some hon. Members seem to be quite certain that there is nothing in this monetary analysis, but it is supported by many in the highest positions inside and outside the Government. It may be a mistaken view, but it is not an eccentricity.

I want to tell my hon. Friends that the great problem is the transitional period before which these policies can be seen to be truly effective. I am, I suppose, almost the last person to be the great apostle of dawn. If I have been prepared to call myself the Jeremiah in any Administration—in the belief that there ought always to be a statutory Jeremiah—I am perhaps now speaking out of turn, but I want to say this to my hon. Friends—[Interruption.] Of course. I am addressing the whole House. but there have surely been times when Opposition spokesmen have felt it necessary to talk to their hon. Friends.

I will tell Opposition Members the good news; I will not keep it simply for my hon. Friends. There are very wel- come harbingers, namely, in the movement in the raw material prices index and in the index of industrial wholesale prices, which indicate that the index of retail prices will be falling during the second half of this year. I make those points in asserting that this policy can succeed, that it will succeed, and that there are signs of its impending success.

I say to the House—and particularly to the hon. Member for Burnley (Mr. Jones), who at the end may come with us into the Lobby—that the social market economy, with its emphasis on monetary discipline and a better ordering of Government spending and taxation, offers a better choice than the sterile world of State regulation of prices and wages. The latter is a policy that is now endorsed by the Liberal Party but is in total contrast to what we have sought to present to the House. Our policy reflects a commitment to freedom and economic reality—principles, unhappily, deserted by the present Liberal Party.

8.2 pm

Mr. Norman Atkinson (Tottenham)

The House shoud recognise that this is not such an innocent occasion as it might appear to be. There is great significance in the fact that there are many hon. Members missing, in the fact that no one from the Labour Front Bench is to participate, that there is no amendment on the Order Paper representing a trade union or Labour view, and that the general advice given to Labour Members was to leave the Chamber, to leave the House of Commons, and not to participate in the debate. The general advice was to get as far from this place as possible to-night.

I suspect that similar advice has been given to many Conservative Members, because there is a division of opinion on each side, and there is ample evidence to demonstrate that. We now know about some of the things that are happening and why they are happening. Perhaps I may be permitted to let two or three small kittens out of the bag in referring to what is happening right now in the political arena.

I want to talk about the CBI as well as the Labour movement. I want to talk about some of the negotiations which I understand have taken place between the leader of the Liberal Party and a certain Roy Jenkins, who at the moment is domiciled in Europe but is shortly to return to the British political arena. This is what the debate is about at the moment and I shall explain shortly how events are likely to develop.

There is a difference of opinion in the Shadow Cabinet. The fact that this is a Supply day has posed a number of difficulties for those in the leadership of the Labour Party. That is clearly demonstrated at the moment. In the Shadow Cabinet there is an opinion represented by people who have become known euphemistically as the "Gang of Three". It is a new and young movement called "ROW". It stands, I gather, for Rodgers, Owen and Williams.

Mr. Ogden

Good brotherly stuff.

Mr. Atkinson

I make no comment about it. Of course, there are discussions taking place among friends on each side of the argument. What we have at the moment is the embryonic Social Democratic movement, of which no doubt the Liberal Party would like to assume the leadership, augmented by disssidents from the Labour movement. These people are hoping to find a popular programme on which to base the formation of such a party.

It involves ideas such as an extended industrial policy, based on co-partnership and the Bullock recommendations.

Mr. Richard Wainwright (Colne Valley)

No.

Mr. Atkinson

The hon. Gentleman may say "No", but those are some of the things that these people have been talking about. Co-partnership is one of them.

The leader of the Liberal party has just mentioned it. He puts that in his package. But part of the co-partnership argument is related to Bullock, because it is linked with the whole business of what is called an incomes policy. One is not possible without the other in the terms set down by the Liberal Party.

Linked with that is the argument among leading members of the CBI who are now wondering whether, together with certain people in the TUC, they should make a joint approach to the Government for some discussion to take place on the need to control—presumably voluntarily—incomes in this country. People in the CBI believe that that would probably be a far less damaging way of reducing the level of wage increases facing us in the near future.

They also believe—I think that they have been conned into believing it—that they can save some jobs which are now perilously poised at some point at which factories or sections of industry may go under. I believe that they are wrong in thinking that anything can be saved by crude wage restraint of the kind talked about in this context, and certainly by the CBI.

I should like to warn the House about one of the insidious things that these people will be suggesting. I hope that the Labour Party will take cognisance of it. It is now being suggested that there should be an all-party approach with regard to the setting up of a new Select Committee. The suggestion is that matters should not be left to the present Select Committee that is dealing with Treasury matters but that another all-party Select Committee should be set up to study the question of wage policy. The idea is that that Select Committee could then present to the House an all-party recommendation which would get the Government out of their present difficulty. It would, it is thought, be able to put before the House some serious and cogent arguments for introducing a wage policy.

Obviously the U-turn is horrendous. The Chief Secretary to the Treasury has already demonstrated that he is horrified at the vision of having to gyrate in such a physical way. It would obviously cause problems for him if the Conservative Party were to become involved in the incomes policy argument. None the less, the people who have been making these suggestions and having these discussions believe that a new Select Committee could possibly be the method of overcoming the present problems.

The stream of opinion on the Opposition side of the House is a demand for a statutory prices policy. I and others believe that there is no necessity to do other than control prices. Once prices are controlled, there are means by which the economy can be managed and within which wages can be voluntarily or freely negotiated. Free bargaining can take place within the constraints of price control. But there is no purpose in attempting to squeeze the whole process of wage bargaining from either end.

In a mixed economy of the kind that we have, it eliminates some of the worst excesses and weaknesses of a statutory incomes policy because it includes the public sector. Therefore, it is possible to talk about resource restraint for the public sector in line with price control for the private sector. If wages are bargained in that way, we can get a degree of equity right across the board and redistribute income in a fairer way than by trying to control incomes and wage bargaining generally. There is a great deal of support for such ideas, and I should not be surprised if they were to appear before too long.

We now know enough about inflation to know its cause. The computer has given us the ability to analyse in precise terms the contributory factors that have led to inflationary trends. We now know the root causes of the inflation of the past 12 months. It is not, as the right hon. Gentleman suggested to do with the money supply.

We now know that works accountants are putting together pricing strategies for their employers covering the next three years. They are analysing what they anticipate unit costs will be over that period. Therefore, they are now working on pricing strategies three years ahead. They have to do that to get sense into industrial structures and so on.

It is now agreed among leading economists that the policies pursued by the Government—particularly taxation policies, VAT and the rest—have largely contributed to the 20 per cent. increase in the prices index to which reference has been made. Of the increase in the price index over the past 12 months, 11 per cent. has come directly from Government policies. Our imports of oil and basic materials are responsible for no less than 4 per cent. of the increase during the past 12 months. That leaves 5 per cent. of the 20 per cent. attributable to wage increases. Those wage rises will mean much more next year.

As I said, works accountants, pricing strategists and analysts are now thinking through the implications of the wage agreements now being made. No doubt the 5 per cent. will increase during the period ahead. But we know what caused the 20 per cent. increase in the prices index during the past 12 months. There is no mystery about it. Therefore, we should look at that.

Mr. Nicholas Baker (Dorset, North)

This is very interesting. The hon. Gentleman is saying that for a proper prices and incomes policy we need only to control prices. How in that scheme would he persuade wage bargainers to negotiate within the price strategy that he would lay down? Secondly, what would be the effect on such a system of increases in prices caused by imports or the prices of goods from abroad?

Mr. Atkinson

Taking the last point first, values across the exchanges are a contributory factor. I do not run away from that.

The brunt of the hon. Gentleman's main point is about wage bargaining generally within price ceilings. All wage bargainers in modern times have knowledge of how far they can push across the table. Even now, irrespective of limits on prices, they know what is happening.

I am sorry that wage bargaining is not more sophisticated than it is. I should like trade unions, as in the United States, to employ a whole battery of economists and lawyers to go into the board room with them so that they knew how far they could squeeze the company and add constructively to its welfare by good wage bargaining. Within a price system of the kind that I have described the redistribution comes from pushing as hard as possible against the price ceiling without weakening the existence of the company. but at the same time paying due regard to the distribution of the gains that could be taken from increased productivity. The redistribution about which I am talking is when the price of the product is known. That applies to most establishments. That is the way in which experienced wage bargainers go about it.

I do not want to get involved in tax differentials—using the tax system to penalise those who break the barrier. It is an impossible situation. It cannot work. Such a system must have an appeals system built into it if anyone is to be taxed for taking a wage increase above the norm. The practicalities are immense. It is a very unfair system. In the absence of statutory provision there is no possibility of an incomes policy succeeding.

Many people recognise that the problem facing politicians today is to know how to take from the system the means whereby welfarism can be developed. The basis of the discussions which would link the Liberal Party with the Social Democrats is finding a way to make this system work and to produce additional welfarism of sizeable amounts. The problem is that the system cannot deliver. The existing orthodox methods of redistributing income or wealth are insufficient to provide the welfarism that the Social Democrats are now talking about. I am a Socialist because I recognise that, without the fundamental transformation that we claim to be necessary in society, it is not possible for this system to deliver the sort of things about which we are talking.

That is why we are seeing these political developments and why this debate is taking place tonight. It coincides with the first opportunity that the Liberal Party has had of having a Supply day. It has caused difficulties on the Opposition side. There are differences to be argued through. I hope that in those areas where the trade unions and the Labour Party come together we shall ultimately find a way of making it possible or of giving confidence in future so that we can overcome the immense problems facing our community.

