§ 12. Mr. Freudasked the Chancellor of the Exchequer whether he is satisfied that the level of wage settlements are effectively lowered by restraint on growth of sterling M3.
§ Sir Geoffrey HoweWage settlements not consistent with the rate of monetary growth run the risk of destroying jobs. The sooner and the more widely that is understood by wage bargainers, the sooner the upward trend in unemployment can be reversed.
§ Mr. FreudWill the Chancellor say to what heights unemployment will have to rise before he achieves restraint in wage settlements?
§ Sir G. HoweIt is not for me to achieve restraint in wage settlements, but for those concerned with the business of pay bargaining. The central conclusion reached by the previous Labour Administration after the collapse of their pay policy was that it was best to leave pay bargaining to those concerned with it. Any attempt to achieve restraint by the imposition of a uniform policy contains the seeds of its own destruction. The 733 right hon. Member for Ebbw Vale (Mr. Foot) may well laugh, but he was the architect of the last lesson in that.
It cannot be too strongly emphasised that it is for pay bargainers on both sides of the bargaining table to recognise their responsibility for creating unemployment if they insist on pay settlements that are too high.
§ Sir William ClarkDoes my right hon. and learned Friend agree that in past wage settlements far too much emphasis was placed on a 10 or 15 per cent. increase, without sufficient attention being paid to the increased productivity that Britain needs?
§ Sir G. HoweYes, indeed. As my hon. Friend knows, during the past two years pay rises have exceeded the rise in prices by about 12 per cent.—more than twice as much as the growth of production in Britain. That is a prescription for disaster and rising unemployment.
§ Mr. Denzil DaviesIs it still the Government's view that high wage settlements are not a cause of inflation?
§ Sir G. HoweHigh wage settlements are incompatible with the maintenance of proper monetary discipline. If the right hon. Gentleman would do me the courtesy of studying the speech that I made yesterday, he would see that it set out the point that high wage settlements contribute initially to a higher level of inflation than would otherwise be the case. In due course, inflation will come down, and the effect of high pay settlements will be to leave us with a higher level of unemployment.
§ Mr. HendersonWill my right hon. and learned Friend confirm that, where there is high profitability and high productivity, high wage settlements are entirely reasonable?
§ Sir G. HoweThat is the right basis on which to approach the matter.
§ Sir G. HoweYes, indeed. As I have already told the House—although the right hon. Gentleman may not have been here to listen—the level at which prices are rising will shortly peak out. The number of employers likely to make price 734 increases is at its lowest level since January 1973. House prices are not rising. Those characteristics suggest that the level of inflation is likely to turn around shortly.