8.10 pm

Mr. Peter Lloyd (Fareham)

I congratulate the leader of the Liberal Party —the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel)—on tabling this motion. Prices and incomes policies have been the chosen path to destruction of two Governments—one ending in a statutory bang in February 1974 and the other in a voluntary whimper in May 1979. Since then, prices and incomes policies have been spectres in every economic debate in this Parliament. Both the Chief Secretary and the right hon. Member for Roxburgh, Selkirk and Peebles said that they had no doubt that the spectre would return again and again, but I hope that it will be exorcised in this debate.

The Liberal Party believes that wages are the prime engine of inflation. The right hon. Member for Roxburgh, Selkirk and Peebles suggested that that was so. If he thinks differently I shall be glad to give way. But, as that is what he and his party believe, they have no alternative but to seize the weapon with which the Conservative Government committed hara-kiri in 1974. That is a doleful prospect for a party that carries the name "Liberal". The right hon. Gentleman gave no trace, in his wide-ranging and determined speech, of that realisation.

Those on my side of the argument sometimes say that an incomes policy will always contain the seeds of its own destruction. That is not true. An incomes policy can be sustained but only by becoming more rigid and detailed. Any voluntary element would eventually disappear. Such a policy would end in disintegration or in the establishment of a command economy similar to that found in Eastern Europe. Economic, if not political, freedom would be extinguished. The system would be inefficient, because normal market forces would not be able to operate. The black market would provide the only lubrication to turn the wheels. That is not an idle or exaggerated threat. One has only to consider the rise of the black economy in recent periods of price and wage control in the United Kingdom.

Mr. Russell Johnston (Inverness)

I admit that Austria is a smaller country, but surely the consequences the hon. Gentleman so apocalyptically describes of a prices and incomes policy in a mixed economy are not found in Austria.

Mr. Lloyd

Austria's prices and incomes policy does not dominate market forces. The supporters of incomes policies always argue that their policy will be flexible and fair. It may be one or the other, but it cannot be both. Flexibility, in this context, is a euphemism for accommodating market forces and powerful interest groups. Fair, in this context, means overriding them to achieve lower pay settlements in general, and altering differentials and relativities in particular.

What is the point of inventing elaborate or simple incomes policies if they only give market forces free play? The irony is that if, in the interests of fairness or any other objective, a prices and incomes policy overrides market forces, it will prove inefficient and, in addition, will be seen as unfair by those whom it is supposed to benefit. The policy will prevent people from doing what they want to do and from doing what they think it is their right to do. Such a manmade policy would be seen as a far greater tyranny than the undoubted imperfections of the present market system.

The position one adopts in the argument depends on what one believes to be the prime cause of inflation. A few years ago there used to be as many ideas and theories about the causes of inflation as there were bar-room pundits to utter them. One heard a great deal about profiteering manufacturers, until the profits of industry almost disappeared. We heard a new cause this evening from the hon. Member for Tottenham (Mr. Atkinson). He said that inflation was the fault of the cost accountant. That is a new one on me, but I like it. At meetings I still find that there are old ladies who are convinced that decimalisation was the cause of inflation. I should have thought that that would have appealed to the Liberal Party if it were not for the anti-EEC implications, which might upset the hon. Member for Inverness (Mr. Johnston).

Two basic arguments are left, that of wage push, and that of excessive money growth. They are not as far apart as they are often alleged to be. Perhaps an Opposition Member will enlighten me, but I understand that wage-push sophisticates believe that the additional money to finance them will automatically follow not precede the wage increase, and will not arrive beforehand. Published statistics are always rough and ready, but they do not bear out that theory.

I regret that the wage and price outburst of 1974–75 followed the vast monetary expansion of the previous Conservative Government. After the IMF had imposed restrictions under Labour, a drop followed the decrease in monetary growth. The effects in that case may have been concealed by an incomes policy, and that may allow Liberal Members to argue differently, but it is difficult to accept that it is the greediness or determined aggressiveness of wage earners that varies so much each year and that it is that which is responsible for the vast annual differences in inflation. It is easier to believe that it is the money stock, not human nature, that is so volatile.

Mr.Cyril Smith

The hon. Gentleman appears to be arguing that wages play no part in inflation. If so, does he agree with the views expressed by the Prime Minister, the Secretary of State for Industry and the Chancellor of the Exchequer? During the past 14 days they have all pleaded for wage restraint this winter. They have pleaded that wages should not be increased by more than 50 per cent. of the amount agreed last winter. I shall leave the Chief Secretary out of that list, because he evaded the issue when I included him earlier. They have talked in terms of 5 per cent. or 10 per cent. Is the hon. Gentleman saying that that plea is irrelevant, because wages play no part in the inflationary spiral?

Mr. Lloyd

It is irrelevant to inflation, but it is relevant to the number of people who will be employed next winter. The hon. Gentleman must either accept that answer or reject it. Common sense and the figures coincide and show that it is money growth that is the prime engine of inflation. Therefore, the Government are right to embark on this course and to concentrate on money growth. That is one of the few factors which they have completely under their control. I fear that they will be shown to be right. I say "fear", because money growth has been at the top end of the Government's target. That means that inflation in the forseeable future is unlikely to be below 12 or 13 per cent.

There is a major fault in the Government's policy. Their policy is not concentrated exclusively on money. In their first Budget they sought not merely to curb money growth and to cut the PSBR but to reduce the standard rate of income tax. We have been trying to square the circle since then by means of excessively heavy and punitively high interest rates. The Government's mistake was to overestimate the beneficial effects on growth of a cut in the standard rate of income tax. They underestimated the difficulty of cutting public expenditure to pay for it. Some of my hon. Friends used almost to argue that there were neat packages of policies in every Department labelled "wasteful socialist expenditure". They seemed to believe that those packages could be chucked out easily. However, as the debate is on incomes policies, I have no time to argue that point now.

I hope that when my right hon. Friend replies to the debate he will give an assurance that if the public sector borrowing requirement and public spending objectives are not met, or there are signs that they will be exceeded, rather than make interest rates bear the full brunt the Government will consider, and carry through if necessary, a policy of raising direct taxes.

Critics of the monetary policy say that it has no effect on wages until bankruptcy looms and that this price is far too high for the economy to pay. I believe that such people are right to pour scorn when the argument on this side is caricatured by one worker saying to another "I see that M3 was down last month. Let us reduce our wage claims by the same amount." But the critics are wrong in the assumption that employees are greedy and aggressive and have to be restrained, either by law or by some other less open, honest or direct method. I am certain that the high wage claims that we have seen in the last few years are largely defensive and that their intention is to keep those who make them at least up to, and if possible ahead of, the expected rise in prices. But it is not the change in M3, published in the serious newspapers, that will have an effect on wage claims; it is not even the knowledge that the retail price index has gone down—although this is something of which people are easily made aware—it is the fact that prices are seen to be coming down. It is not until that happens that the beneficial effects will be felt in wage claims.

Alas, the problem is that prices are affected after the contraction of jobs and firms. That is when siren voices on this side of the House say "It is all true about long-term monetary policies. One cannot have anything dainty or flexible. What about a freeze in order to minimise the damage done to jobs and firms during the transition?" I hope that my right hon. Friend will make it clear that that would be an unmitigated disaster. Now, as always, is the wrong time to have a freeze. Inevitably, any figure that would gain acceptance would have to be set far too high to be worth having at all, if prices are to come down—as I believe they will—in the second half of this year. The norm would be established by that figure for people who might even have settled for less. Then there will be the adjustments that will have to be made up afterwards.

If the monetary policy is sustained intact through all this, and if the inflation rate falls, Liberal Members will have another opportunity to say "It was not monetary policy at all. Inflation started to come down only when the freeze was introduced." I know that my right hon. Friend the Prime Minister has been very careful not to rule out the freeze. I have always been advised that in politics one should never say "never." I do not believe that is true. I believe that there are times when one should say "never", and this is one of them. Because without doubt—

Mr. Cyril Smith

Will the hon. Member vote against a freeze if it is introduced?

Mr. Lloyd

Certainly I shall.

Mr. Smith

We will remember that.

Mr. Lloyd

So will I. If a freeze were expected later, the effect would be to push up wage demands now and bring about the very situation that we seek to avoid.

Mr. Winnick

When I intervened in the Chief Secretary's speech he said, in effect, that there would be no such wages policy or freeze. Therefore, one would assume that the word "never" has been used tonight by the right hon. Gentleman in giving the Government's views.

Mr. Lloyd

The hon. Member can draw that inference, and the House can draw that inference, but I hope that it will be put more explicitly so that the inference can be drawn outside. If my right hon. Friend the Chief Secretary is able to make that clear tonight he will have done a service for the policy of which he has been such a stalwart defender.

8.33 pm

Mr. Cyril Smith (Rochdale)

We have heard one or two interesting and remarkable speeches and some quite remarkable theories. For example, we heard from the hon. Member for Tottenham (Mr. Atkinson) that all Labour Members had been sent home.

Mr. Dennis Skinner (Bolsover)

No.

Mr. Smith

I am delighted to hear it, but I understand that there are some hon. Members who do not do as they are told and I believe that some have refused to go home.

Mr. Skinner

No one told me.

Mr. Smith

Perhaps they did not know that the hon. Member had come back. Certainly we now know the importance that the official Opposition place on defending the view of the trade union movement in a debate on prices and incomes policy. It is astounding that the party that claims to be the champion of trade unionists, lower-paid workers and the working class generally should make no Front Bench contribution in a debate on a prices and incomes policy. It would at least have been a contribution had a Labour Front Bench spokesman said only that he did not agree with a prices and incomes policy. Not only has the Labour Party decided not to make a contribution: it has told its Members to go home, or to go as far from the House as possible.

The hon. Member for Tottenham expounded another interesting theory—that prices should be controlled but not wages. That theory rests on a responsible trade union movement, as I suspect the hon. Gentleman would agree. I believe that the trade union movement can and would be responsible if it was treated properly. I therefore believe that an incomes policy is possible.

The hon. Member for Fareham (Mr. Lloyd) said that a prices and incomes policy had caused the previous Tory Government to commit hari-kari. That in itself may be a good reason for having one. However, with great respect, the hon. Gentleman missed the point of the speech of my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel). My party seeks a long-term commitment to the future of this country through an incomes policy and not a short-term commitment. The hon. Gentleman's criticism was based on the assumption that we were talking of a stop-start incomes policy, to be introduced and thrown out again as soon as possible. I agree with many of his strictures against such a policy. However, as my right hon. Friend said, it is because there have been stop-start income policies that the problems were created.

The most remarkable speech was made by the Chief Secretary. I am sure that he will not mind my putting him right on a serious point. The right hon. Gentleman got rattled, which is unusual for him. I like him, and I was surprised by his attitude. He got annoyed when it was suggested that he was dishonest. I would not suggest for one minute that he was. However, he said that he had never voted for a prices and incomes policy. I am sure that he will be anxious for the record to be corrected.

Mr. Biffen

I know exactly what the hon. Gentleman is about to say. He is absolutely right, and I apologise.

Mr. Smith

The right hon. Gentleman did so vote in 1973 in a Second Reading debate.

Mr. Biffen

I was put on the Committee, and I caused immense trouble.

Mr. Smith

That proves the right hon. Gentleman's honesty. I have served on Committees with him and can vouch for the trouble that he is capable of causing.

The right hon. Gentleman talked about control of public expenditure as being the major weapon to control inflation. That may be why the Government have so far not been very successful. Perhaps the right hon. Gentleman can tell us how successful the Government have been over the past 15 months in controlling public expenditure. What was the level of public expenditure when they came to office, and what is it now? What does the right hon. Gentleman project as the level in 12 months' time? How does he propose to achieve that projection?

Public expenditure is unlikely to be controlled if the two financial consequences that we envisage still remain. The Government say that the way to control wages is create unemployment so that workers accept lower wage increases in order to retain their jobs.

The hon. Member for Fareham said that the Government were calling for lower wage increases in order to control unemployment and not to control inflation. It appears that unemployment is an important weapon in the Government's armoury for controlling wages. There are those who would argue that that is an incomes policy. It is certainly a policy which is intended to control incomes, though it is not an incomes policy which is acceptable.

I hope that the Chief Secretary will give us specific figures of the cost of keeping people on the dole. If 2 million or 3 million are to be forced on to the dole, what will that mean in terms of public expenditure? As those people will not be paying income tax, what will that level of unemployment mean in terms of reduced revenue for the Government? If the Government are in control of the economy, they should have some idea of how those figures will balance out.

There will be an increase in expenditure on the one hand and a loss of revenue on the other. Perhaps the Chief Secretary will explain how the Government will be able to increase public expenditure—one of the consequences of adding to unemployment—and reduce inflation at the same time.

The Chief Secretary also said that a wages policy would lead to industrial unrest. But that depends on what the policy is. If we had within a wages policy a statutory minimum earnings rule, which my party would not rule out, much of the unrest of the winter of 1978, particularly among hospital workers, would not have taken place. An incomes policy could have reduced industrial unrest.

Mr. David Mellor (Putney)

Does not the hon. Gentleman appreciate that a minimum earnings rule would lead to an erosion of differentials and that, although one could buy off trouble from the lower paid, there would be trouble further up the line?

Mr. Smith

It could lead to a reduction in differentials, but it would not necessarily do so. It depends on the policy and how one goes about a minimum earnings rule. I used that phrase deliberately and did not say a "minimum wages rule".

Mrs. Elaine Kellett-Bowman (Lancaster)

The hon. Gentleman and I share an interest in youth unemployment in the Lancaster area. He is vice-chancellor of Lancaster university. Does he agree that if a minimum wage for a school leaver were set too high the difference between that and the full salary would be compressed and would lead to an abnormally high number of young unemployed?

Mr. Smith

I take that point, but the Liberal Party has always referred to an adult minimum earnings rule.

The implication of the Chief Secretary's claim that incomes policies lead to industrial unrest is that a free economy does not lead to such unrest, but I did not see much evidence of that among the steel workers earlier this year. There was not much evidence either that the threat of unemployment affected their demands for higher wages or weakened their resolve. I believe that the Chief Secretary will have a rude awakening this winter if he believes that his present policy of a free-for-all, creating unemployment as a weapon to control wages—

Mr. Skinner

It is not a free-for-all. Much comment is made, not only here but outside, about Government's lack of intervention and everyone getting what they can in a free-for-all if they are big enough. I do not accept this notion. I hear constantly Tory Ministers, especially Treasury Ministers, saying that in certain areas of the public sector—for instance, the nurses, who have been kept down to 14 per cent.—this is a wages policy. They have a wages policy where they can implement it and get away with it against people who, seemingly, have not enough bargaining power. There should be none of this nonsense that the Government are not interfering. They are interfering all over the place where they can get away with it. The Chief Secretary, who reckons to stand up for the free-for-all, is secretly conniving at keeping down wages where it can be done without anyone challenging him.

Mr. Smith

I am grateful to the hon. Gentleman for that intervention. I agree entirely with the point that he makes.

The Chief Secretary was arguing that there was a free-for-all and that, in that situation, industrial unrest would not occur. If that is his naive belief—I would not challenge him on economics but I would do so on industrial and trade union experience—he is due for some grave shocks during the winter.

Unemployment is a crude weapon. It is an anti-social weapon. In the end, it is not a weapon that works. I quoted the steel industry as an example. There are other examples to show that threats of unemployment do not force workers to go for lower wage increases. There are clear examples to disprove this point. The Government should not imagine that this approach will work during the coming winter. It will not work. If the Government take the view of the hon. Member for Fareham that wages have nothing to do with inflation, their policy may be justified. If they take the view that I take that wages have something to do with prices—I can assure him that in my company they have something to do with prices—and if prices have something to do with inflation, the Minister faces a great shock over wage demands.

Sir Raymond Gower (Barry)

Does not the hon. Gentleman believe that the earnings of people in a particular industry should reflect the ability of that industry to pay the salaries and wages or does he ignore that altogether? Does he not take the view that, in a company of any kind, there must be some relationship between its success and achievement and the wages and salaries that it can pay? This does not obtain in the case of the Government. The Government are in a different state. Where the Government act as employer, they have to act on a different basis.

Mr. Smith

There are certain things that a company needs in order to proceed. I agree with the Government that it has to be able to sell the goods that it produces. It also has to be able to produce the goods. That means that the company has to be able to get skill. It cannot buy skill because there is not enough. There is enough labour, but that is not the same as skill. It cannot buy skill in competition with another firm unless it pays the same wage. If it has to pay the same wage, it has to be able to compete in prices. It has to draw a price for its products that allows it to pay that wage. There is a relationship between wages and prices. Of course, they have an effect on the inflationary spiral.

Mr. Peter Lloyd

The hon. Gentleman talks about the effect that wages have on relative prices. They do not cause inflation which is an across-the-board and continuous decline in the value of money. The hon. Gentleman must make proper distinctions.

Mr. Smith

Perhaps the hon. Gentleman wants to be an academic. To an ordinary working class fellow who earns his living in industry inflation is about having to pay prices which are 20 per cent. more this year than they were last year and receiving wage increases of only 10 per cent. more than they were last year. That is what the man in the street understands about inflation. There might he highfalutin academic tripe expressed, but what matters is what the man in the street thinks. That is relevant to the debate because there cannot be a proper incomes policy, nor can the Government make their free-for-all policies stick, unless the man in the street co-operates.

The man in the street understands that inflation is about prices rising much faster than he can afford. His mortgage and other things cost him more. That is what inflation means to me and the man in the street. The hon. Member for Fare-ham might have highfalutin academic ideas. They are all right for universities but not for the working man and the man in the street.

The present situation cannot continue. Some change must come. Last year I was faced with wage demands from my employees of between 15 and 20 per cent. I had to pay in order to retain labour. Industry is already talking about wage increases far in excess of 10 per cent. Of course, industry would like to persuade the trade union movement to accept wage increases of 10 per cent. or less. But no trade union will accept such an increase when unemployment is increasing, when mortgage rates are rising and when prices are increasing by 15 or 17 per cent. The only way to secure a breakthrough is to seek the co-operation of the trade union movement. That means round-the-table discussions. That is what my right hon. Friend the Member for Roxburgh, Selkirk and Peebles was talking about. He spoke of the possibility of a wages strategy and of getting all interested parties round the table.

Mr. Skinner

What about the Employment Bill?

Mr. Smith

I voted for it.

All these matters must be discussed if the co-operation of the trade unions is to be obtained. That cannot happen by refusing to talk about a wages stategy and saying that it is irrelevant to inflation. It is no use saying "Don't worry boys, we will beat you anyway because we will force up the number of unemployed." A stable society cannot be achieved in that way. In such a way, in the long term, the basis of industry will be destroyed. If inflation is controlled in that way, there will be nothing left to pick up because industry will have been destroyed and will be incapable of pulling itself together and getting back on its feet. It will not be able to give the country what it deserves, and what it could have if there was a proper strategy—a long-term, stable economy on responsible wage bargaining.

8.55 pm

Mr. David Mellor (Putney)

I felt compelled to attend this debate because I sensed that it was bound to provide a somewhat singular experience. So it has, if only for the fact that at one point during the debate—almost an hour ago—there were eight Liberal Members in the Chamber. I cannot think that that has happened before during the lifetime of this Parliament.

One Liberal Member is company and two Liberal Members are certainly a crowd for most of our debates. The leader of the Liberal Party was somewhat foolish in trailing his coat and criticising Opposition Members who were not in their places. I cannot say that I expected that Parliament would revolve round the Liberals, but I have been somewhat surprised at the small contributions that they make to our debates.

Having regard to the way in which this debate has been trailed outside the House, it is no doubt looked upon by the leader of the Liberal Party and his colleagues as a major propaganda coup. No doubt they have been closeted night after night with their latest adherent, Mr. Aubrey Jones, who, sad to say, is a little bit of a "day before the day-before-yesterday's man."

There was the leader of the Liberal Party conferring with Mr. Aubrey Jones and the hon. Member for Colne Valley (Mr. Wainwright)—who I think will be speaking to us soon—who has come back into the breach as spokesman on Treasury matters now that poor old Tigger has gone to the happy hunting ground, courtesy of my hon. Friend the Member for Cornwall, North (Mr. Neale).

I cannot pretend to have been particularly impressed—

Mr. Ogden

Will the hon. Gentleman give way'?

Mr. Mellor

Later on; not now.

Mr. Ogden

Will the hon. Gentleman give way?

Mr. Mellor

No, I am not obliged to give way now and I do not intend to.

As my right hon. Friend the Chief Secretary said, the trouble with the proposals that have been put forward is that they have all been tried before. Sadly, they do not cut very much ice with anyone who looks back over the experience of the past 30 years in this country.

It would be unfortunate, of course, if were to lose the opportunity tonight not simply of considering the motion and the amendment before us, but of looking at the whole of the Liberal economic strategy, since it seems to be that which underlines the campaign that the Liberals are mounting—no doubt in readiness for the next by-election—in order to try to show that they have a viable alternative to Government policy.

If one recalls the last Liberal Party conference one has difficulty in finding any evidence that the arguments advanced by the leader of the Liberal Party and by the Liberal spokesman on economic affairs even got near to convincing their own party members at the conference. They have precious little chance of convincing us.

Perhaps we should examine one or two of the things that were said. Surely the key to the economic management of this country and to giving any future to our citizens is the question of an increasingly prosperous society and economic growth. At their conference last year the Liberals passed a motion saying that: Sustained economic growth as conventionally measured is neither achievable nor desireable. Needless to say, the hon. Member for Colne Valley was not very keen on that proposition and sought to have it amended. He used strong words, saying that it was a reckless and arrogant forecast. He said that such a proposition would mean a far-reaching and unexplained reversal of all our economic policies. He said that it was particularly illiberal. However, the conference was not prevented from passing the motion by a substantial majority.

The hon. Member for Colne Valley, in a speech that he no doubt wished to see as enlightened compared to those made by some of the people with whom he was debating had some criticism to make of another fundamental part of the economic strategy of any sensible Government. That concerned exporters. He said that Governments had been forced to search for economic growth at all costs—processing nuclear rubbish, selling armaments to Shahs and other oppressors and adventurers, and foisting on the Third world prestigious, expensive equipment irrelevant to their needs. Once one cuts through the hot and intemperate descriptions one is left with a condemnation, apparently, of most of the export trades in which we are still capable of being competitive in the modern world. Is that the strategy that they will hawk round the country to the detriment of the Government, if they are given the opportunity? He went on to say Britain has thus resembled one of those families desperately over-stretched on mortgage and hire purchase payments which then advertises in the evening paper ' Must get work. Will take anything.'. Is there anything wrong with some people in this country saying that they must get work and that they will take anything? If a few more people took that attitude we might he happier. It would certainly do something to deal with a situation in London where, notwithstanding the high unemployment rate, there are still hundreds of jobs remaining unfilled in any given area.

In what the hon. Member said later the cat was let out of the bag in respect of so much of this debate and so much of what the Liberal Party says on economic matters. He came to his central thrust on why the conference should not have passed the resolution that it did about economic growth. He said What a burden of defeatist nonsense to put on our future by-election candidates. So there we have the nub of all this. It is not some high-minded approach to the future of this country's economy. Rather it is just something that can be cobbled together to be thrust at whatever constituency has the misfortune to have a by-election in which the Liberals think they have a chance. No wonder they were so unsuccessful at Southend, East when, notwithstanding a farrago of nonsense, coupled with a singularly unpleasent racialist attack upon my hon. Friend the Member for Southend, East (Mr. Taylor), who, apparently, because he was a Scotsman, was unfitted to stand there as a candidate, they finished third. They will have to devise a few better arguments than that.

The hon. Member for Colne Valley will be lecturing us tonight as, no doubt, he lectured his conference. The more one looks at last year's Liberal conference the less can one find anything that went through in the way that the platform would have liked.

Mr. Cyril Smith

Unlike the Tory Party conference.

Mr. Mellor

At least we know what we want to do and we set about trying to do it. The tragedy of the Liberal Party is that what is said is no doubt cobbled together in such a way that it is not even convincing to their followers.

The hon. Member for Colne Valley said that the consistent Liberal long-term aim was carefully continued growth. Here we have an extraordinary proposition, which makes it difficult to take the hon. Gentleman seriously as a sort of shadow Shadow Chancellor of the Exchequer. What an extraordinary way to describe growth! He speaks as though growth is something that some Ministry can conjure out of the air and then carefully control. That leads one to the essence of so much of what the Liberals think about the economy. They do not present a coherent strategy. That last sentiment is a collectivist sentiment and the whole of the policy that is being advanced is a rag bag and mish-mash of ideas drawn from all parts of the political spectrum which as well as being wrong is without the virtue of being consistent.

Of course, we want economic growth, but how can one say, as the Liberals did at their conference last year, that economic growth is not desirable while also saying—they passed a motion to this effect proposed by those wise financial heads in the Young Liberals—that there should be increases in public expenditure? We are being lectured tonight about incomes policy, and yet the Young Liberals proposed a motion that was passed at the conference that everyone in the public sector should be entitled to be compensated for the rise in prices. Are we saying that the norm to which we should be working within this incomes policy will be 20 per cent? What are we being told? Some of my earlier observations caused amusement to the hon. Member for Isle of Ely (Mr. Freud). He did his best to try to argue with the conference. He had to deal with an intriguing motion, which tells us a little about how relevant the Liberals are to the problems of today. They put forward a five-point programme designed to put matters right. It provided for financial inducements for parents to stay at home, a return to village-type life incorporating all age and income groups, more spending on leisure facilities controlled by those who need them, and extended use of schools and community education. The hon. Member said that he thought that that amounted to paying a salary to housewives, and that he would have none of it. However, the conference accepted that programme, once again gratuitously adding to public expenditure in a way that makes it difficult to take its attacks on the Government seriously when we consider its alternatives.

Mr. Clement Freud (Isle of Ely)

I wonder when the hon. Gentleman will come to this year's Liberal conference.

Mr. Mellor

I am talking about the conference of 27 September 1979. I do not know to which conference the hon. Gentleman refers. Reports of the conference appeared in the newspapers, and are readily available in the Library if the hon. Gentleman has forgotten about them. I do not wish to weary the House, but some of these matters should he put on the record so that the public know exactly what they are being sold when there is concentration on a specific point.

One would have thought that the Liberal Party's approach to free enterprise would be a key to the economic recovery of Britain. The conference dealt with a motion on multinational corporations—not favoured by the platform but none the less accepted overwhelmingly by the conference. That motion was extremely intemperate. It referred to multinationals creating and exploiting human suffering and manipulating democratic procedures and national economies. It referred not to companies in South Africa but to operations in England. Mr. Colin Dean came to the rostrum, amidst applause, and said that multinationals had no loyalty to any country, no ethics except their own, no answerability and no masters. Corruption, blackmail, bribery and threats were their business skills. Are those the sentiments of the leader of the Liberal Party about the multinational companies, when we as a country depend upon their investment? I thought that it was worth quoting those matters to show that the somewhat intemperate observations—observations that I thought the right hon. Member would have been only too happy to deny—of an offshore worker in North Sea oil, speaking at the conference, have now apparently become Liberal Party policy.

On this singular occasion when the Liberal Party introduces a motion, it is not enough for them to tell us about prices and incomes policy in terms which, as my right hon. Friend the Chief Secretary to the Treasury so rightly said, have been tried and failed before. We need to know exactly its basis for the constant sniping and jibing at the Government when we are trying to tackle the economic problems of the nation. Unless the Liberal Party can convince its immediate supporters of the wisdom of the totality of its economic package, it has precious little chance of persuading us. I have little doubt that the motion will be voted down tonight.

9.9 pm

Mr. Eric Ogden (Liverpool, West Derby)

The hon. Member for Putney (Mr. Mellor) clearly enjoyed himself this evening, if nobody else did. Of his rather verbose contribution, his misuse of words, I agreed with six words. I listened to them carefully, and he used them twice. He said "This House is being lectured tonight", and that is what he did. I tried to intervene because I wished to be helpful. He is comparatively new. The House can see what time has done to me, and I hope that it does the same to him.

It is not a custom in the House to attack those who cannot defend themselves in this place. We may, by all means, criticise one another, but let Mr. Aubrey Jones be answerable outside. Let former Members who are not able to defend themselves be left out of the argument. [Interruption.] I am offering the hon. Gentleman advice. From time to time he may need help, not from me, but from other hon. Members. However, that has been a useful convention. We hit one another because we can hit back. Those who cannot, be they Officers of the House or anyone else, should be left out of the argument.

Mr. Mellor

rose—

Mr. Ogden

The hon. Gentleman did not give way to me. I shall not give way to him.

There seem to be three versions of what is happening tonight. First, I welcome the decision of the Parliamentary Liberal Party and its leader to introduce this subject. I agree with some of the right hon. Gentleman's arguments and disagree with some of his conclusions. There is still a large gap between us, even larger than the Gangway that separates us.

I came to listen, and I have been tempted to make a contribution. My hon. Friend the Member for Tottenham (Mr. Atkinson) referred to advice to Labour Members. I do not know whether none of my friends are speaking to me, but no one has offered me advice, either to come or to go. Technically I am paired, but I do not know what will come of that later on.

Earlier today the House seemed to be in a particularly stroppy and independent mood, which is not a bad thing. I regret that there is no motion on the Order Paper from the Parliamentary Labour Party. There was ample opportunity to recognise the differences that exist and yet to table a motion that would have commanded the full support of every member of the Parliamentary Labour Party. I regret that that has not been done. I am not criticising my hon. Friend the Member for Gateshead, West (Mr. Horam). I realise that he has a watching brief, and he is the best House-watcher in the business. He is an excellent contributor when he wants to be, but tonight he is doing the job that he was sent to do.

I remind the House of what we are supposed to be debating. We must decide the fate of this motion. We in this House should try to mean what we say and say what we mean. The Liberal motion states: That this House believes that inflation and unemployment cannot be effectively controlled without a prices and incomes policy; and calls on Her Majesty's Government to bring forward proposals for such a policy without delay. The leader of the Liberal Party was euphoric, at least about the benefits that resulted from controlling inflation because of the Lib-Lab pact. If it was so good, and if the effect was so great, why was the right hon. Gentleman so keen to defeat the Labour Government at that time and to spend most of the time since then opposing everything that has been done by the Conservative Government, which the right hon. Gentleman knew would happen? Secondly, there is some confusion in the House about whether the Liberals are calling for a statutory policy or not.

We would be more honest to use the words that were used by the hon. Member for Rochdale (Mr. Smith). I almost said "my hon. Friend", because of the time when he and I were members of the Labour Party in Rochdale. The House should be aware of the things that he had to say about the Liberal Party in those good old days.

Three different voices seemed to be raised from the Conservative Benches. With respect, I think that the Chief Secretary gave us his personal version of what is Government policy. It would seem that if there were any U-turns he would no longer like to remain a member of the Government. However, there seems to be confusion between what he believes and what other Conservative Members believe; otherwise, how can he explain the almost 100 per cent. support for the Government from those Conservative Members who have spoken? It is always dangerous to give 100 per cent. support to one's Government, because when they change their policy one is left standing on a breaking branch.

There is the voice of the Prime Minister, who clearly links wage inflation to prices and jobs. The hon. Member for Fareham (Mr. Lloyd) said that "prices do not affect inflation, but they certainly affect jobs ". Before the next Liberal motion on this subject, perhaps the Tory Party can get together and give us the official version.

Mr. David Steel

The hon. Gentleman asked me two questions: first, why we ended the agreement and, secondly, why we support an incomes policy. The short answer is that if the hon. Gentleman invests in a copy of my book, published this week, price £6.50, he will find the longer answer, which I shall summarise. The lack of a formal incomes policy was one of the reasons, and the breakdown in the agreement between the Government and the trade unions was foreseeable. The hon. Gentleman asked whether the policy would be statutory. It is now widely recognised that any effective incomes policy would have to have some statutory element. Indeed, the Chief Secretary pointed out that the notification of income increases by companies would have to be brought within the statute.

Mr. Ogden

I am grateful to the right hon. Gentleman for giving us more information. I shall certainly agree to buy a copy of the right hon. Gentleman's book if the Prime Minister will allow the free collective bargaining of the House on the next tranche of hon. Members' incomes. The right hon. Member's book may have a scarcity value if nothing else. The Liberal Party's motion calling for a prices and incomes policy, and the Government's amendment to that motion, could fit very well together. The Liberal Party is calling for a policy. The Government—any Government—whether they like it or not, have a policy on prices and incomes, even if that policy is not to have a policy. That sounds a little strange but a prices and incomes policy is inevitable and unavoidable for any Government. Only the Opposition can refuse to have a policy on prices and incomes, because they have not yet decided what it is. The policy of the Conservative Party was to oppose the social contract and to oppose the limited sanctions of the previous Labour Government and they voted for free collective bargaining. The present Conservative Government, elected on the basis of free collective bargaining, lower taxation and less Government intervention, should not now complain that free collective bargaining is not producing the results that they expected. They have a prices and incomes policy, and they should recognise that as a fact.

I am one of that rare species who believed in the social contract, and I still believe in the social contract. More and more people outside are beginning to realise that perhaps it was not too bad. Perhaps we all have a monetarist policy. There is a monetarist policy at 26 Sherbrook Gardens, in Liverpool, and at home. If there is no money in the bank, there is a monetarist policy. A person can borrow money if he can repay it. It is no use going to the bank manager and asking for a loan of 20 per cent. when there is only 5 per cent. there.

We have had free collective bargaining for 12 months or more. I believe that the social contract was better than free collective bargaining for both the weak and the strong. My hon. Friend the Member for Bolsover (Mr. Skinner) may disagree. He is sponsored by the National Union of Mineworkers, and he will remember the NUM conference in Torquay in 1979, when the NUM rejected any further part in the social contract. The conference called for free collective bargaining. The following day, the then Secretary of State for Energy, my right hon. Friend the Member for Bristol, South-East (Mr. Benn) said that the only way in which unemployment was solved before the war was by the use of public money on armaments. We must now find a way of using public money in investment to solve the problems. The only way in which we can do that fairly is through an understanding or an agreement between the trade union movement, the Labour Party and a Labour Government. The aim of the Labour Party and the trade union movement should be to put in power a Government who will listen to the voice of the trade unions and work things out with them. It has not worked out that way. We are all agreed that it is not working out in the way that we hoped last year. There must be a better way, and we have little time left to agree that better way.

Will the right hon. Gentleman, in his five minute peroration, by leave of the House—he forgot to ask about that—clarify the differences between himself, his Prime Minister, and his hon. Friends on the Government Benches who support him?

9.20 pm

Mr. Dennis Skinner (Bolsover)

My hon. Friend the Member for Liverpool, West Derby (Mr. Ogden) is absolutely correct when he says that there is no agreement between members of the Parliamentary Labour Party. In this narrow respect, there is not altogether agreement in the miners' parliamentary group. It may well be that within the Labour Party generally there could hardly be agreement on this question while we are living within the framework of what is loosely called a capitalist society.

But there is a party policy, nevertheless, and the party policy—as distinct from the Parliamentary Labour Party mess or shambles on this question—is quite specific. It threw out the last incomes policy, which was then 5 per cent., way back in 1978, when the Prime Minister at that time—foolishly, in my view—decided to throw away his general election prospects. It is all wrapped up in the decision taken at that time, and it is the same argument that we are discussing today.

The Prime Minister at that time had an opportunity of getting away from the rigours of an incomes policy and wage cutting. That is what it really is. We might as well call a spade a spade. That is what it is all about—to curtail the ability of those who work by hand and brain and create the wealth of this country to get as much money as they possibly can, left to the devices of the market. That is what has been talked about here today and that is why a lot of hon. Members are missing. It is unpleasant and they do not like to talk about it. They would like it to get through on the nod, in the hope that perhaps all the problems could then be solved.

The issue today is really a replay of what went on in 1978, after two years of wage restraint had resulted finally in the break-up and the collapse of the Labour Government. This is well known and rehearsed by many people who supported the 5 per cent. policy at that time. I did not support it. I did not support a 10 per cent. policy either. Many people are now saying that the Prime Minister of the day was wrong to go as low as 5 per cent. They say that if only he had had an airy-fairy 8 or 9 per cent., and called an election in October, the Labour Party would now be in office—and I would still have been in Opposition.

But we are not sitting on the Government Benches, and the opportunity was thrown away because of the attempts by the previous Labour Government to get involved in an incomes policy for the third successive year. I suppose it was about the ninth, tenth or eleventh time that there had been an incomes policy during the course of the past two decades. I have lost count of the number of times.

We are constantly being told by many experts, and particularly by the Liberal Party, which has never been in power and does not know what it is like— [Interruption.] I cannot account for what happened in the nineteenth century. I am more concerned with what has happened since 1932, when I came on the scene.

Mr. David Steel

The hon. Member has not been in power.

Mr. Skinner

I have not personally, no. What I am trying to say is that the Liberal Party, without having power, has always been among those who believe that we would be better with a permanent prices and incomes policy. The Liberals believe that inflation and all the rest of the excesses exist because we have not had such a policy. Since I came here in 1970, there have been more years when there have been incomes policies than years when there have not. There have been statutory incomes policies; there have been semi-statutory incomes policies. The last one was non-statutory and it had a name all of its own. But all these policies are built around the same objective, namely, to cut wages.

I am speaking for the national executive committee of the Labour Party tonight. I do not care whether Labour Members have gone away from the House tonight. It is important that some of us have stayed in order to put the Labour Party point of view in the absence of the Shadow Cabinet's point of view. I know what their problem is. The Shadow Cabinet, or certain members of it—not all of them—were hankering after an incomes policy for most of the last 12 months, until they found that the Prime Minister and others on the Treasury Bench were gradually moving into one. Although they were saying they had not got one and that it was a wages free-for-all, the facts were staring the Shadow Cabinet in the face. The slight nuances coming into the speeches indicated that, after all, the Government were sliding into some kind of Biffen fashioned incomes policy. It has to be fashioned in a strange way if it is to include the Chief Secretary to the Treasury. I can see him disappearing from the end of the Table ere long if the nuances move more in the direction of formulating a fully-fledged incomes policy, because he, like me, would, I hope, argue against a fully fashioned incomes policy on the ground that it cannot work. Not only can it not work, but it cannot include everybody.

Mr. Arthur Lewis (Newham, North-West)

That is the point.

Mr. Skinner

It does not include Members of Parliament.—[Interruption.] Here we go again pleading poverty. The Liberal Party is supposed to be looking after the little man and the first words that the leader of the Liberal Party utters are that it will affect us.

Mr. David Steel

Wait and see.

Mr. Skinner

We are not part of the poverty-stricken masses. We are lucky to be here. That is why we have never been part of the incomes policy brain-wave.

Mr. Steel

Wait and see.

Mr. Skinner

We had a wage increase a couple of weeks ago, and I suppose that the leader of the Liberal Party had his.

Mr. Steel

That is right.

Mr. Skinner

I hope that he will add to that the increase that he might get in the course of the next few weeks.

In all the many times that incomes policies have been attempted, there has been no incomes policy for millions of people throughout the land. How can we impose an incomes policy on an estate agent?

Mr. Steel

Or an autioneer.

Mr. Skinner

Or an auctioneer. Or the many accountants who are added to the thousands of accountants used by people in every succeeding incomes policy to escape from incomes policies. Every time a new type of incomes policy is introduced, another 20,000 accountants have to be hired to find out another 1,001 devices to get round it.

It includes all the lawyers. How can we impose an incomes policy on a lawyer? I suppose that there are plenty of lawyers in here now. [An HON. MEMBER: "Not tonight.") They may not be here tonight as it is not a three-line Whip. How can we put an incomes policy on lawyers and all the people in our so-called professional life? We can extend it ad nauseam. I have no doubt that if the Tory Government, as is possible, introduce an incomes policy ere long, we shall see the Chief Secretary move out of the limelight into another area of the spotlight. When that happens, many more people will escape from the harshness of an incomes policy.

Nearly everybody who works on a building site has found a way round an incomes policy. I do not blame such people, because they are grafting every day, getting up at 6 or 7 o'clock in the morning to do some real work. I can well understand why they have got out of it.

Numbers are added every year. As every incomes policy is introduced, more perks are introduced. Every time we have an incomes policy, another newfangled perk comes on to the scene.

I well remember the first time that I got involved in this argument in 1972 when the right hon. Gentleman was a Back Bencher. The then Tory Government had a policy of £1 plus 4 per cent. The chairman of the Fatstock Marketing Corporation found a way round that. He got some kind of productivity bonus that made him £1 plus 44 per cent., and apparently it was legal. On and on it goes.

How do we impose an incomes policy on the many Members of Parliament and others in the land who have moonlighting jobs? Some hon. Members are moonlighting six or seven times. Some of them are at it tonight.

Mr. David Steel

Most of them are the hon. Gentleman's hon. and learned Friends.

Mr. Skinner

I am not embarrassed when hon. Members point to empty Labour Benches. I am not here to answer for them. That is their business. The moonlighters have shown that millions of opportunities exist for people to escape an incomes policy. There is no such escape for the 250,000 miners. The Government may want to slap an incomes policy on them, but none of them are involved in moonlighting because they are too tired by the time they get home.

It is easy to impose an incomes policy on 250,000 miners. It is also easy to impose an incomes policy on dustbin men, because they are easily identified. In addition, they are nearly always members of trade unions. The same is true of teachers and local authority workers. It is easy for any Government to impose an incomes policy on those who have to bear the brunt of the economic mess that we continually face. That is another reason why I hope that the Chief Secretary will ensure that we do not slide any further into one.

The Chief Secretary should be the last person to argue that we have not got some type of incomes policy now. The nurses have been subjected to one. People in the public sector have not got any bargaining power. They are being subjected to an incomes policy. The Chief Secretary does not like hearing such remarks, but he knows that he is carrying out a policy that subjects certain people to a cut in their wages when inflation is running at 22 per cent.

To some extent, the workers at British Leyland are controlled by the Government's purse strings. They had to settle for between 5 per cent and 10 per cent. this year. They are not causing the inflation that we hear so much about. The same would have been true of the steel workers had they not decided to fight and to get about 20 per cent.

When the new-fangled policy that the Liberal Party so ardently desires is achieved, how will banks be controlled? According to their last annual returns, they made profits of about £1,500 million. What about them? They have made profits because there is a bank rate of 17 per cent. Their profits have nothing to do with the wages of those who create the wealth. How will the Liberal Party control those who have invested in Ladbroke's and in the casino economy? Our manufacturing base is being eroded and decimated. All sectors—textiles, carpets, boots, shoes and so on—are being run down by the Tory Government. However, Ladbroke's and the banks are allowed to make money hand over fist. Ladbroke's increased its profits by 71 per cent. How can its income be controlled? Why should it always be argued that those who are to blame are those who get up early in the morning, go to work and do a real job?

Mr. Arthur Lewis

My hon. Friend need not go so far away. Is he not aware that only a few weeks ago all the noble Lords in the other place attacked workers because they were expensive? Is he aware that those noble Lords are picking up £36 a day tax free? That is worth £125 per day to each and every one of them. However, they said that nurses should not get more than £30 or £40 a week.

Mr. Skinner

Like many Conservative Members, most of those in the other place are not only getting £36 tax free, but are also moonlighting. The chairman of the Tory Party is one of the biggest culprits. We have just heard the leader of the Liberal Party argue that he is in favour of trade unionists going to gaol.

Mr. David Steel

The hon. Gentleman was not here when I spoke.

Mr. Skinner

I have heard the right hon. Gentleman talk about a statutory policy. A statutory policy cannot exist without involving the possibility of sending honest-to-goodness trade unionists down the line if they refuse to comply. That is what it means. This wonderful, free, so-called Liberal Party of ours is in favour of sending people to gaol.

Mr. Steel

Absolute rubbish.

Mr. Skinner

I do not fall for that nonsense, nor do I fall for the nonsense that there is no wealth in our society. I am fed up with hearing year after year that this country is in a mess and that if only people would give a little bit here or there everything would be all right tomorrow.

Mr. Penhaligon

About 15¼ minutes ago the hon. Member said he would tell us what the national executive committee of the Labour Party thought about a pay policy. Is there any chance of his actually getting to that subject?

Mr. Skinner

The hon. Member must be deaf, because at the beginning I said that in 1978 the Labour Party threw out the 5 per cent. pay policy, and it has stood against a pay policy ever since. I shall be one of those on the NEC who will fight to steer clear of any incomes policy. When the Tory Government introduce a fully-fledged incomes policy for everyone my right hon. Friends on the Front Bench will run towards me and the NEC. They will not want to be tarred with the same brush. It has happened before and it will happen again.

The Liberal leader should be told to explain what he means by a statutory policy which results in trade unionists being sent to gaol. I do not fall for the notion that there is no wealth in this country, and that workers must suffer another incomes policy in order to drag the country out of a mess. It has been in a mess every year that I have been involved in politics. All Governments have declared that everything would be all right if only workers would pull up their socks. Yet there is £15,000 billion worth of petroleum revenue tax coming from the North Sea. That wealth should be used to reduce working hours, remove dole queues and increase public spending.

We should get away from the notion that incomes policies will resolve all our problems. There is plenty of wealth in this country, and it should be shared out among those who create it.

9.38 pm

Mr. Richard Wainwright (Colne Valley)

Putting the need for an incomes policy on the Order Paper today has exceeded the greatest hopes of Liberal Members. It has proved to be a magic spell. We have had three hours of House of Commons time, virtually without either Government or official Opposition influence. That is how Parliament should work. It has provided an opportunity for commendably frank and outspoken views to be exchanged between various segments of the official Opposition. Long may they argue their differing cases publicly, honourably and frankly as they have done among themselves tonight. That will be of educative value to British democracy.

The Government have trotted out the only Minister they could—their lone Horatius who alone is untainted from appeals to the British public for wage restraint. We have always given the right hon. Gentleman full marks for the sincerity of his purist, monetarist faith which has only deserted him once—in 1973 when, in a fit of absence of mind, he voted for a prices and incomes policy, for which we hereby forgive him.

The attitude of the Shadow Cabinet has been even more flagrant. Two Trappist monks have in succession taken their lonely place on the official Opposition Front Bench with the sole purpose of keeping Liberal Members off it. I do not know whether the heresy-hunting in the Labour Party has reached the stage where even the tone of voice of certain dissentients, including the hon. Member for Bolsover (Mr. Skinner), has to be reported to the Whips. Save for that, I see no purpose in the presence of the totally silent representatives on the Labour Front Bench.

Although persistent and tenacious as always, the Chief Secretary was a grave disappointment. He did not desert his faith, but he did not enlarge on it, nor did he take the opportunity, which, after all, is what the House of Commons is largely for, to get across to the country what the Government stand for and what they intend to do about inflation. The right hon. Gentleman must have very much on his mind the fact that the country does not appreciate the way in which the Government's policies are supposed to work. One would try in vain to get any accurate idea of the Government's money supply targets from talking to people on the streets of London, yet the Chief Secretary allows tonight's opportunity to educate the public to go unused.

Uncharacteristically, the right hon. Gentleman also failed to take on board the methods of enforcement that my right hon. Friend the leader of the Liberal Party was at pains to propose, namely, working through tax incentives for compliance instead of returning to the stale and somewhat clapped-out policies of penalties for infringing a prices and incomes policy. We suggest a positive method of enforcement, which could almost be designed to appeal to someone with the Chief Secretary's philosophy, and it is disappointing that it excited no comment from him.

I therefore wish to enlarge a little on what the right hon. Gentleman said. The Liberal Party believes that a Conservative Government could retain their credibility if they seized the opportunity to use tax incentives for compliance with a prices and incomes policy. We have suggested rebates on the national insurance surcharge, which would be appropriate for a Conservative Government, as the national insurance surcharge was entirely a Labour measure. It is rightly resented by employers, as it is a tax on jobs. Offering a rebate would alleviate the unemployment that the Government have helped to create. It would be relatively simple, as it is not as an assessed tax but one that has to be met week by week by every employer.

Mr. Norman Atkinson

Is the hon. Gentleman suggesting that if, for whatever reason, a worker receives an increase from one week to the next that exceeds the norm set by the Government, it should be subject to a tax penalty?

Mr. Wainwright

No. What is suggested—and it is open to elaboration or alteration by wiser heads—is that those employers who sign a declaration that they will comply with the prices and incomes policy, who at the end of the year sign again to say that they have complied and who have stood up to the necessary tests, inspections and examinations, should be automatically entitled to a fixed rebate on the national insurance surcharge. That is a positive approach, and deserves comment from the Chief Secretary.

The right hon. Gentleman has been disappointing in other ways. He had nothing to say about the effects of his monetary policy when and if the glorious time arrives when contraction and de- flation can end and the economy can once more be expanded. Throughout this Parliament we have never yet heard how the monetarists intend to allow the economy to expand eventually, without the old cycle of wage-push-inflation starting all over again.

It is unfortunate that the Chief Secretary, while poking fun at the admitted failures of some previous incomes policies, did not take the opportunity to demonstrate that there is a way out of his own policy that would enable the country to get back to some sort of prosperity without wage inflation starting all over again.

I was disappointed that the right hon. Gentleman did not comment on the success of incomes policies in other democratic countries. As my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) said, virtually every other country in northern Europe runs some sort of incomes policy. The fact that most have much more successful economies that ours surely requires comment from a Government who are obstinately refusing even to look at any measure of formal organised incomes policy, but are simply trotting out ad hoc incomes policies every time that there is an embarrassing report from Lord Boyle or Professor Clegg.

The Chief Secretary was unable to enlighten us on how much unemployment the country will have to suffer, and for how long, before inflation turns down and his measures appear to be working. It is a deplorable aspect of the Government's policies that the country is given no light at the end of the tunnel and no date by which we can expect something to begin to work.

Many economists believe that it will require unemployment of more than 3 million to have any serious effect on the mass of wage demands. We regard that as a barbarous method of proceeding and it enjoins us to search for every possible alternative. That is why we tabled the motion.

Opinion polls have shown time and again that the mass of working people in all parts of the country would welcome an incomes policy. They are willing to accept moderate settlements if they can be satisfied that their fellow-citizens are also accepting them. Surely that opens out an essentially Conservative approach. It stresses the unity of the country and of society. The alternative is to let the country descend into an anarchy of competing claims by frightened people who are scared that if they do not get in a big claim quickly, their neighbours will submit an even bigger one and put them at a disadvantage.

Our society is at a crossroads in that respect. Do we proceed on the basis of selfish individualism, with a host of mutually competing wage claims, or do we act as a responsible society, under the leadership of Parliament, in getting the sort of restraint that the great mass of our people are willing to accept if they can be assured that it applies to the majority of the population?

I was disappointed with much of the rest of the debate. We learnt that the Chief Secretary has a disciple in the hon. Member for Fareham (Mr. Lloyd), though the hon. Gentleman has some way to go and it may be that the monetarist policy will have become totally discredited before he emerges into full parliamentary maturity.

It was engaging to hear from the hon. Member for Liverpool, West Derby (Mr. Ogden). As always, he made his position clear and he incited some useful comments in reply from the hon. Member for Bolsover. The hon. Member for West Derby asked a question that must be answered. He wanted to know whether the Liberal Party was proposing a statutory policy. The answer is clearly and positively "Yes", in the sense that we believe that we should use the tax system to provide an incentive for compliance with the policy.

Of course, that is a world away from any threat of prison sentences or other criminal penalties.

Mr. Skinner

It is not.

Mr. Wainwright

We suggest proceeding by way of a tax incentive. We do not propose to send to gaol the odd extraordinary citizen who actually refuses a tax incentive. The whole object of getting away from tax penalties is to avoid the spectre of imprisonment that the hon. Member for Bolsover, having come late to this debate, introduced into our discussion.

The fact is that we are drifting into incomes policy in the usual ad hoc, shambling and disorganised way that has characterised British government in the past. The plea of hon. Members on the Liberal Bench, not for the first time, is that instead of drifting into a wage freeze or a suddenly improvised, back-of-the-envelope incomes policy, from which this country has so often suffered, we should, this time, calmly and with as much support from both sides of the House as can be mustered, go into an organised, carefully planned incomes policy, based on the positive idea of a tax reward for compliance and thus follow the example, far too late in the day, of the other democracies of northern Europe. That proposition seems to us fully justified by the appalling experience of wage anarchy in this country in the past.

The alternative is the negative stance of continually pointing out the 1,001 little difficulties that can crop up, the anomalies, the odd people, such as Members of Parliament and members of another place, who do not quite fit into the picture. Those are trivial matters compared with the crisis confronting the country. Our fellow-citizens this winter, if Parliament does not assert itself and if the Government do not organise their existing ad hoc incomes policy into formal shape, will be ground between two millstones of deliberately created unemployment and trade union monopoly power. That is a fate that we want to spare our fellow-citizens.

It seems to me Nero-like to be raising a lot of trivial administrative objections when many school-leavers, who cannot be blamed for exercising extravagant claims, and also so many people who have been moderate in wage claims in the past now face endless periods of unemployment to which the Government are unable to set any term. It is because that is a prospect that Liberals and, I hope, many other hon. Members on both sides refuse to tolerate, that we have tabled the motion. We invite hon. Members to come into the Lobby in support of it.

9.53 pm

Mr. Biffen

With the leave of the House, I should like to reply to the debate. I join the hon. Member for Colne Valley (Mr. Wainwright) in reflecting upon the Trappist modesty that has overcome the Front Bench of the Labour Party. I only hope that the hon. Member for Gateshead, West (Mr. Horam) can perpetuate this new-found characteristic to cover Thursday's Standing Committee on the Finance Bill. The silence from the Front Bench however, was more than compensated by the contribution of the hon. Member for Bolsover (Mr. Skinner). I mean that sincerely. I mean it sincerely because the hon. Gentleman spoke with obvious great feeling, but, above all, with a real grasp of the immediate practical implications of what happens once one gets into any kind of policy of this character.

I hear the hushed words between Liberals consorting together—"Coalition" they say. Any hon. Members who have tested these policies in the outside world, no matter from what corner of the House they come, have the obligation to come here and discuss what are their limitations and what are their challenges. I tried to define, not out of any hostility to the Liberal Party but for the order of the debate, what I thought was the essential characteristic of an incomes policy. It is the process whereby the central authority engages in the identification, selection and enforcement of the differential movement of incomes throughout the economy. Anything less than that is not really gilt-edged incomes policy.

Mr. Skinner

Not fully fledged.

Mr. Biffen

The other variations are noises which Governments have essayed from time to time, usually as a prelude to ending up with the fully-fledged article. The experience with the fully-fledged article makes the House a little circumspect—by absence or by consideration of the motion.

Not much time is available for me to reply to the debate. I shall comment on the two speeches from the Liberal Benches as a courtesy to the party whose Supply time this is. The hon. Member for Rochdale (Mr. Smith) promised me great shocks this winter. I can believe him. He made a fair and pertinent point about the difficulties that the Government face on the control of public spend- ing. The targets are set out in the Red Book. Nothing has happened since to persuade us to depart from the targets.

The central Government borrowing requirement for the first couple of months certainly shows a disturbing overspend. However, that was early in the year and it would be foolish to make an elaboration of that. I accept that industrial conflicts occur outside incomes policies, but a characteristic of industrial disputes within incomes policies is that they bring the Government into direct conflict in areas where we wish to distance ourselves as far as possible.

The hon. Member for Colne Valley was complimentary when he said that I had not said much in my speech. I am told that that is a good characteristic for a Minister to acquire. He was worried about the novel form of penalty, the benefit for good behaviour—or incentive, to use that magic word. It all turns on the existence of an employer who pays the stamp. The hon. Member for Bolsover immediately saw the great scope for a rush into the black economy in order not to be visible to be caught up in this convoluted nonsense. That was a point that I made earlier in the debate.

I understand the anxiety of my hon. Friend the Member for Fareham (Mr. Lloyd) that we should do all in our power to ensure that interest rates fall. That certainly is at the centre of Government policy.

The short debate has been entertaining. It has thrown up a variety of divisions within the parties. That is not bad. The House has debated, as it should, and has engaged in earnest disputation. Hon. Members have not spoken for outside audiences, but to each other in the Chamber. However, the debate has not disarmed my scepticism about the statutory regulation of incomes. I do not think that incomes policies affect inflation. I do not believe that they affect employment. They are massive areas of social engineering. Above all, they are a supreme example of hope over experience —a true slogan for the party that introduced the debate.

Question put, That the original words stand part of the Question:—

Division No. 383]	AYES	[10.00 pm
Alton, David	Penhaligon, David	Wainwright, Richard (Colne Valley)
Grimond, Rt Hon J.	Ross, Stephen (Isle of Wight)
Hooley, Frank	Smith, Cyril (Rochdale)	TELLERS FOR THE AYES.
Howells, Geraint	Steel, Rt Hon David	Mr. Alan Beith and Mr. Clement Freud
Johnston, Russell (Inverness)

NOES
Aitken, Jonathan	Goodhew, Victor	Murphy, Christopher
Alexander, Richard	Gorst, John	Myles, David
Alison, Michael	Gow, Ian	Neale, Gerrard
Ancram, Michael	Gower, Sir Raymond	Needham, Richard
Aspinwall, Jack	Gray, Hamish	Nelson, Anthony
Atkins, Rt Hon H. (Spelthorne)	Greenway, Harry	Neubert, Michael
Baker, Nicholas (North Dorset)	Griffiths, Peter (Portsmouth N)	Newton, Tony
Beaumont-Dark, Anthony	Gummer, John Seiwyn	Normanton, Tom
Benyon, Thomas (Abingdon)	Hamilton, Michael (Salisbury)	Onslow, Cranley
Benyon, W. (Buckingham)	Hampson, Dr Keith	Page, Rt Hon Sir R. Graham
Berry, Hon Anthony	Hannam, John	Page, Richard (SW Hertfordshire)
Best, Keith	Haselhurst, Alan	Parris, Matthew
Bevan, David Gilroy	Hawksley, Warren	Pawsey, James
Biffen, Rt Hon John	Heddle, John	Pollock, Alexander
Biggs-Davison, John	Henderson, Barry	Powell, Rt Hon J Enoch (S Down)
Blackburn, John	Hogg, Hon Douglas (Grantham)	Proctor, K. Harvey
Boscawen, Hon Robert	Hooson, Tom	Rees, Peter (Dover and Deal)
Bottomley, Peter (Woolwich West)	Howell, Ralph (North Norfolk)	Renton, Tim
Braine, Sir Bernard	Hunt, John (Ravensbourne)	Ridley, Hon Nicholas
Bright, Graham	Hurd, Hon Douglas	Roberts, Michael (Cardiff NW)
Brinton, Tim	Jopling, Rt Hon Michael	Sainsbury, Hon Timothy
Brooke, Hon Peter	Kaberry, Sir Donald	St. John-Stevas, Rt Hon Norman
Brotherton, Michael	Kellett-Bowman, Mrs Elaine	Shepherd, Colin (Hereford)
Brown, Michael (Brigg & Sc'thorpe)	King, Rt Hon Tom	Shepherd, Richard(Aldridge-Br'hills
Browne, John (Winchester)	Kitson, Sir Timothy	Skeet, T. H. H.
Bruce-Gardyne, John	Lamond, James	Skinner, Dennis
Bryan, Sir Paul	Lamont, Norman	Speed, Keith
Budgen, Nick	Lang, Ian	Speller, Tony
Bulmer, Esmond	Lawrence,Ivan	Spence, John
Butcher, John	Lawson, Nigel	Spicer, Jim (West Dorset)
Cadbury, Jocelyn	Lee, John	Stanbrook, Ivor
Carlisle, John (Luton West)	Le Marchant, Spencer	Stanley, John
Carlisle, Kenneth (Lincoln)	Lester, Jim (Beeston)	Stevens, Martin
Channon, Paul	Lewis, Arthur (Newham North West)	Taylor, Teddy (Southend East)
Churchill, W. S.	Lloyd, Peter (Fareham)	Tebbit, Norman
Clark, Hon Alan (Plymouth, Sutton)	Lyell, Nicholas	Thatcher, Rt Hon Mrs Margaret
Clark, Sir William (Croydon South)	McCrindle, Robert	Thomas, Rt Hon Peter (Hendon S)
Clarke, Kenneth (Rushcliffe)	Macfarlane, Neil	Thompson, Donald
Clegg, Sir Walter	MacGregor, John	Thore, Nell (Ilford South)
Cockeram, Eric	Major, John	Thorne, Stan (Preston South)
Colvin, Michael	Marten, Neil (Banbury)	Trippier, David
Cranborne, Viscount	Mates, Michael	Waddington, David
Dean, Paul (North Somerset)	Mather, Carol	Wakeham, John
Dover, Denshore	Maxwell-Hyslop, Robin	Walker, Bill (Perth & E Perthshire)
Dunn, Robert (Dartford)	Mayhew, Patrick	Waller, Gary
Eden, Rt Hon Sir John	Mellor, David	Ward, John
Eggar, Timothy	Meyer, Sir Anthony	Watson, John
Elliott, Sir William	Miller, Hal (Bromsgrove & Redditch)	Wells, Bowen (Hert'rd & Stev'nage)
Emery, Peter	Mills, Iain (Meriden)	Wheeler, John
Faith, Mrs Sheila	Mills, Peter (West Devon)	Whitney, Raymond
Farr, John	Moate, Roger	Wickenden, Keith
Fenner, Mrs Peggy	Molyneaux, James	Wolfson, Mark
Fletcher, Alexander (Edinburgh N)	Montgomery, Fergus
Fookes, Miss Janet	Morgan, Geraint	TELLERS FOR THE NOES:
Garel-Jones, Tristan	Morrison, Hon Peter (City of Chester)	Lord James Douglas Hamilton and Mr. John Cope
Glyn, Dr Alan	Mudd, David

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to

The House divided: Ayes 10, Noes 164.

Standing Order No. 32 (Questions on amendments):—

The House divided: Ayes 144, Noes 25.

Bevan, David Gilroy	Gummer, John Selwyn	Nelson, Anthony
Biffen, Rt Hon John	Hampson, Dr Keith	Neubert, Michael
Biggs-Davison, John	Hannam,John	Newton, Tony
Blackburn, John	Haselhurst, Alan	Normanton, Tom
Braine, Sir Bernard	Hawksley, Warren	Onslow, Cranley
Bright, Graham	Heddle, John	Page, Rt Hon Sir R. Graham
Brinton, Tim	Henderson, Barry	Page, Richard (SW Hertfordshire)
Brooke, Hon Peter	Hogg, Hon Douglas (Grantham)	Parris, Matthew
Brotherton, Michael	Hooson, Tom	Pawsey, James
Brown, Michael (Brigg & Sc'thorpe)	Howell, Ralph (North Norfolk)	Pollock, Alexander
Browne, John (Winchester)	Hunt, John (Ravensbourne)	Proctor, K. Harvey
Bruce-Gardyne, John	Hurd, Hon Douglas	Rees, Peter (Dover and Deal)
Budgen, Nick	Jopling, Rt Hon Michael	Renton, Tim
Butcher, John	Kellett-Bowman, Mrs Elaine	Roberts, Michael (Cardiff NW)
Cadbury, Jocelyn	King, Rt Hon Tom	Sainsbury, Hon Timothy
Carlisle, John (Luton West)	Lamont, Norman	St. John-Stevas, Rt Hon Norman
Carlisle, Kenneth (Lincoln)	Lang, Ian	Shepherd, Colin (Hereford)
Channon, Paul	Lawrence, Ivan	Shepherd, Richard (Aldridge-Br'hills)
Churchill, W. S.	Lawson, Nigel	Skeet, T. H. H.
Clark, Hon Alan (Plymouth, Sutton)	Lee, John	Speed, Keith
Clark, Sir William (Croydon South)	Le Marchant, Spencer	Speller, Tony
Clarke, Kenneth (Rushcliffe)	Lester, Jim (Beeston)	Spicer, Jim (West Dorset)
Clegg, Sir Walter	Lloyd, Peter (Fareham)	Stanbrook, Ivor
Cockeram, Eric	Lyell, Nicholas	Stanley, John
Colvin, Michael	McCrindle, Robert	Stevens, Martin
Cope, John	Macfarlane, Neil	Taylor, Teddy (Southend East)
Cranborne, Viscount	Major, John	Tebbit, Norman
Dean, Paul (North Somerset)	Marten, Neil (Banbury)	Thatcher, Rt Hon Mrs Margaret
Douglas-Hamilton, Lord James	Mates, Michael	Thomas, Rt Hon Peter (Hendon S)
Dover, Denshore	Mather, Carol	Thompson, Donald
Eden, Rt Hon Sir John	Maxwell-Hyslop, Robin	Thorne, Neil (Ilford South)
Eggar, Timothy	Mayhew, Patrick	Trippier, David
Emery, Peter	Mellor, David	Waddington, David
Faith, Mrs Sheila	Meyer, Sir Anthony	Wakeham, John
Farr, John	Miller, Hal (Bromsgrove & Redditch)	Walker, Bill (Perth & E Perthshire)
Fenner, Mrs Peggy	Mills, Iain (Meriden)	Waller, Gary
Fletcher, Alexander (Edinburgh N)	Mills, Peter (West Devon)	Ward, John
Fookes, Miss Janet	Moate, Roger	Wells, Bowen (Hert'rd & Stev'nage)
Garel-Jones, Tristan	Molyneaux, James	Wheeler, John
Glyn, Dr Alan	Montgomery, Fergus	Whitney, Raymond
Goodhew, Victor	Morrison, Hon Peter (City of Chester)	Wickenden, Keith
Gorst, John	Mudd, David	Wolfson, Mark
Gow, Ian	Murphy, Christopher
Gower, Sir Raymond	Myles, David	TELLERS FOR THE AYES:
Gray, Hamish	Neale, Gerrard	Mr. Robert Boscawen and Mr. John MacGregor.
Greenway, Harry	Needham, Richard
Griffiths, Peter (Portsmouth N)

NOES
Alton, David	Freud, Clement	Smith, Cyril (Rochdale)
Ashton, Joe	Hamilton, W. W. (Central Fife)	Spriggs, Leslie
Atkinson, Norman (H'gey, Tott'ham)	Home Robertson, John	Steel, Rt Hon David
Beith, A. J.	Howells, Geraint	Strang, Gavin
Campbell-Savours, Dale	Johnston, Russell (Inverness)	Wainwright, Richard (Colne Valley)
Canavan, Dennis	Lamond, James
Clark, Dr David (South Shields)	Lewis, Arthur (Newham North West)	TELLERS FOR THE NOES:
Cryer, Bob	Penhaligon, David	Mr. Stan Thorne and
Dixon, Donald	Ross, Stephen (Isle of Wight)	Mr. Ioan Evans.
Douglas, Dick	Skinner, Dennis

Question accordingly agreed to.

Mr. Deputy-Speaker

forthwith declared the main Question, as amended, to be agreed to, pursuant to Standing Order No. 18 (Business of Supply).

Resolved, That this House believes that a lasting cure for inflation and unemployment is best secured by policies designed to control public spending, borrowing and the money supply, whilst providing a realistic and equitable framework of taxation.